Income taxes can be especially tricky for partners in a law firm. Partners are considered self-employed for tax purposes and are required to report their share of the Partnership’s income and expense items on their personal tax returns. As a result, law firm partners tend to face a unique set of issues including numerous state and local reporting requirements, various state tax deductions and credits, and proper utilization of foreign tax credits, just to name a few.
As income and employment tax rates have risen in recent years, poor tax compliance and/or planning can be quite costly to a practicing attorney. Therefore, proper tax return preparation and thoughtful, proactive tax planning are critical components of an attorney’s overall wealth management strategy. Below are some items that every partner should consider:
The important item to remember is that tax consequences should be considered in all aspects of your wealth management. Remember: It’s not what you earn, but what you keep.