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Who We Serve · Law Offices

Run the firm with the rigor you bring to the client's file.

Law firms hold money that isn't theirs, collect revenue in lumps, and carry an owner tax profile the Code treats as a specified service. Our three practices handle the trust reconciliations, the case-cost and fee-deferral questions and the partner economics in one engagement — built for personal injury, transactional, family law and estate planning practices.

Schedule a Strategy Session Where the leverage is
  • Personal injury and contingency-fee firms
  • Transactional and business-law practices
  • Family law firms
  • Estate planning and probate practices
  • Solo attorneys forming or converting an entity
  • Multi-partner firms with IOLTA and trust accounts
  • $403,5002026 joint taxable income where §199A limits begin for law, an SSTB; gone $150,000 higher1,2
  • 5 yearsHow long Indiana trust-account records must be kept after each matter concludes3
  • 2.95%Indiana pass-through entity tax rate for 2026, elected each year by the partnership or S corporation4
  • $290,0002026 §415(b) limit on the annual benefit a defined benefit or cash balance plan can provide5

Figures verified October 23, 2026 · sources at the end of this page

The financial shape of the business

Law firm finance runs on three ledgers.

The operating books, the trust books and the case inventory follow different rules, and most problems start where they touch.

  1. 01

    Trust money has its own rulebook.

    Indiana's Admission and Discipline Rule 23 §29 requires a deposit and disbursement journal, a ledger for each client, a ledger of the firm's own nominal funds, and periodic reconciliation of all three to the bank statement. Advance fees and expenses go into trust and come out only as they are earned or incurred (Prof. Cond. R. 1.15(c)).

  2. 02

    Contingency revenue arrives in lumps.

    A personal injury practice can carry years of advanced costs and unbilled effort before a settlement converts them to fees. Cash planning, partner draws and credit lines have to be built around the case inventory, not the calendar.

  3. 03

    Each practice type bills differently.

    Estate planning and transactional firms lean on flat fees, family law firms on retainers held in trust, litigation firms on hourly or contingency matters. Each produces a different revenue pattern, a different load on the trust account and a different set of KPIs.

Tax Advisory

Where law firm taxes are won or lost.

These provisions move the numbers for firm owners, with figures current for 2026.

  • Law is a specified service under §199ALegal services are a specified service trade or business (§199A(d)(2), cross-referencing §1202(e)(3)(A)). For 2026 the QBI deduction on law-firm income phases out between $201,750 and $276,750 of taxable income for single filers and between $403,500 and $553,500 for joint filers. P.L. 119-21 made §199A permanent and widened the phase-in ranges from $50,000/$100,000, so planning around the threshold — retirement contributions, timing, entity choice — now has a long horizon.2,1
  • Entity choice: S corporation, partnership or QPSCSmall firms commonly operate as S corporations or partnerships. A law-firm C corporation that is a qualified personal service corporation pays the flat 21% rate (§11(b)) and can stay on the cash method regardless of size (§448(b)(2)). Law is excluded from QSBS treatment (§1202(e)(3)(A)), so the exit math for a law-firm C corporation differs from other C corporations.6,7,8
  • Case costs are loans, not deductionsUnder the general rule, costs a firm advances on a contingency matter and expects to recover from the settlement are loans to the client, deductible only when they become worthless (Canelo v. Commissioner, 447 F.2d 484 (9th Cir. 1971)). The Ninth Circuit allowed a current deduction where a 'gross fee' contract gave the firm no right to reimbursement (Boccardo v. Commissioner, 56 F.3d 1016 (9th Cir. 1995)). Indiana's Rule 1.8(e)(1) permits advancing costs with repayment contingent on the outcome; the cost terms in the fee agreement drive the tax treatment.9,10,11
  • Structured fees: the IRS disagrees with ChildsChilds v. Commissioner, 103 T.C. 634 (1994), aff'd, 89 F.3d 856 (11th Cir. 1996), let attorneys defer tax on contingency fees paid over time under settlement agreements in which they held only a general creditor's claim. In AM 2022-007 the IRS concluded that a firm sending its fee to a third party to defer receipt has income when the funds are transferred, relying on the assignment-of-income and economic benefit doctrines, §83 and §409A. Deferral now calls for careful documentation and a clear view of the audit risk.12
  • 1099 reporting runs in both directionsPayers report settlement checks to the attorney as gross proceeds in Form 1099-MISC box 10 once they reach $600 — including the client's share — so IRS matching shows more than the firm's fees. Attorneys' fees of $2,000 or more go in Form 1099-NEC box 1a for 2026, and the exemption for payments to corporations never applies to legal services. Firms paying expert witnesses report those payments as well.13
  • Indiana pass-through entity taxPartnerships and S corporations can elect to pay Indiana income tax at the entity level (IC 6-3-2.1) at 2.95% for 2026 and 2.90% for 2027. The election is made each year on the original IT-65 or IT-20S, or on Form IN-PTET by the return's due date including extensions, and it binds every owner. Under Notice 2020-75, the entity deducts the tax and it isn't counted against owners' SALT limitation.4,14
  • Cash balance plans for partnersA cash balance plan is a defined benefit plan, so it is limited by the annual benefit it can provide — $290,000 for 2026 under §415(b) — rather than the $72,000 §415(c) cap on defined contribution additions. Paired with a 401(k) ($24,500 deferral, $360,000 compensation limit), it lets high-earning partners shelter far more than a 401(k) alone. Funding is a firm-level commitment, so we model it against the case inventory before the actuary sets the plan.5

CFO Advisory

The numbers managing partners should see monthly.

Hours and fees tell part of the story. These metrics show where the firm's cash is tied up and which matters actually pay.

MetricWhat it tells youCadence
Realization rateBilled value as a share of standard rates on time worked, and collected value as a share of billed. The gap between the two shows whether discounts happen at the invoice or at collection.Monthly · By timekeeper
UtilizationBillable hours against available hours by timekeeper. Read alongside realization, it separates capacity problems from pricing problems.Monthly
Lockup (WIP days + AR days)Days of unbilled time plus days of billed but uncollected fees — the clearest single measure of cash tied up in the practice.Monthly · Trailing 3 months
Case cost inventory and agingAdvanced costs by matter, stage and age, with expected recovery. For contingency practices this is the balance-sheet asset that converts to cash only when cases resolve.Monthly · By matter
Contingency pipeline valueOpen matters weighted by stage and expected fee, used to plan draws, hiring and credit-line use around likely settlement timing.Monthly · Quarterly
Origination and working-attorney creditRevenue by originating and working attorney — the basis for partner compensation discussions that rest on numbers rather than recollection.Quarterly · Annual
Trust-to-ledger varianceThe difference between the bank balance, the journal and the sum of client ledgers. The target is zero; any variance is resolved before the next disbursement cycle.Monthly
Effective hourly rate on flat-fee mattersFees collected divided by hours actually worked on flat-fee estate planning, family and transactional matters, showing which packages are priced correctly.Quarterly · By matter type

Accounting & Compliance

What we run, and who we coordinate with.

Trust accounting, payroll and the tax calendar are recurring work we own. Plan design, banking and fee structuring involve specialists we work beside.

Handled by our team

  • Monthly trust reconciliation — journal, client ledgers and attorney-funds ledger matched to the bank statement, with the reports retained as Rule 23 §29(a)(7) requires
  • Independent reconciler — when a non-attorney can disburse, reconciliation by someone without disbursement authority, as Rule 23 §29(c)(3)(ii) requires
  • Earned-fee transfers — fees moved from trust to operating before they are spent, never paid out of trust directly
  • 1099 reconciliation — box 10 gross proceeds matched to trust deposits; Forms 1099-NEC issued to experts, co-counsel and vendors
  • Payroll and owner compensation — reasonable-compensation support for S corporation owners and guaranteed payments for partners
  • Indiana PTET — annual election analysis, estimated payments and owner credit tracking
  • Unclaimed trust funds — tracking toward the five-year Rule 1.15(j) process and remittance to the Indiana Bar Foundation

Coordinated with your specialists

  • Plan actuary and third-party administrator — cash balance and 401(k) design, testing and annual filings
  • The firm's bank — approved-depository status for trust accounts and any overdraft report sent to the Disciplinary Commission
  • Structured-settlement and annuity providers — fee-deferral arrangements reviewed before settlement documents are signed
  • Lenders — schedules and reconciliations behind credit lines and case-cost financing

What changed · What’s next

Dates that matter to firm owners.

Recent changes and the filing dates that follow from them.

  1. IRS AM 2022-007

    Chief Counsel concludes that sending a contingency fee to a third party to defer receipt creates income when the funds are transferred, and that an unfunded version would fail §409A.12

  2. Current Rule 1.15 in effect

    Indiana's safekeeping rule includes an unclaimed-funds procedure — reasonable efforts over five years, then remittance to the Indiana Bar Foundation — and requires engagement letters to describe it.15

  3. §199A made permanent

    P.L. 119-21 removed the 2025 sunset and, for tax years beginning after 2025, widened the SSTB phase-in range to $75,000 single and $150,000 joint.2

  4. 1099 thresholds split

    Attorneys' fees on Form 1099-NEC report at $2,000 for 2026 payments; gross proceeds in Form 1099-MISC box 10 still report at $600.13


  5. Ahead

    2026 Forms 1099-NEC due

    January 31, 2027 falls on a Sunday, so 2026 Forms 1099-NEC are due to recipients and the IRS on the next business day.13


  6. Ahead

    Partnership and S corporation returns

    Calendar-year 2026 Forms 1065 and 1120-S are due. An Indiana PTET election for 2026 is made on the original IT-65 or IT-20S, or on Form IN-PTET by the due date including extensions.16,17,4

The Beaconshire Method

How an engagement runs.

Four phases, one accountable team. Tax, CFO and accounting work move together, so a decision made in one discipline is already reflected in the other two.

  1. Phase 01

    Discovery

    We review trust records, fee agreements, the case-cost ledger, entity documents and recent returns, and test one month of trust reconciliation from bank statement to client ledger.

  2. Phase 02

    Strategy

    We set the entity and owner-compensation structure, the case-cost and fee-deferral positions, the PTET decision and the retirement-plan design.

  3. Phase 03

    Implementation

    We rebuild the chart of accounts around matters, clean up client ledgers, start monthly trust reconciliations and file the elections on time.

  4. Phase 04

    Stewardship

    Monthly KPI package and trust reconciliation, quarterly tax projections ahead of estimated payments, and a year-end planning meeting before December 31.

Run the numbers first

CalculatorS-Corp vs. LLC Tax SavingsPayroll tax, the §199A trade-off, administration and state costs, and a reasonable-compensation check. CalculatorOwner Retirement & Solo 401(k)Deferral, catch-up by age and the employer share — Solo 401(k) vs. SEP vs. SIMPLE, and the tax saved. Calculator13-Week Cash Flow & RunwayWeek-by-week closing cash with payroll, estimated-tax dates and one-off items — the low point and runway.

Where this work lives

Tax Advisory & Planning

Year-round planning, entity design and multi-year projections — scoped so the savings justify the fee.

Explore advisory →

Fractional CFO

Forecasts, KPI dashboards, lender and board reporting, and a monthly close review.

Explore fractional CFO →

Bookkeeping

Tax-ready books and cleanup — the foundation every strategy and forecast depends on.

Explore bookkeeping →

FAQ

Common questions.

Can our firm deduct case costs when we pay them?

Usually not. If the fee agreement makes costs reimbursable from the recovery, the courts treat them as loans to the client, deductible only when they become worthless (Canelo). The Ninth Circuit allowed a current deduction for a firm whose 'gross fee' contract gave it no right to reimbursement (Boccardo), but that is one circuit and one contract form. We review the agreements and set up a cost ledger that supports whichever treatment applies.

Does the QBI deduction help a law firm?

Only below the threshold. Law is a specified service, so for 2026 the deduction shrinks as joint taxable income rises from $403,500 to $553,500 ($201,750 to $276,750 single) and disappears above that. Owners near the range often have room to stay under it through retirement contributions and timing.

Will you reconcile our IOLTA account?

Yes. We reconcile the journal, every client ledger and the attorney-funds ledger to the bank statement each month and keep the reports for the five years Indiana requires. Signing authority stays with the firm's attorneys. When a non-attorney disburses, Rule 23 requires the reconciliation to be done by someone without disbursement authority — a role we fill.

Should our firm elect the Indiana PTET?

Often, but not automatically. The tax is paid at the entity level — 2.95% for 2026 — and deducted by the entity federally. It must be elected every year, binds all owners, and interacts with nonresident owners and other credits. We run the comparison before the return is filed.

Can we still structure our contingency fees?

Childs remains the leading case allowing deferral, and there the payment schedule was built into the settlement agreements themselves. The IRS's AM 2022-007 takes the opposite view for arrangements that route fees to a third party before settlement. We model the cash and tax effect and coordinate with the structured-settlement provider and the firm's counsel before anything is signed.

Why does the IRS show more income than our books?

Payers report the full settlement check made out to the firm as gross proceeds in Form 1099-MISC box 10, including the client's share, while the firm's return reports only its fees. We reconcile every box 10 amount to trust deposits and disbursements, so a matching notice can be answered with a schedule.

Other industries we serve

Sources

  1. [1]Rev. Proc. 2025-32 (2026 inflation adjustments) — IRS
  2. [2]26 U.S.C. § 199A — Qualified business income (with P.L. 119-21 § 70105 notes) — Legal Information Institute (Cornell Law School)
  3. [3]Indiana Admission and Discipline Rule 23, Part V — Trust Accounts (Sections 29–30), effective July 1, 2023 — Indiana Supreme Court
  4. [4]Income Tax Information Bulletin #72B — Pass Through Entity Tax (July 2025) — Indiana Department of Revenue
  5. [5]Notice 2025-67 — 2026 amounts relating to retirement plans and IRAs — IRS
  6. [6]26 U.S.C. § 11 — Tax imposed (corporations) — Legal Information Institute (Cornell Law School)
  7. [7]26 U.S.C. § 448 — Limitation on use of cash method of accounting — Legal Information Institute (Cornell Law School)
  8. [8]26 U.S.C. § 1202 — Partial exclusion for gain from certain small business stock — Legal Information Institute (Cornell Law School)
  9. [9]Canelo v. Commissioner, 447 F.2d 484 (9th Cir. 1971), aff'g 53 T.C. 217 (1969) — Justia
  10. [10]Boccardo v. Commissioner, 56 F.3d 1016 (9th Cir. 1995) — Justia
  11. [11]Indiana Rule of Professional Conduct 1.8 — Conflict of Interest: Current Clients: Specific Rules — Indiana Supreme Court
  12. [12]AM 2022-007 — Payment of legal fees to a third party (Generic Legal Advice Memorandum, Dec. 9, 2022) — IRS Office of Chief Counsel
  13. [13]Instructions for Forms 1099-MISC and 1099-NEC (Rev. December 2026) — IRS
  14. [14]Notice 2020-75 — Deductibility of payments by partnerships and S corporations for certain state and local income taxes — IRS
  15. [15]Indiana Rule of Professional Conduct 1.15 — Safekeeping Property (effective Oct. 1, 2024) — Indiana Supreme Court
  16. [16]Instructions for Form 1065 (2025) — IRS
  17. [17]Instructions for Form 1120-S (2025) — IRS

Figures and deadlines verified October 23, 2026

Start with one month of trust records.

We'll reconcile it, review your fee agreements and case-cost ledger, and show you the tax and cash picture. Every project is scoped so the potential tax savings and financial clarity justify the cost of our fees — and if we don't believe the math works in your favor, we'll tell you before you engage.

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