Understanding tax laws can feel overwhelming, especially with frequent changes that make it nearly impossible to stay updated. At Aligned CPA, we’re here to ensure your law firm is taking advantage of all possible tax-saving strategies.
Here are five tax-saving strategies every law firm should implement now:
1. Retirement Planning for Law Firms
Law firm owners can choose from SIMPLE IRA, SEP IRA, and Solo 401(k) plans. These options allow for tax-deferred investment growth and tax-deductible contributions.
Each plan is unique, and selecting the right one depends on your firm’s goals. Remember, you can’t contribute retroactively once a tax year closes—so act now to secure these savings.
Related Post: How to Create a Retirement Plan for Your Small Business
2. Hiring Family Members for Tax Benefits
Hiring family members can shift income into lower tax brackets and enable them to contribute to your firm’s retirement plan.
Follow IRS rules:
- Ensure your child meets the legal working age.
- Pay a reasonable wage for the work performed.
- Keep proper records to support this deduction.
Related Post: Tax Strategies for Family-Owned Businesses
3. Implementing Health Reimbursement Arrangements (HRAs)
With a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), law firms can reimburse employees for out-of-pocket medical expenses tax-free.
Requirements for QSEHRA:
- Fewer than 50 employees.
- No group health insurance offered.
- Equal benefits for all employees.
This strategy can help reduce both income tax and payroll tax liabilities.
4. Choosing the Right Business Entity
Your firm’s entity type—whether a sole proprietorship, S Corp, C Corp, or partnership—impacts how much you pay in taxes.
A professional evaluation can save thousands or even hundreds of thousands of dollars. At Aligned CPA, we specialize in helping law firms optimize their entity structure for maximum tax savings.
5. Tax-Free Reimbursement Plans
Reimburse owners and employees for eligible out-of-pocket expenses under an accountable reimbursement plan. This ensures tax-free reimbursements and minimizes IRS scrutiny.
Key components include:
- Detailed policies for expense reporting.
- Proper substantiating documentation.
- Procedures for returning unused advances.
We can help you design and implement a compliant reimbursement plan tailored to your firm.
Take Action Now
The best time to implement these strategies is today. Don’t wait to start saving on taxes—schedule a consultation with Aligned CPA and let’s explore how we can help your law firm save money and grow.
Joy Lutz, CPA, CTP
I help our client’s keep more money in their pockets by implementing proactive tax strategies.
I promise you, working with a CPA and Certified Tax Planner can be much more exciting than crunching numbers and reviewing last year’s taxes.