Individual Tax Planning for Lawyers
Individual income taxes can be relatively simple for attorneys who are employees of a C corporation that has a single office located in Illinois. However, one’s tax situation is much more complex for attorneys who work for a firm that is a limited liability company, a partnership or an S corporation that has offices in multiple states and/or foreign countries. In these instances, a partner or shareholder may be liable for multiple state returns and may be required to file quarterly estimated tax payments. At ORBA, we know there are many planning opportunities in this area. Law firms often file composite returns in states where the firm does business. We can advise you which of those returns impact you. For example, there can be a substantial tax savings to opting out of New York or California returns and filing individually. Our experts are here to help you develop a tax planning strategy designed to minimize your taxes and increase your cash flow.
We will help you identify tax-savings strategies, such as determining if you have any unreimbursed business expenses that can be linked to your firm’s K-1 on your tax return. Because law firms often earn a large percentage of their income in the third or fourth quarter of the year, we can monitor your share of income each quarter to help defer your quarterly estimated tax payments.
Some law firms operate as a partnership or professional corporation, with each partner maintaining his or her own professional corporation though which bills are paid, distributions are received and salary is paid to the attorney. ORBA’s Law Firm Group has extensive experience in setting up these types of structures and can guide attorneys on how it works. Law firms often offer 401(k) and other retirement plan options to their attorneys. We will help you sort through the options so that you can make the right choices for your future financial security.
Whether you are just beginning your career in the law, changing firms or looking toward retirement, ORBA’s experienced tax professionals are here to help you with every aspect of your personal income tax planning and preparation requirements.