Tax Bite #1 | 4 Tax Concerns for Attorneys Starting Solo Practices

1. Tax structure. A bad tax structure can hurt you now and in the long run. Maybe an S Corp is a good idea, maybe not. If your tax pro tells you to create an S Corp without discussion or analysis, find another tax pro.

2. A solid accounting system. Revenue minus expenses equals profit which is (roughly) what you’ll pay tax on. Have a reliable and accurate way to keep track of all this. You may or may not need a true accounting platform your first year as a solo. QuickBooks or Xero may be overkill. If you can use an Excel spreadsheet accurately, go for it. And for the love of all that is holy, please open separate bank and credit card accounts for your firm and be strict about NOT co-mingling activity between your personal life and your firm in your firm’s account.

3. Changes to your personal tax situation. You’re moving from a W2 role and into a business owner role. Your new firm will likely be a pass-through entity of some type, meaning the tax impact will primarily be felt at your personal level. Will you owe self-employment tax? Will you receive a QBI deduction? Do you want to make estimated tax payments? And so on.

4. Being sold a “tax strategy” by some snake oil tax salesman. A good tax pro will keep you away from fly-by-night, expensive tax moves that don’t hold water. But the bad actors have better marketing. Be careful of tax content you consume and who you trust. If it sounds too good to be true, it probably is.

Have questions navigating your new firm’s taxes? Give us a shout. We’re happy to help.