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Tax Considerations & Benefits for Law Firms

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Tax Considerations & Benefits for Law Firms

Whether you’re a partner or an associate in a law firm, the Internal Revenue Service has rules that apply specifically to you as well as several opportunities. Following is a list of tax provisions that affect attorneys in particular.

Tax Benefits for Partners in a Law Firm

Home office deduction

The home office deduction may be available to practitioners who run their business out of their home. This deduction is not as straightforward as it may sound: the space must be dedicated to running the practice. In addition, the deduction is based on the square footage of the dedicated space, not the total square footage. Once the square footage is calculated, a proportional share of expenses, including mortgage interest, real estate taxes and utilities, may be deducted. The deduction does come with a cap.

Unreimbursed expenses

Law firm partners may be able to use Schedule E to deduct business expenses that were not reimbursed by the firm. This is a valuable deduction because it reduces both taxable income and the self-employment tax.

Capital account loans

Interest paid on capital account loans also are deducible on Schedule E.

State taxes

State taxes are tricky. The total allowable deduction for all state and local taxes is limited. As long as the amount isn’t exceeded, you may be able to deduct any state taxes the firm pays on your behalf on Schedule A of your personal return. Ensure that you are filing in all relevant tax jurisdictions and document your filings and consider filing composite state returns.

Self-employed health insurance

If your firm shows a profit for the year, medical, dental and long-term care insurance costs may be an above-the-line deduction. This deduction is worth more than an itemized deduction.

Retirement savings

Take advantage of tax saving offered by your firm’s retirement plan. Deferring income can result in substantial tax savings.

Tax Considerations for Associates

Associates are salaried employees at their firms who have federal and state income tax taken out of their paychecks and whose income is reported on Form W-2. Consequently, they have fewer options for deductions. They cannot take itemized deductions unless they exceed the standard deduction amounts.

While more restricted in their options, associates may benefit from the following:

Unreimbursed business expenses

These expenses can no longer be deducted as a line item, but associates can ask their firms to implement an accountable reimbursement plan. Such a plan would allow associates to be reimbursed without having to report the reimbursements as income, and the partners would be able to deduct the amounts on their Schedule E.

Income deferral

Deferring income by maximizing use of the firm’s retirement plan may reduce taxable income.

Student loans

If your firm has a student loan payment program, the amount they pay may not be taxable if certain parameters are met.

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Which Chicago Office Space Provider is Best for Your Business?

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Which Chicago Office Space Provider is Best for Your Business?

 

It’s important to know just what you’re getting with your office space provider before you sign on the line. We chose three major law office space providers in Chicago – WeWork, Regus and Amata – and broke down the differences to provide you better insight on where your firm might thrive best.

The Basics: Pricing & How Each Chicago Office Space Provider Measures Up

All three of the office space companies have a variety of locations and therefore will have pricing that varies depending on square footage and office building location.

What you really need to focus on, is where the additions come into play, and most of that can only be found once you request a proposal.

WeWork: Need phone services? Then you’ll need an office or desk…

Only members with a Dedicated Desk or a Private Office are able to request phone services. So, if you are looking for an all-inclusive Virtual Office package, you will need to look elsewhere.

Regus: Build what you need – but pay attention to price.

Regus is a build what you need facility, and that means all their amenities are add-ons, including essentials like the internet. This is good if you need the bare minimum (or less) but your invoice can add-up quickly if you don’t pay attention.

Amata: An attempt to bundle services, but not an exception.

Amata makes things easier by bundling select services into their Private & Virtual Offices – internet and furniture is included for their private offices, for instance.

But you can only bundle so much and so like WeWork and Regus you will need to request a proposal if you are interested in a private office. If you are looking for a Virtual Office program, however, full details and pricing are listed online.

Amenities Make All the Difference – Who Has the Best?

Let’s face it: amenities can often make or break the deal. If you’re going to pay for law office space, you want more than four white walls and a door.

WeWork: Perfect for start-ups, incubators, and aspirations of being Google.

With any WeWork office space in Chicago, you’ll also receive:

  • Reception
  • Micro-roasted coffee, tea, and fruit water
  • Beer on tap at select locations
  • Locations may also include: ping pong tables, bocce ball courts, and meditation rooms (these are just a few fun perks!)

Regus: The basics you need, none of the riff-raff.

While Regus doesn’t offer quite as many amenities as WeWork, they do offer the basics you need to run a business.

  • Reception and telephone answering
  • Admin support
  • Coffee, water and tea

Amata: Tailored to small firm attorneys who need more from their space.

The list speaks for itself, but at Amata, you’ll get to enjoy amenities tailored specifically to attorneys like:

  • Paralegal services and administrative support
  • Customizable reception and phone answering
  • Legal networking and education events
  • Fixed-fee court filings
  • Spanish translation services
  • Coffee, water, tea; coke fountain machine at select locations
  • Cognac room for important meetings and celebrations

Choose the Partnerships that Work Best for Your Firm

The best way to decipher a company’s true interests is to look at the partnerships they invest in. Are they linking with companies that help their clients? Are they joining with non-profits to create a better world? Or are they simply partnering with people that help fulfill their needs?

All good companies are a mixture of these things but pay attention to partnerships and you may uncover more about the character of the people in charge.

WeWork Partnerships

2U: Education Technology Company, Airbnb, Techstars’ Accelerator and Start-up Programs, and Salesforce.

Regus Partnerships

Business Continuity Institute, American Airlines Admiral Club, Delta Airlines Crown Room Club, Equity Office Properties, Hines Interests, and Mack-Cali Realty Corporation.

Amata Partnerships

Union League Club of Chicago, The Metropolitan Club, Republic Bank, CBA Insurance Agency (a subsidiary of The Chicago Bar Association), and R4 Services.

No matter which Chicago office space provider you choose for your firm, it’s important to know exactly what you’re getting and how those features, amenities, and partnerships can benefit and even possibly help grow your law practice.

Download this chart for a side-by-side comparison of each of these office space providers.

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PARO: End-of-Year Checklist

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Now that we start a New Year it is important to reflect on our past year’s performance and set a plan for success in the years to come.

Below, please reference PARO‘s End-Of-Year checklist for small businesses. These 6 steps can help your business become successful in 2017:

  1. Review accounts receivable and payable
    Accounts Receivable: To ensure that your cash flow is accurate be sure that your accounts receivable is up to date. If a payment is owned collect ASAP, collect in the next year- but file as a cash or accrual basis, or write it off as a loss.Accounts Payable: Be sure to record your bills on a monthly basis. If you do have a system in place review your accounts payable to see if it is accurate.
  2. Review you inventory (if applicable)
    It is important to keep an accurate record of your inventory quarterly and if you can monthly is even better. This can help you plan in the next year so you know if you are holding too much or missing out if you are holding to little.
  3. Verify 1099 / W2 information and send out forms
    Accurately obtain the personal information from your vendors and contractors to send their 1990s and W-2 forms.
  4. Close your books and prepare for tax filing
    Before you reflect on 2016 your books must be closed. Your bookkeeper or accountant must reconcile your bank accounts, credit cards, and credit facilities. Finally, then can you can review your financial year of 2016 more accurately.
  5. Review your P&L Key Performance Indicators (KPIs)
    Review your key performance indicators by identifying 2 or 3 indicators that drive your business. Over the course of tracking these indicators you are able to see what areas are doing well. From there you can assess the low indicators to help improve your business.
  6. Create a budget for the new year
    Now that you have finally reviewed your financial statements you can plan on working on your businesses’ yearly budget. Since you have gained a financial insight you can budget accordingly.

Click to download PARO’s End-of-Year Checklist

Upcoming Events:

  • Stop by for PARO’s Lunch & Learn Event! January 18th at 12pm, 225 W. Washington , Floor 22.
  • See more upcoming events

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How Healthy Is Your Office? 4 Must-Have Perks

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Health-conscious environment emphasized in a coworking space, as an individual practices hygiene, underscoring the commitment to wellness in shared legal offices.

A recently released survey commissioned by the American Psychological Association found that six in 10 U.S. adults consider work to be a very or somewhat significant source of stress in their life. And for entrepreneurs, who often find themselves working longer hours for less pay, anxiety levels can be even higher, taking a toll on their business and, more importantly, their health.

While a person’s work environment can have negative effects on their mental and physical well-being – open-plan offices have been criticized for facilitating the spread of workplace illnesses – some offices also come with special services and amenities designed to help workers lead happier, healthier, and more productive lives. And it’s not just employees of Fortune 500 companies who have access to them. Thanks to the growing popularity of coworking spaces and other alternative office environments, these health-related perks have become accessible to freelancers and other self-employed individuals, including those who previously worked from home because they could not afford to lease a space of their own.

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The 3 (Free) Perks of a Shared Office

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The 3 (Free) Perks of a Shared Office

Shared offices have become a popular choice for everyone from freelancers and “solopreneurs” to large national and international businesses looking to open short-term or satellite locations in new markets. While these alternative office environments have the obvious benefit – Class A space at a price smaller users can afford – they also come with a number of free perks tenants may not even think about when searching for office space.

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