Tax Alert No 01

It’s important to remember that a standard payment processor will keep a certain percentage of each transaction as a fee. Because of this, you run the risk of breaking certain trust accounting laws (those transaction fees need to be immediately paid back into the trust account). The act of “bookkeeping” produces financial statements, which your CPA then uses to file your taxes.

For example, when you send an invoice to a client, you’ll mark it as revenue, even though you might not get paid for 30 days. One mistake when recording your debits and credits, and your entire balance won’t add up. Accounting software where you download transactions can help avoid this error, as can double-checking entries as you go. The most powerful solution to this problem is taking the time to frequently update your books (or outsourcing your bookkeeping to a team that will reconcile the numbers for you). You’re busy providing legal services and developing business so that Uber expense to meet a client falls through the crack.

4 Calculating holiday pay for irregular hours workers and part-year workers

Cooper Hurley Injury Lawyers has been a leader in personal injury litigation in Chesapeake and the surrounding cities in Hampton Roads and coastal Virginia. Many different factors can affect the timing of a refund after the IRS receives a return. Although the IRS issues most refunds in less than 21 days, the IRS cautions taxpayers not to rely on receiving a refund by a certain date, especially when making major purchases or paying bills. Some returns may require additional review and may take longer. The easiest way to check a refund’s status is by using Where’s My Refund? So with this system, we can add the contractor or of counsel names as separate users or as separate timekeepers, and we don’t have to pay for additional subscriptions to enter their time.

The following example uses a worker’s gross pay data to set out how to calculate paid and non-paid weeks. The reference period must only include weeks for which the worker was actually paid. It must not include weeks where they were not paid as they did not work. Where this gives less than 52 weeks to take into account (that is, where the worker has many weeks without any remuneration), law firm bookkeeping the reference period is shortened to that lower number of weeks. Where a worker has been employed by their employer for less than 52 weeks, the reference period is shortened to the number of weeks of their employment. If a worker has not been in employment for long enough to build up 52 weeks’ worth of pay data, their employer should use however many complete weeks of data they have.

Keep strict records

You should be charging your clients accordingly for your services. Otherwise, you could wind up losing clients to other firms (and no bookkeeper wants that). The FUTA tax rate is 6%, which taxes wages up to the first $7,000 earned by the employee during the year. There are also state and sometimes municipal payroll taxes to be collected.

• The calculation method follows the same principle as the accrual method for statutory holiday entitlement outlined in section 3.1.
• Speak to your accountant to make sure you are correctly withholding each payroll tax.
• Double-entry accounting is a system of bookkeeping where every entry to an account (i.e., every financial transaction) requires a corresponding and opposite entry to a different account.
• When it comes to key accounting concepts, it’s really about organization.

Taxpayers will continue to see helpful changes at the IRS following ongoing transformation work. Average cost will be around $200- $3000 / month depends on volume, nature and complexity of work. We have prepared comparison of outsourced bookkeeping rates by various agencies, CPA, freelancers in this post. Accounts receivables, also known as A/R, are amounts owed to you by clients.

Common legal accounting and bookkeeping mistakes

Your bookkeeper goes into your accounting software regularly (at least weekly) and records all the money coming in and all the money going out so that it appears in the correct place. Cash accounting is also beneficial because you can look at your bank balance at any time to understand the amount of money available. Since revenue isn’t recognized until the cash is paid, there are no income taxes until the money is in your bank account. In fact, some bookkeeping tools integrate with your practice management tools, allowing you to easily track your clients, invoices, and more. Make sure whatever tool you use integrates, or choose an all-in-one software for both.

• But rules vary by state, so consult your State Bar Association and a professional accountant before finalizing your accounting setup.
• Your business’s accounting method will affect cash flow, tax filing, and even how you do your bookkeeping.
• Without the proper business bank accounts, you risk inaccurate bookkeeping, messy records, and potential compliance violations regarding trust funds.
• The IRS doesn’t require you to keep records of certain expenses under $75, but we still recommend that to be safe, you keep digital copies of all records.

If a taxpayer resides in a federally declared disaster area, they also may have additional time to file. Qualification of bookkeeper / accountant is important factor. Many believe that non – commerce degree holder person can do accounts. I am agree but he does not understand basic principles of accounting and there are chances of errors.

Commingle operating and Client Trust Account funds

With all the options available, we know it’s difficult to choose which software is the best choice for your firm. After all, you have to sift through the options alone, convince your partners to agree, and pray that it works as it should. Biglaw Investor is helping thousands of lawyers manage and eliminate student loans and make great investment decisions. We’re on a mission to help every lawyer achieve financial independence. Anyone who has started a business has been guilty of this mistake. Intermingling expenses isn’t a fatal mistake but it causes problems for your business when it comes to claiming expenses and tracking the financial health of your business.