Taxes are one of the most significant and volatile aspects of finance. A single change in tax laws can have a ripple effect on the whole economy. For example, the Tax Cuts and Jobs Act changed a lot about tax law firm accounting. Fortunately, tax law firm CPAs are experts in adjusting the way they track their client’s finances based on new tax rules.
An essential thing that tax law firm accountants understand is the role that the qualified business income deduction plays. They need to help their employers know if they qualify for this deduction and what, if any, wage bonuses will need to be paid in 2019 to be eligible for it.
How Tax Law Firm CPAs Can Determine If Your Law Firm Qualifies for the 20 percent QBI Deduction
Partnerships, some limited liability companies, and subchapter S corporations may receive a 20 percent deduction on their QBI. However, tax law firm accountants understand that the deductions are limited to SSTBs, or “specified service trades and businesses.”
An attorney who is a single filer and makes over $160,700 will start to see this deduction limited. Those who file jointly will begin to see a limitation in this deduction once the joint income breaks $321,600. The benefit starts to phase out at $210,700 for individuals and joint filers at $421,400. Tax law firm accountants need to have these figures in mind as they go about their tax law firm tax planning.
Carefully Monitor Expenses and Entertainment for Tax Law Firm Tax Planning
Somethings that will affect the way that law firms do their tax law firm bookkeeping are changes that were made to how entertainment and meals can be deducted. In years past, entertainment could be deducted at a rate of 50 percent. With current laws, meals can still be deducted at 50 percent if they are for a business meeting. However, entertainment expenses can no longer be deducted. This means that tickets to a play, a sporting event, or club memberships cannot be deducted.
It’s important to remember that if payment for the entry to an event is also a payment for meals, you still cannot deduct the cost of the ticket. However, let’s say you pay for entry into a baseball stadium. While you are there, you purchase some meals for yourself and your clients. As long as this is done in the setting of a business, the meals can be deducted at a rate of 50 percent.
Limitations On Net Interest Expense Deductions
Several law firms have a capital strategy based on borrowing. As of 2018, these law firms will need to come up with a new approach. Net interest expense that is more than 30 percent of ATI now has limited deductibility. Until 2021, ATI is calculated without taking depletion, depreciation, or amortization into consideration. However, starting in 2022, those factors will be considered. This could bring your ATI down by limiting your interest expense deduction even more.
Reasons To Use Tax Law Firm Financial Advisers For Your Tax Law Firm Bookkeeping
Tax laws that affect law firms are continually fluctuating. Your law firm may benefit from tax law firm CFO advisory services like those we at Fusion CPA offer. We offer tax law firm CFO advisory services to law firms throughout Atlanta and around the country.
As tax law firm financial advisers, we primarily use QuickBooks Online. However, we work with clients who use other accounting platforms as well. You can learn more about our services by clicking the button below to schedule a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.