Under the recent Tax Cut and Jobs Act, a gem of a deduction exists for passthrough entities, which most law firms are. Most of our clients are plaintiff contingency fee lawyers.
This quick tax update is vital if you make just slightly over $300K after all other factors are considered. This deduction is allowed for service professionals (Get confirmation from your tax advisor, or call Mike Dansa at Dansa & D’arata of Buffalo, 716.842.3900). The deduction phases out at $315,000 married joint filing.
As you plan your cases, settlements, income and overall quality of life, if you can afford to defer income, our attorney fee strategy could be worth considering.
Much like a traditional structured settlement, attorneys participating in our Attorney Fee Deferral Program must elect periodic payment obligations from either the defendant or a QSF administrator in exchange for a release. Since Metlife received favorable tax guidance on periodic payments that were backed by the SP500 in 2003, many firms have successfully leveraged this practice to the betterment of their trial lawyers clients’ lives.
The decision to defer must be made along with the settlement of the underlying plaintiff case. You may defer an unlimited amount of income, and based upon the exception in 409A, attorney fee structures (fixed or equity) are not considered qualified or non qualified deferred compensation plans. See Robert Wood’s article on the subject here.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).