Agencies, consultancies, law firms, architects and engineers. Revenue is recognized on work performed, cash arrives later, and the single largest expense walks out the door every evening. The accounting has to keep up with that.
Fixed fees, quoted in writing. Florida licensed CPA.
Cash basis books hide all three of these.
You deliver in March, invoice in April, and get paid in June. On cash basis, March looks empty and June looks like a record month.
Money received before work is performed is deferred revenue. Firms that book it as income on receipt feel rich in January and confused in June, and they systematically overstate profitability in growth periods.
Under Section 199A, law, accounting, consulting and similar fields are specified service trades or businesses, so the 20 percent deduction phases out above the income thresholds. Architecture and engineering are specifically excluded from that limitation.
Owner-operated firms, typically 3 to 50 people.
Unbilled work in progress, receivables and retainer liabilities on the balance sheet, so the profit and loss reflects the period you actually worked.
What each engagement contributes after fully loaded staff cost. Firms are routinely surprised by which of their largest clients earn the least.
Services firms lean heavily on subcontractors and freelancers. The classification has to hold up on the facts, because reclassification carries back payroll taxes and penalties.
S corporation election timing, reasonable compensation for working owners, and how partner draws, guaranteed payments and distributions should actually be structured.
Where the QBI deduction is limited, plan design becomes the primary lever. For a small firm with a high-earning owner, a cash balance plan alongside a 401(k) can shelter a substantial amount.
A remote employee in another state can create payroll registration, withholding and income tax filing obligations there. This surprised a great many firms after 2020 and is still unresolved at plenty of them.
Connected properly, so your books close on live data instead of month-old statements. Where we hold a certification, we say so.
General information, not advice for your situation. Outcomes depend on facts we would need to review with you.
“Philip is more than our CPA, he is part of our team. He is proactive, incredibly responsive, and always thinking ahead about our business and taxes.”
Marketing and creative agencies, management and IT consultancies, law firms, architecture and engineering practices, recruiting firms, and similar businesses where revenue is generated by people delivering expertise. The common thread is that labor is the main cost and timing differences between work, billing and cash are large.
For management purposes almost certainly, because cash basis makes a services firm unreadable. For tax purposes it depends on your gross receipts and entity type, and a firm can maintain accrual books for management while filing on a permitted method. We will tell you which applies rather than defaulting to the cheaper option.
Consulting, law, accounting, health, financial services and similar fields generally are, which means the qualified business income deduction phases out above the income thresholds. Architecture and engineering are specifically carved out and are not treated as SSTBs. Firms that sit near the line, such as an agency that mixes strategy advice with production work, deserve a careful look rather than an assumption.
Potentially payroll registration and withholding in each state where an employee works, and possibly a business income tax filing obligation for the firm itself. Thresholds vary and some states are aggressive. It is worth mapping before a notice arrives, because the registrations are far easier to do prospectively than retroactively.
Fixed and quoted in writing before work starts. We do not run an hourly meter, partly because we do not think you should hesitate before calling your accountant.
Most firms make you book a call before they will name a price. Answer a few questions and get a real starting number in about two minutes.
