When it comes to managing the financial complexities of a law practice, partnering with a CPA who understands the unique challenges of the legal profession is invaluable. From sophisticated entity selection and tax planning to managing trust accounts and ensuring ethical compliance, specialized accounting services for law firms go far beyond basic bookkeeping.
At Huddleston Tax CPAs, our team, which includes CPAs with law degrees and experience on the Washington Law Review Executive Board, offers comprehensive financial services tailored specifically to legal professionals. Whether you’re a solo practitioner or managing a multi-partner firm, our expertise helps you navigate the intersection of legal practice and financial management, ensuring your firm’s growth and compliance while optimizing tax strategies and operational efficiency.
Why Law Firms Need Specialized CPAs
Law firms operate within a highly specialized environment that demands precision and expertise in financial management. From trust account management, which requires strict adherence to client fund handling regulations, to navigating complex billing structures and ensuring ethical compliance, law firms face unique accounting challenges. Partnership compensation models often involve intricate profit-sharing arrangements that require tailored financial strategies.
Additionally, the legal industry has specific tax considerations, such as managing deductions for continuing education or understanding the nuances of pass-through taxation for partnerships. A CPA specializing in law firms brings the necessary expertise to address these complexities, ensuring compliance, optimizing financial performance, and freeing attorneys to focus on their practice.
Services for Law Firms
Huddleston Tax CPAs have specialized accounting services for law firms. Some of our CPAs have acquired law degrees and served as members of the Washington Law Review Executive Board.
CPAs for law firms are integral members of your legal team especially as your firm grows. Rather than bring in bookkeepers or accountants in-house (which can be costly), choose a specialized CPA lawyer for both. For small sole proprietors to large, multi-partner law firms, Huddleston Tax CPAs can tend to all of your accounting and bookkeeping needs.
Some of the ways Huddleston Tax CPAs function as specially equipped law firm accountants are:
1. Valuation Services for Your Law Firm
To start with, Huddleston Tax CPAs can provide an estimate of what your law firm is valued at in its current state as well as different scenarios and business strategies. We consider the value of your law firm’s assets in the event of a liquidation or sale, and we offer small business coaching to help you and your business to achieve the desired outcome.
2. Law Firm Accounting Management
We don’t intend to run your business for you, but law firms need a third-party, privy to finances, that can help attorneys and partners with:
- Control of expenses
- Capping billable hours
- Settling partner (and staff) compensation disputes
- Employee retention
- Improving collections
- And more
Huddleston Tax CPAs can help your law firm run efficiently and effectively.
3. Manage Cash Flow
Our CPA lawyers conduct a thorough review of your law firm, addressing concerns and ensuring you maintain financial control. We find ways to achieve tax breaks
Entity Selection Recommendation for Law Firms
Your entity selection will affect Income Tax and Payroll/Self-Employment Tax, so there are a number of considerations there in. Certified Public Accountants familiar with the practice of law are more qualified to advise lawyers as to which business entity to select.
Entity Types for law firms
- Sole Proprietorship – Or self employed
- PLLC– Single Member – Taxed as sole proprietorship if no election is made, or with elections can be taxed as S Corporation or C Corporation.
- PLLC– Multi Member – Tax as partnership if no elections are made, or with election can be taxed as S Corp or C Corp.
- Professional Service Corporation – Such as C Corporation (if no elections are made), or S Corp (if elections are made).
- Partnership – Each partner treated as self-employed
- Shared Expense Arrangements – Sharing expenses versus sharing profit
Common Tax Deductible Expenses According To CPA Lawyers
Entertainment Expenses
- Substantiation under IRC Sec. 274
Travel Expenses
- Must comply with substantiation requirements of IRC Sec. 274
Books, Periodicals, and Software
- Cost of books and subscription services with useful life of more than one year is depreciable over 5 years.
- Software is not depreciable property subject to bonus depreciation of section 179 depreciation. Software is to be amortized over 3 years straight-line.
- Books, subscription services, and software purchased on annual basis having useful life of one year of less are currently deductible.
Bonus Depreciation and Section 179 Depreciation
- The bonus depreciation amount for qualifying business assets purchased after December 31, 2011 has returned to 50%.
- Bonus Depreciation Qualifying Property: The bonus deprecation allowance is only available for new property (original use must being with the taxpayer) which is depreciable under MACRS and has a recovery period of 20 years of less.
- Section 179 depreciation has a $125,000 dollar limit and $500,000 investment limit for tax years beginning in 2012.
Other considerations for lawyers include:
- Which is the best method of accounting: Cash versus Accrual?
- Any CPA lawyers worth their salt should be able to answer this for your firm.
- What are the tax implications of a specific retainer, an annual retainer?
Frequently Asked Questions
What does an accountant do in a law firm?
All the essentials, such as bookkeeping, accounting, forecasting, etc. However, where they come in handy with law firms is knowing your specific profession’s ethic rules so your firm stays compliant.
Law in particular is a unique field since your clientele vary dramatically in time spent and frequency. Knowing what money is coming in and when is integral to ensuring your firm can grow and be profitable.
What is a CPA litigation?
Commonly referred to as litigation support, it’s advice from non-lawyers to lawyers. CPA litigation can take many forms, but recently some CPAs take on the legal legwork for attorneys. CPAs can get involved in pre-trial activities, evaluating financial records, helping during discovery for a deposition.
And, it’s likely that you have your own specific question. Call us at 1-425-483-6600 or e-mail us at [email protected] and we’ll do our best to give you a straight forward answer.
Check out our Google, Yelp, and Yahoo Reviews -or- Read our Self Employed Tax Guide
Find a meeting location near you.