Black Lawyers & Generational Wealth: What History Teaches Us About Financial Power
February 3, 2026
How to File Your Law Firm Taxes with Confidence in 2026
For most law firm owners, tax season feels like a sprint—racing against the clock, scrambling to find receipts, and praying you didn’t miss anything that could trigger an audit or cost you money.
But it doesn’t have to be that way.
Filing your 2025 taxes in 2026 should feel like closing out a winning season—not cleaning up a mess. With the right systems, strategy, and support, you can file with confidence, clarity, and maybe even a little celebration.
Here’s what that looks like—and how to get there before deadlines start looming.
✅ Step 1: Understand Exactly What You’re Filing
Too many lawyers assume tax season is just about their Form 1040 and maybe a Schedule C—but if you’re running a real firm, it’s more complex.
Depending on your structure, your tax responsibilities may include:
- S Corporations – Filing an 1120S plus issuing K-1s to owners
- LLCs/PLLCs – Filing as disregarded entities, partnerships, or S Corps
- Partnerships – Filing a 1065, including K-1s
- Trust Accounts (IOLTA) – While not taxed, these accounts must be properly tracked to avoid compliance issues
Your firm’s entity type determines what gets filed, how income is reported, and what counts as taxable.
If your CPA hasn’t asked about this—or if you’re unsure what forms you’re even supposed to be filing—it’s time for a strategy session. Get our free ebook: Is Your Accountant Qualified to Work with Lawyers?
💸 Step 2: Know What Counts as Income
Many firm owners assume that whatever hits their business bank account is income—but the IRS is more nuanced.
You’ll need to include:
- Earned revenue (fees for services rendered)
- Referral fees or co-counsel income
- Income from contingency cases resolved in 2025
- Any interest earned (yes, even a few dollars from IOLTA)
- Non-traditional revenue (like legal courses or speaking fees)
You should not include client retainers still held in trust or reimbursements not categorized as income.
The clearer your books, the cleaner your taxes.
🧾 Step 3: Have Your Financial Reports Ready
If your CPA asks for your Profit & Loss, Balance Sheet, and General Ledger, and you can’t confidently run them from your accounting software… you’ve got a problem.
At Prestige Accounting, we’ve helped dozens of firms upgrade from spreadsheets and “bank balance math” to real-time dashboards that show:
- Actual revenue vs. projected revenue
- Overdue invoices and AR aging
- Spending by category (hello, tax deductions)
- Safe-to-draw cash vs. tax reserve balances
The better your reporting, the more deductions, savings, and compliance protection you’ll have.
🧠 Step 4: Don’t Miss These Key Deductions
Here are just a few commonly missed write-offs law firm owners often overlook:
- Legal research platforms (Westlaw, Lexis, etc.)
- Business coaching or retreats (of course Climb to Cash counts)
- Home office expenses
- Legal tech subscriptions (Clio, MyCase, Lawmatics)
- Business use of personal car
- Marketing services (ads, consultants, video production)
If your books aren’t categorized correctly, your CPA won’t know to deduct them. That’s money left on the table—and confidence lost.
📉 Step 5: Fix the Cash Flow Gaps Before You File
Even profitable firms run into cash trouble at tax time—usually because they’ve pulled too much in distributions or haven’t saved for their tax liability.
Here’s the truth: Profit ≠ cash ≠ safe-to-spend.
If you haven’t forecasted your tax bill using real data, you’re gambling.
We help our clients set up monthly cash flow systems with built-in tax reserves. That means:
- No last-minute panic
- No surprise tax bills
- No accidental IRS debt
It’s not magic. It’s just strategy—and it works.
🛡️ Bonus: Don’t Forget About IOLTA & Compliance
Tax time is also a chance to review your trust accounting practices, especially if your firm handles client funds.
✅ Make sure you’ve done monthly three-way reconciliations
✅ Verify all earned vs. unearned income is separated
✅ Close out all inactive trust balances
✅ Document everything for bar audit protection
Need help with IOLTA? We’ve built a dedicated resource at FixMyTrustAccount.com to support attorneys in every state.
🎯 You Don’t Need to Stress About Taxes—You Need a Plan
The lawyers we work with don’t walk into tax season stressed. They walk in with:
- Clean, up-to-date books
- Final reports ready for filing
- A mapped-out tax plan
- Confidence that they’re not missing anything
If that sounds better than what you’ve been doing, we should talk.
💼 Ready to File With Confidence?
Don’t wait until March to realize you’re behind. Book a consultation and let’s build the systems that support your law firm’s profitability, compliance, and peace of mind.
