If your taxes haven't been processed yet, you are either (a) slacking or (b) using H&R Block (zing!). If you haven't yet filed, this discussion of possible deductions could save you money or prevent an audit. If your tax season is over and done with, this will help with tracking deductions for next year.
You probably know that the lease or purchase of a company car, if only used for business purposes, is tax deductible as a business expense. You may not know that the use of a personal vehicle for business is also deductible. Track miles driven, maintenance expenses, etc., and run the receipts past your CPA.
Credit Card Processing, Banking Fees
Again, many attorneys will remember that the fees paid for their business checking and IOLTA accounts are tax deductible. They may not remember to deduct credit card processing fees. For some payment methods, this can be as much as 2 to 3 percent of the amount processed. However, if you add the fees to your client's bill, obviously, you aren't covering the cost and can't take it as a deduction.
We all know that this is a tricky area. After all, what's to stop someone from turning every meal and party into a "business expense"? The best advice is to use common sense. You'll obviously need to discuss some substantive business matters during the party, such as the law firm's marketing or billing strategies or if a client is present, the case strategy. Another thing to keep in mind is this: Keep the party proportional to the bottom line. If this is a $2,000 case, don't buy Dom Perignon for the client. If your firm is barely breaking even, don't rent a ballroom at the Ritz Carlton. There are more great tips for company parties at Entrepreneur.com.
Let's see how many of these we can list: stamps, notepads, pens, post-it notes, business cards, janitorial services, CLEs, bad debts, bar association dues (state and local), gifts for customers, accountant fees, legal fees, malpractice insurance, newspapers and magazines, practice guides, parking and tolls, safe-deposit boxes, certain local taxes, website design, telephone and internet services, cell phone bill, and the smart phone itself.
For some more helpful small law firm tax tips, check out the Related Resources below.
Editor's Note, February 6, 2015: This post was first published in March 2013. It has since been updated.
- Small Business 101: Law Firm Tax-Preparation Tips (FindLaw's Strategist)
- Small Firm Startup: Tax Tasks to Tackle Before Hiring Employees (FindLaw's Strategist)
- 5 Things You May Be Able to Deduct From Your Firm's Tax Bill (FindLaw's Strategist)
- Small Firm Startup: Income and Self-Employment Taxes (FindLaw's Strategist)