The end of the year usually means a last-minute scramble to reduce taxable income. Pushing income into 2011 will provide temporary tax relief but another option could provide even longer-term tax benefits: creating tax-deferred fee structures with payments (and thus taxes) paid over time.
These fee payments do not enjoy the same tax-free benefits of structured settlements for, say, an injured party, but taxes are due only on the portion of payments actually received in the year they are received.
This can be beneficial to attorneys who wish to:
- delay income to later years when their marginal tax bracket may be lower,
- guarantee a predictable and stable income stream over a period of years– not prone to market fluctuations or the health of the legal practice,
- set aside money or arrange lump sum payouts specifically for retirement or children’s educational costs,
- possibly reduce tax obligation by spreading out income over time.
The terms of the structured fee schedule must be determined at the time a case is settled. If you have a case wrapping up by the end of the year, you may want to consider consulting with your tax professional to determine if structuring your fees makes sense. Of course, creating attorney fee structures could be beneficial regardless of the time of year.
Here is an article on the subject (my interview with Mark Simurda, a CPA and tax partner with Lesley, Thomas, Schwarz & Postma, Inc., in Newport Beach) about structuring settlement fees.
Do Structured Fees Make Sense for Your Practice? http://patrickfarber.com/pat-farber-headlines/do-structured-fees-make-sense-for-your-practice/
Patrick C. Farber Structured Settlements Broker – With more than 30 years experience, Pat has placed over $1.75 billion in annuity premiums and U.S. Government notes. He specializes in settlements involving medical malpractice, physical injury, non-physical injury, product liability, workers’ compensation, mass torts, punitive damages, employment, construction defect cases and attorney fees in court hearings, arbitrations and settlement conferences–all at no cost to clients. E-mail Pat personally at firstname.lastname@example.org or call 800-734-3910.