Expense Account In Law Firms in United States

Practical Information

Note: Some of this information was last updated in 1982

A statement of an individual’s costs incurred for a specific period and purpose, usually for a particular assignment on behalf of the person’s company. Sometimes a lawyer’s firm will advance money, and the lawyer returns the unused portion. Or the lawyer may use his or her own funds, and the company will reimburse the lawyer. If the lawyer accounts to the firm for expenses incurred on its behalf, the lawyer need not report on his or her income tax return those expenses for which the lawyer was reimbursed. The expenses and reimbursements balance, thus having no effect on the lawyer’s income. However, the lawyer must state on the return that reimbursements did not exceed expenses, or if they did that the excess was included in income.

If the lawyer does not account to the firm for expenses, he or she must report them on the return. The lawyer must also attach a statement showing the total of all amounts received from the firm .including the amounts charged to it.

The law firm should keep a record of expenses incurred on behalf of the firm. The record shows the company the amount spent for each item and also serves as a record for income tax purposes. Any form of record that shows the date, description and amount of the expenditures is satisfactory.

(Revised by Ann De Vries)

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