Practice Management – NWSidebar

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How the IRS Views Structured Legal Fees

All lawyers pay taxes and know that legal fees are income. They are ordinary income and even subject to self-employment taxes. But what about timing? Much in the tax law is about timing. A classic tenet of tax-planning is to try to defer income and to accelerate deductions. For generations, tax lawyers have explored all manner of tax-deferral strategies. According to the IRS, you have income for tax purposes when you have an unqualified, vested right to receive it. Asking for payment later doesn’t change that. The idea is to prevent taxpayers from deliberately manipulating their income. A classic example is a bonus check available in December, where the employee asks to have the employer hold it until Jan. 1. Normal cash accounting suggests that the bonus is not income until paid, but the employer tried to pay in December and made the check available. To the IRS, that makes the bonus income in December, even though it is not collected until January.

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Legal Tech & Practice Management Part 2: Transform Solo- and Small-Firm Billing with Software

During a recent consultation, a lawyer shared that they regularly did not bill the clients until the end of representation. Fortunately, most clients paid after their case had concluded. Unfortunately, one client stiffed the firm on a $50,000 bill for a multiyear-long matter that even proceeded to trial. To make matters worse, the firm had not sent any bills until the matter concluded, and the large outstanding balance enraged the client. After multiple failed efforts to collect the fees, and not wanting to risk a bar complaint, the firm elected to accept its losses and walk away from the fees. The lawyer I consulted with was seeking practice management help to learn about billing software solutions and best practices. I further learned that the firm was struggling to get bills out on a regular schedule, which delayed its own timekeeping and contributed to an overall time-consuming billing process.

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Environmental, Social, and Governance: What Lawyers and Firms Need to Know About Accountability

Environmental, Social, and Governance (ESG) is essentially an investing framework that brings a broad range of what have traditionally been considered nonfinancial factors into financial decision-making and risk analyses. ESG expands corporate accountability beyond shareholders to include external stakeholder expectations on a variety of factors such as climate change, use of consumer data, and racial justice (among many others), which we broadly group into the three buckets of environmental, social, and governance.

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New Advisory Opinion on Malpractice Insurance Disclosure

In September 2021, the Washington Supreme Court adopted amendments to RPC 1.4, which now require disclosure regarding minimum malpractice insurance levels. With some exceptions, this new requirement applies to all practicing attorneys and has generated many questions.

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Legal Technology and Practice Management, Part 1: Practice Management Software as a Hub for Your Practice

Making technological investments in a law firm is fundamental for planning for the life of the practice. According to the Thomson Reuters’ 2021 Report on the State of the Legal Market, 84 percent of surveyed partners expected their firms to increase investments in technology after the pandemic. The pandemic has forever changed the use of technology in law firms and altered consumer expectations. Firms who fail to adapt will be left behind.

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Washington Court of Appeals Addresses ‘Professional Judgment’ Rule in Legal Malpractice

Division I of the Washington Court of Appeals recently addressed the “professional judgment” rule in Angelo v. Kindinger, 2022 WL 1008314 (Wn. App. Apr. 4, 2022). The rationale of the rule, which is a long-standing part of the decisional law of legal malpractice, is that a lawyer should not be held liable for malpractice for a good faith judgment within a range of reasonable alternatives.

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New Advisory Opinion on ‘Reply All’ Emails

Is it OK to hit “Reply All” when responding to an email from another lawyer when that lawyer cc’d their own client on the initiating email? Have you just violated RPC 4.2? Or is including the other client permissible because they were already included in the initial email?
There’s a new advisory opinion which helps you answer this question. The Committee on Professional Ethics just posted Advisory Opinion 202201 on the WSBA website, which takes a comprehensive look at the issue.

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Legal Fee Tax Deduction Gets Easier

Since 2018, it’s been tough to deduct legal fees, and some plaintiffs in contingent fee cases are even taxed on their gross recoveries, not net after legal fees. Creativity is needed in this new age, since sometimes the rules seem to say you shouldn’t be deducting fees at all. Fortunately, the mechanics of deducting legal fees in employment, whistleblower, and civil rights cases have been improved, at long last.

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Why Young Attorneys Fear Working in Rural Areas and Why They Shouldn’t

When the towns of Malden and Pine City were destroyed by fire in 2020, the residents were left with nothing and are still trying to pick up the pieces. They need help dealing with government agencies and state agencies—and I get calls daily for assistance. Most can’t afford an attorney but they still need the […]

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Why Legal Professionals Should Embrace a Legal Regulatory Lab

The Washington Supreme Court’s Practice of Law Board recently met with the Washington Supreme Court justices to update justices on the latest version of the Board’s Blueprint for a Legal Regulatory Lab, a new framework for regulating innovative legal services and business models. A legal regulatory lab is not a physical place; rather, it is a process that uses Supreme Court orders to define a set of customized regulations to allow legal professionals and entrepreneurs to safely test new services.

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How Lawyers Can Create an Inclusive Environment for Coworkers and Clients

Our language, a shared communication tool, reflects our society. As such, we can use it to create a more inclusive environment where all belong. Part of this work is actively and continuously creating a space where gender and pronouns are not assumed. For lawyers especially, this is a critical part of ensuring a healthy workplace and happy clients.

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The Ups and Downs of Starting Your Own Law Practice

For a lawyer who’s thinking about striking out on their own and starting a firm, there are naturally pros and cons. You gain more autonomy in how you practice, but lose the structure of an established firm. You get to choose how you run your business, but you also take on more risk.

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Legal Multitasking: The Advantages of Multiple Section Membership

More than 10,000 WSBA members are also members of the nearly 30 sections spread across the many diverse practice areas of the law. Through sections, these members band together to share knowledge, perfect their skills, and push the boundaries of the legal profession. Just as no single legal professional is limited to one area of law, a number of WSBA members are actually members of multiple sections. Nicholas Pleasants, for example, is one such lawyer. A solo practitioner and owner of Pleasants Law Firm, he participates in three WSBA sections. Read on to find out why he does it and what he gets out of it.

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Analyzing the Year of the New Normal in Washington State Bar News

2021 has been a year of adaptation. Though we went into the year with cautious optimism of a return to normal, it seems that we are now coming to grips with a world in which we are collectively creating our new normal. As Mark Fucile explains in the latest Ethics & the Law column in Washington State Bar News, “there are a number of risk-management considerations for the work of a traditional law firm both inside and outside of a physical office.”

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How Law Firms Can Prepare for Disasters with a Business Continuity Plan

It doesn’t take much to imagine the many disasters that, in an instant, could derail a law firm’s operations. Unexpected events that affect your health — pandemic, perhaps? — or others that affect your working space — think floods or fires — or cyberattacks can severely hamper your ability to provide legal services. Without a strategy to mitigate the effects of sudden calamity, you can lose time, money, and resources trying to recover. You could even end up the subject of discipline or malpractice claims if failure to prepare harms a client.

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Why Every Law Firm Should Offer a Client Portal Service

If you’re reading this, then you’re probably looking at client portals and are in the process of deciding whether your law firm should invest in them. In this guide, I’m going to cut the fluff and get straight into what client portals are all about and what they can do for you.