To reduce their tax liability, law firms should seek deductions where possible.
Business tax is determined based on the profits of a company, with the actual tax rate determined by the entity type. While there are additional considerations for lawyers as to what can be deducted depending on their entity structure (sole proprietorship, partnership, limited liability company or s-corporation), law firms should be sure the following are being applied as tax deductions for the firm.
These types of expenses are ones that are currently deductible right now, but can be deducted over the life of an asset. For example, equipment and furniture whose useful life extends beyond a year or the costs associated with defending a property title.
Employee Payments and Benefits
Costs associated with employees, including wages, retirement contributions and bonuses, are deductible.
Credit Card Convenience Fees
The IRS has ruled that credit card convenience fees can be deducted as a business expense, provided they are paid by the firm (and not your client).
Lawyers can also seek deductions from:
- Business supplies and equipment’
- Education and associations, including bar associations and CLE courses
- License and insurances
- Office rent
- Postage and shipping
- Professional fees, including accountants
- Travel expenses related to the business