Finances for a Solo Attorney: Tax Season

solo-attorney-finance-taxes

After a year of learning the financial aspects of running a small business, solo attorneys should (deservedly) pat themselves on the back for a job well done.

In a perfect world, every new solo attorney will have been paying estimated taxes from the outset. Don’t worry, I didn’t know what that meant either until I did my taxes for the first time.

Then I got some outside help. Here’s why you should do the same thing.

It should pay for itself

Lots of Americans do their own taxes. Before I ran my own firm, I did my own taxes. Not anymore. It’s not rocket science, but it’s money well spent.

Like any small business owner, I understand the importance of keeping overhead low in order to maximize profit. But hiring an accountant or tax advisor, in my humble opinion, should be considered a necessity.

You can probably spend as much, or as little, as you would like on hiring someone to assist with your taxes. As far as I can tell, there’s nothing super “crazy” about my business, so I’ve gone with a modestly-priced service provider.

They don’t appear particularly interested in testing the boundaries of the tax code, but they also run a very tight ship. And the bottom line is that they are saving me money, considerably more than their fee. That’s money well spent.

They’re experts, you’re not (unless you’re a tax attorney)

Lawyers should be extremely wary of armchair lawyer clients—clients who think they know the law better than you. Many lawyers turn down these clients on the grounds of “I’m the expert, not you.” Oddly, some of these lawyers than disregard their own advice and try and tackle tasks outside of their skills, like tax preparation.

It’s especially dangerous for lawyers to prepare their own taxes because of their propensity to argue. Just because you can make an argument about why your “business trip” to Disneyland was a “business trip,” that does not mean it’s actually deductible, or that it’s a good idea to try it. If getting audited is your idea of a good time, well, more power to you.

Think about all the clients you run across where you find yourself thinking “if they had hired me in the first place, instead of trying to fix it themselves, they wouldn’t be in this mess.” That could be you.

You will spend more time on it than you think

Hiring someone to prepare your taxes does not mean you just sit back and wait for a refund. You still have to gather documents, more documents, and provide tons of information. But that’s where your work should stop and the expert takes over.

Tax software likes to make you think it’s as easy as putting number A in blank 1 and so forth. Even if you get all the numbers in the right place, that probably took a couple of hours. Then you went back and double-checked everything. Then you realized you forgot something. Then you called your friend to ask a “hypothetical question” about taking a business trip to Disneyland.

Chances are, you’ll never plow through your taxes in one sitting, which makes it easy to lose track of how much time you are really spending on them. Do yourself a favor and get some outside help. Oh, and by the way, it’s deductible as a business expense.

(photo: http://www.flickr.com/photos/68751915@N05/6736194099/)

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  • http://constructionlawva.com Christopher G. Hill

    Great advice Randall. One of the first things I did was hire a small business accountant. The time and money saved over the past two and a half years has been tremendous. Not outsourcing these tasks would have been the definition of penny wise and pound foolish.

    • http://consumerlawyer.mn/cgi-sys/suspendedpage.cgi Randall Ryder

      Agreed, it is well worth the money. Do you use an accountant on a regular basis, in addition to tax preparation?