Tax-Season Prep Checklist for Law Firms
Tax season goes faster and costs less when your books are ready before your CPA asks. For law firms, that means reconciled operating and trust accounts, accurate financial statements, organized contractor records, and clear documentation of client costs and owner draws. Here’s what to have in place.
Start With Reconciled Books
Reconcile every bank, credit card, and loan account through year-end.
Complete the three-way reconciliation for every trust and IOLTA account. See: Trust Account & IOLTA Reconciliation
Review uncategorized transactions and correct any miscoded items.
Confirm retainers and trust deposits weren’t recorded as income.
If your books are behind, start now. See: Law Firm Bookkeeping Cleanup
Financial Statements Your CPA Will Want
Year-end profit and loss statement
Year-end balance sheet
General ledger detail, if requested
See: Law Firm Balance Sheet and Law Firm Profit and Loss
Contractor and 1099 Records
Collect W-9s from contractors and other vendors you paid during the year.
Total payments by vendor from your books.
Ask your CPA or payroll provider which vendors need a 1099 and when they’re due.
Payroll and Owner Records
Year-end payroll reports that match the books
Owner draws, distributions, and any owner contributions
Health insurance, retirement contributions, and other benefits paid for owners
Other Documents to Gather
Loan statements showing year-end balances and interest paid
Records of equipment and other large purchases
Advanced client costs by case, including costs on closed or lost matters
Any large or unusual transactions, with notes
See: Year-End Bookkeeping Checklist
How Azar Insights Helps
Year-end close and reconciliations, including trust accounts
Clean, CPA-ready financial statements
Catch-up work for firms that fell behind during the year
Frequently Asked Questions
When should a law firm start preparing for tax season?
In the fall, ideally. Starting with a clean year-end close in December makes January and February much smoother. If the books are behind, start the catch-up work as early as possible.
What does my CPA need from my law firm?
Usually reconciled accounts, a year-end balance sheet and profit and loss statement, payroll reports, contractor payment totals, loan statements, and records of large purchases. Ask your CPA for their specific list.
Do I need to send 1099s to contractors?
Possibly. The rules depend on who you paid, how much, and how you paid them. Your CPA or payroll provider can confirm which vendors need a 1099 and the filing deadlines.
Do trust accounts affect our tax return?
Client funds held in trust aren’t firm income. Clean trust records make it clear what was earned and transferred to operating, which helps your CPA report income correctly.
What if our books aren’t ready when the CPA needs them?
A catch-up project can reconcile the missing months. Most cleanups take 45 to 60 days, so the earlier you start, the better.
Azar Insights provides bookkeeping and accounting services. Consult your CPA for tax advice.
Related Reading
Year-End Checklist · Bookkeeping Cleanup · Cash vs. Accrual
About Azar Insights
Azar Insights provides outsourced bookkeeping, accounting, and fractional controller and CFO services for law firms nationwide. With 15 years of accounting experience, we work remotely with solo attorneys and multi-partner firms using secure, cloud-based tools.