Attorneys handle money that isn’t always “theirs” yet. We are aware that retainers can sit in a trust account & client costs may be paid upfront and contingency fees arrive months after the work. Card payments, online filing fees, e-discovery vendors and reimbursements can hit the same bank feed — and the books get complicated super fast. That’s where accountants for attorneys step into the picture.
What are Accounting Services for Attorneys?
Our dedicated accounting services for attorneys are simply the day-to-day and month-end tasks —- focusing on precision in records, readability and readiness for tax filing. In otner words, such services cover bookkeeping & bank and trust reconciliations and financial statements along with tax planning support.
Our services can be outlined as below:
- Recording income based on how your firm earns it — retainers, hourly invoices, contingency payouts
- Tracking client cost advances & reimbursements
- Three-way trust reconciliation that matches the trust bank statement and the trust account ledger with the total of all client/matter ledgers
- Producing statements — that owners can actually use
- Coordinating taxation work and and planning for the following years
What Makes Law Firm Accounting Different from Other Businesses?
Law firms have rules around client funds. The accounting should simply mirror those rules from day 1. IOLTA is a pooled client trust account that holds client funds in trust — generally short-term or nominal — until they are earned or disbursed in parallel to the relevant state’s rules. Solid books separate operating cash — from client money. Such a professional practice shows what is earned vs unearned — and keeps every matter traceable.
Which Reports do Attorneys Need to Review Each Month?
A short set of documentation presents full control without drowning in spreadsheets. The following are the ones that matter most for a practice:
- Profit & loss by month — and by practice area, if it is tracked
- Balance sheet with separation of trust activity
- Cash summary for the next 30–60 days
- Accounts receivable aging linked with the distinct billing system
- Matter-level view of costs advanced and amounts owed back
How Should Bookkeeping for Attorneys be Set Up from Day 1?
The starting point is a structure that fully complies with how the firm works. Then the focus should be on keeping the routine steady. Our accountants for attorneys follow the routine outlined below:
- Building a chart of accounts custom-designed for legal work — fees, cost advances, reimbursements, trust liability
- Keeping separate bank accounts for operating and trust — with clear access controls
- Connecting the practice management & billing and payment tools in order to make sure that the same transaction isn’t entered twice
- Reconciling every bank and trust account monthly — not “when there’s time.”
- Closing the month with a short review in order to prevent errors snowballs.
What Tax Items are Easy to Miss for Law Practices?
Missed items — in general — come from cash timing or owner pay or paperwork — not from exotic tax law. We can exemplify them:
- Quarterly estimated taxes — when revenue is uneven across cases
- Year-end 1099s for specific payments — generally Form 1099-NEC for contractors; some payments to attorneys may be reportable too
- Payroll taxes for staff — plus fringe benefits that need proper treatment
- Owner compensation and distributions in S corporations
- State tax exposure if attorneys or staff work across state lines
- Deductions linked with the owner’s individual taxation picture — K-1 income and retirement contributions or health insurance
What Happens When Accountants for Attorneys Take Over?
Our specialized accountants for attorneys take the first action by getting your records to a place where you can trust them. Then we keep them that way — with a consistent monthly process. If your books require cleanup, we fix the foundation first. This process cover bank balances & trust ledgers and owner activity — before we move into ongoing service.
You get a simple pack as outlined below:
- Reconciled books and a month-end close
- Client-fund ledger tie-out — so each balance matches down to each matter
- Financial statements — with plain-English
- A cash snapshot with key metrics
- A short list of questions or items that necessitates client’s input
Ready to Partner with Dimov Tax?
If you want accounting services for attorneys that complete the way a law practice actually runs — reach out to us. Our team stands ready for professional assistance.
FAQs
Do accounting services for attorneys include IOLTA trust reconciliation?
Yes. Reconciliation for trust activity is performed and matched to matter ledgers in order to keep the client funds and earned fees separate.
What bookkeeping for attorneys helps track cost advances and reimbursements?
Cost advances are recorded by matter. And reimbursements are posted when received in order to keep clear balances.
How often should a CPA for attorneys review estimates and payroll taxes?
A quarterly check-in is the most suitable one in general, with extra reviews after large settlements or major hiring.
Can accountants for attorneys work with Clio and other billing platforms?
Yes. We sync invoices and payments as well as trust transfers in order the books to match the billing reports.
Does accounting for attorneys provide aid in deciding between LLC vs partnership or S corp treatment?
Yes. We run side-by-side projections using owner pay and distributions with self-employment tax exposure.