Would you say your law firm is efficient, or do you feel disorganized, spending too…
Stepping into a new year means taking a step closer to filing taxes for the previous year. When gearing up to file your law firm’s taxes, it is a good idea to consider all the expenses you can deduct. Ideally, you have been saving the receipts from all your business-related expenses. If not, this year should be the year you start. Many of your receipts may be in a digital format. If not, you can scan them and save them somewhere that is convenient.
Business deductions aren’t completely clear since the Internal Revenue Service tax code defines a valid deduction as any expense incurred to produce income. The best strategy is to keep track of your expenses and how they are connected to your law practice and work with an experienced accountant familiar with the latest tax laws. Here are some areas in which expenses may be deducted by category.
As an attorney, you can deduct the costs related to Continuing Legal Education (CLE) classes. You may also be able to deduct other legal courses you take and conferences you attend. To count as a business deduction, the course or conference must be to maintain or improve the skills you require for your law practice.
Now that so many of us are working from home, more attorneys are making their home offices their principal place of business. If this is true for you, you may be able to deduct certain expenses related to the work you do from your personal bills. Some of the expenses that qualify are portions of your mortgage or rent payments, insurance, utilities, repairs, and depreciation. Consult with your accountant to find the best way to take deductions in this area.
Expenses incurred while traveling on behalf of your law firm are tax deductible. The travel must be solely related to business. Examples of travel that may qualify for deductions include traveling an unusual distance to a courthouse you don’t normally go to and traveling to a law-related conference.
Advertising, Promotion, and Entertainment
Nearly all expenses related to marketing for your law firm are tax deductible. This includes expenses for online advertising as well as tangible marketing materials, such as print ads and brochures. Half of your expenses for meals and entertainment can be claimed on your tax return as long as they are strongly related to your business. Make sure you track these business-related events accurately in case the IRS questions them. You may need to prove that you and your client(s) used the event to discuss work.
Outsource Your Marketing
It is easy to neglect your marketing and communications efforts while you are busy working on your law firm’s taxes or handling other matters related to running your practice. Hiring a marketing agency focused on law firms, such as Law As a Business (LAB), will help promote your practice while allowing you to put more time and energy into other areas of your business.
Increase the value of your law firm!
There is a right way and a wrong way to build and then exit a law practice. Specific decisions and actions build value while others do not. Watch this video and learn the steps you should take to create value within your firm and increase desirability to a potential buyer.