Managing Corporate Houston Taxation Problems For Lawyers And Law Firms

Yes, even lawyers and law firms also experience taxation problems and yes, they also need help to settle their Houston taxation problems. And what better way to get a credible advice about taxation is to get it from an expert Houston CPA who has done some noteworthy corporate taxation planning and management with different types of solo practitioners, law firms, multi-office large firms and also judges.

What makes the lawyers and a law firms taxation tricky is that you need somebody who knows how to asses when an income is taxable and when it is not. This is especially difficult since there are a lot of things to consider, such as trust accounts for fees, trust accounts for litigation settlements and also the requirement of court approval of fees in some cases. Another thing that makes corporate tax for law firms and attorneys difficult is you need to know and assess what expense should be deducted and when a certain expense should be deducted.

Aside from the two general difficulties that corporate tax for lawyers and law firms has, there are actually some areas that you need to be very particular about. These areas are the usually the common trouble areas that most corporate tax experience. First concerns the constructive receipts. Constructive receipts, to put it simply, indicates when a tax payer gets gross income. This is not the same with the usual receipts because constructive receipts do not require a physical possession of the item purchased. A problem arises in constructive receipts come in when a taxpayer has not really received any payment and that if the income is available for tax timing purposes. Second is the advance expense payment which is a very major thing for plaintiff attorneys who are working on contingency. Yes, a win is something to be happy about but it also means a big corporate tax liability. In this case, the liability can be moderated through pre-paying law office expenses which should strictly follow the guidelines imposed by the IRS concerning this matter. Last is the employee benefit plans that cold be used to lessen corporate tax. When we say employee benefit plans, it talks about tuition reimbursements, pensions, health care plans, among others. However, you should heed these words: there are cases when corporate tax is not lessened even with employee benefit plans. This is when there is a violation of anti-discrimination rule or affiliated group rules that the IRS put on benefit plans.

In order to understand why law firm and attorney taxation pose such kinds of difficulties, you must understand the nature of such taxation that causes these difficulties. The taxation that concerns law firms and attorneys who do solo practice falls under corporate and partnership tax. In particular, the method of tax accounting that law firm use is on a cash basis. When we say cash basis, it means that the reporting of income happens only when there is a collection of fees from clients or when a court proceeding is concluded. Normally, charging of fees is usually done either on an hourly or contingency basis, however, there are some law firms that mix both the hourly and contingency when it comes to billing.