Taxes and Non-Equity Partnership

[Anonymous]

Quick background: I do our taxes. turbo tax, for all its faults, is pretty easy to use and has served us well. DH was just made a non-equity partner at his firm. This change apparently changes the taxes as we now have to do quarterly reporting.

Q: If you or spouse (heck, or both) made partner, were you able to continue to do your own taxes or did you have to hire someone to do them? I want to be prepared for either situation and start looking for someone or making sure I have all the right forms/tools to manage. With the new taxes/responsibilities we're not looking at any rise in income so it would be nice if I could continue to manage but I also don't want to be penny wise and pound foolish and seriously mess something up. Thanks for your help.

[Anonymous]

Not in your situation, but an equity partner at my firm told me he used Turbotax, and that it took him two weeks to do the taxes but that a private accountant would cost a fortune. The firm also had some sort of group filing for certain states.

(Although query why you have to do quarterly reporting? If he's nonequity he should still technically be an employee and get a W2 like everyone else).

[Anonymous]

I've BTDT as a non-equity partner.

Depends on your situation. Just shifting to a quarterly tax payment schedule is not too complex -- you just pay the quarterly taxes, and then properly report payments on your year-end W2. But when I was in that situation, we also had other factors that made it more complicated, like a partner ship K-1 with shared profits and deductions, and also multiple filings in many states. Those elements made tax returns more complicated than I was willing to confront, so switched to an accountant. First accountant suggested by the firm cost something like $2300/yr, but I finally realized I was being ripped off, so I switched to one that charges only about $1200. I have some friends with even cheaper ones, so I'm hoping to switch again.

[Anonymous]

In addition to what others said, I have two other things to consider. I receive the information from my law firm needed to calculate the quarterly taxes maybe two days before the taxes are due and I have to pay taxes in a lot of states so there is a lot to calculate. In many instances, there may not be enough time for me to do all the taxes between receipt of the information and when the taxes are due since I also do have to work, take care of kids, etc. Also, because the taxes are somewhat complicated and have to be paid in so many states, I often get letters from the tax authorities in various states stating (erroneously) that I underpaid. I would say I get at least two of these a year. I just would not have time to figure that out and deal with it so my accountant who really understands everything handles them much better than I ever could. In every case, the state that sent the letter has been wrong but it always seems to take a while for them to recognize it. And, yes, this leads to more accountant fees, but I chalk it up to the price of being a partner (which is hefty as you'll find out). My accountant doesn't understand why anyone would want to be a law firm partner.

[Anonymous]

I'd probably err on the side of safety and hire someone. I always prided myself on doing my own taxes but at a certain point(multistate being one) it exceeded my abilities.

Some non equity partners are K1 and some are W2. Depends on the firm.