Who we work with
We work with owners of law firms bringing in $1 million or more in annual revenue: personal injury and other contingency-fee firms, business and estate planning practices, family law, criminal defense, and other independent firms, from solo owners to partnerships with several attorneys.
Firm owners at this level are usually in the top brackets, law is a specified service field for the QBI deduction, and contingency fees can make income swing from one year to the next. That makes planning before the year ends especially valuable.
The tax and financial challenges law firm owners face
Law firms combine high personal income with business decisions that change the tax bill every year.
Law is a specified service field
The 20% QBI deduction phases out for law firms at higher incomes, so many partners get little or none of it. Other ways to lower taxable income matter more.
Uneven income from contingency fees
One large settlement can push a year into the top bracket. Retirement contributions, charitable giving, and equipment purchases can be timed to the big years.
Case cost advances
Costs you advance for clients, like filing fees, experts, and records, are generally treated like loans when you expect repayment from the recovery, not deducted when paid. Your books need to track them case by case.
Client trust accounts
Money in your trust or IOLTA account belongs to clients and isn’t your income. Books that keep it separate and reconcile every month protect you and your license.
Partner pay
Draws, guaranteed payments, profit splits, and S corp salaries each carry different payroll and self-employment tax. The structure should match how your firm really works.
Partners joining and leaving
Bringing on a partner, buying out a retiring one, or merging with another firm raises questions about goodwill, payment terms, and timing that affect taxes on both sides.
Strategies that often fit law firms
Every business is different, and we only recommend what fits your numbers and your goals. These are strategies that often come up for owners like you.
- A cash balance plan on top of your 401(k)High-earning partners, especially 45 and up, may be able to deduct far more for retirement than a 401(k) alone allows.
- The Oklahoma PTE electionOklahoma firms taxed as partnerships or S corps can turn state income tax into a federal business deduction.
- S corp reasonable compensationIf your firm is an S corp, a salary that reflects your work and holds up to IRS scrutiny, with the rest as distributions.
- The accountable planYour firm can reimburse you tax-free for a home office, phone, and mileage.
- The backdoor Roth IRAAttorneys over the Roth income limits can often still build tax-free retirement savings.
- Own your office, rent it to the firmHolding your building in its own LLC can protect it and give you a separate asset when you retire.
Advanced strategies for higher-income owners
Partners with high incomes and growing estates often need more than the basics.
- The mega backdoor RothIf your firm’s 401(k) allows after-tax contributions and in-plan conversions, you can move much more into Roth savings.
- Donor-advised fund bunchingPut several years of giving into a big-fee year so your gifts do the most good on your taxes.
- Avoiding the 3.8% net investment income taxRent your firm pays to your own building LLC can stay out of the 3.8% tax when the rules are met.
- Lifetime gifts and SLATsMove future growth out of your estate under the $15 million per person exemption.
- 529 superfundingPut five years of gifts into a 529 at once for children or grandchildren.
- Charitable remainder trustSell appreciated stock or property inside a trust with no tax at the sale and take income for years.
Everything under one roof
One monthly Tax Plan covers your business and your personal taxes. Plans start at $475 per month and are priced by complexity, and you’ll know your price before you commit.
- Year-round tax planningWe project your tax bill all year and plan around big fees, partner changes, and retirement contributions before deadlines pass.
- Business and personal returnsYour firm’s return and your personal return, included in your plan.
- BookkeepingMonthly books that keep trust money separate, track case cost advances, and show profit by attorney or practice area.
- PayrollAttorneys, paralegals, and staff, with payroll tax filings handled.
- 1099sPrepared and filed for experts, contract attorneys, and vendors who need them.
- Quarterly estimated paymentsFederal and state amounts calculated for you, with personal and business taxes shown separately.
- IRS audit protection and representationIf a notice or audit comes, we represent you before the IRS and handle it with you.
- CFO-style reportingClear reports on profit, cash, collections, and how each attorney and practice area performs.
- Direct access to your advisorCall before you decide, not after.
An illustrative example: the Oklahoma PTE election for a two-partner firm
Picture an Oklahoma law firm taxed as a partnership, owned by two Oklahoma residents, with $2,000,000 of profit. Both partners are in the 37% federal bracket. Business tax and personal tax are shown separately.
Business tax (Oklahoma PTE)
For illustration purposes. Tax law may change, which may change these calculations slightly.
| No election | PTE election | |
|---|---|---|
| Oklahoma PTE tax paid by the firm (4.75%) | $0 | $95,000 |
| Profit passed through to the partners for federal purposes | $2,000,000 | $1,905,000 |
Personal tax (federal and Oklahoma)
| No election | PTE election | |
|---|---|---|
| Oklahoma income tax on this firm income, paid personally (up to 4.5%) | up to $90,000 | $0, excluded |
| Federal deduction for the Oklahoma tax | little or none (SALT limit) | $95,000, at the firm level |
| Federal income tax saved, both partners together (37%) | $0 | about $35,150 |
The firm pays a little more Oklahoma tax than the partners would have paid personally, since the PTE rate (4.75%) is higher than the top individual rate (4.5%). In exchange, the partners’ federal income tax drops by about $35,150 together. Because law is a specified service field and these partners are above the QBI limits, the election doesn’t reduce a QBI deduction here.
The election is made each year, and it affects how partners claim credit for the tax on their own returns. Partners who live in other states need their own analysis. We run the numbers every year before electing.
Illustrative example. The firm, partners, and figures above are hypothetical, used to explain how the strategy works. They are not a client and not a promise of results. The example assumes both partners are Oklahoma residents, the partners’ own federal deduction for state and local taxes is limited at this income, and the full deduction is used in the 37% bracket. This page is educational and is not tax advice for your situation.
Questions law firms ask us
Why don’t I get the full 20% QBI deduction?
Law is a specified service trade or business under the QBI rules. Above certain income levels, the deduction phases out and then disappears. Retirement contributions and other deductions can sometimes keep taxable income in range, and we look at that in your free tax analysis.
Can I deduct case costs I advance for clients?
Usually not when you pay them. When you expect to be repaid from the client’s recovery, advanced costs are generally treated like loans, and costs you never recover may be deducted when it’s clear they won’t be repaid. Your fee agreements matter, so we review them and track advances case by case.
How do we plan for a year with a big contingency fee?
Start before the year ends. Depending on your numbers, we may look at a larger retirement contribution, a cash balance plan, bunching charitable gifts into that year, equipment purchases, and the Oklahoma PTE election. We project the year as fees come in so you can decide in time.
Is a cash balance plan a good fit for a law firm?
It can be for profitable partners who want to save more than a 401(k) allows, especially partners 45 and up. Plans require contributions for eligible staff and a multi-year commitment, so we compare the cost with the tax savings first.
Do you work with law firms outside Oklahoma?
Yes. We’re based in Norman and fully virtual, and we work with law firm owners in Oklahoma and beyond.
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- S corp
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- Augusta Rule
- Hiring your kids
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