DH is a new big law partner and I have no clue how to budget

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Do firms no longer retain accounting firms to handle partner’s taxes?

Nope. Most will “recommend” several. But retaining a single firm or even recommending just one is a massive liability.

It’s been awhile since I left big law but all partners in my firm, including nonequity, definitely used one of the big three firms. I guess one could opt out, but few did.

Not the way it works now. Also one of the big three is going to give you zero personal attention and charge a ton.

[Anonymous]

Anonymous wrote:For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

If the end result is way better than you anticipated, you also should have anticipated a really big tax bill. Been there and it sucks but you need to have an explicit talk, in advance, with your accountant about whether you’d rather hold on to your money as long as possible or try to withhold exactly.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This thread is so nauseating.

+1 poor rich people.

No one is complaining, they’re just trying to figure out how to best deal with their situation. If you don’t have anything to contribute you’re just annoying.

[Anonymous]

My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"'

+million

--Biglaw female partner. Whose male colleagues generally are not married to women like this.

[Anonymous]

DH is on year 5 of non-equity partnership and we have learned a lot. My biggest advice is get the family on your health insurance if possible and save more than you think. We had a surprise tax bill of $30,000 this spring. It wouldn’t hurt to have a line of credit set up, this is what we plan on using for the buy in when it comes up.

Like others mentioned, a lot of it depends on the firm structure. We lose a lot in Q1 because of mandatory retirement contributions, so we know that we need to have cash set aside for those months.

[Anonymous]

Anonymous wrote:My take on this is that OP and others are humble bragging about having spouses making lots of money in big law.

-- Biglaw partner whose spouse has never found any of this to be "so complicated"'

+million

--Biglaw female partner. Whose male colleagues generally are not married to women like this.

My take is that you’re stirring the pot. It’s a whole thing, especially if you’re from a background where you’ve never had to deal with k-1s and capital contributions and taxes in multiple jurisdictions.

[Anonymous]

Anonymous wrote:For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

A large portion of DH's income comes at the end of the year (combination of clients paying bills in December and end-of-year bonus). If this is what happened to you then you've got to use that bonus/bigger distribution to pay your tax bill. Not uncommon. If you use the annualized installment method on your taxes or pay the safe harbor amount, you should be able to avoid a penalty for underpayment.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This thread is so nauseating.

+1 poor rich people.

No one is complaining, they’re just trying to figure out how to best deal with their situation. If you don’t have anything to contribute you’re just annoying.

+1. Stop reading if you find it annoying.

[Anonymous]

Take a look at You Need a Budget. It's software I used way, way back to help me get on track and save.

But it sounds like you also need advice specific to partners at law firms. For that, I like the idea someone else here shared of asking a trusted more senior partner for advice or perhaps even a referral to a service provider who can help.

[Anonymous]

Anonymous wrote:Take a look at You Need a Budget. It's software I used way, way back to help me get on track and save.

But it sounds like you also need advice specific to partners at law firms. For that, I like the idea someone else here shared of asking a trusted more senior partner for advice or perhaps even a referral to a service provider who can help.

How is this helpful? OPs problem is the massive unpredictability of partner compensation and the complex tax situation. She didn't ask for help with basic budgeting.

[Anonymous]

Good god people are being awful to you OP.

My DH is also in his first year as a partner and it’s confusing. Thankfully his firm springs for tax advice for new attorneys, but the person upthread who said it feels like a paycut after quarterlies and before EOY is spot on.

It makes perfect sense to me why this would be confusing if you’re used to a system where you pay bills and otherwise budget based on the money that ends up deposited post-tax. This is totally different and we are going through the same thing. I’m thankful to have professional help

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I'm not going to judge you for not being actively involved in the big-picture finances; that's the same in our house (with a gender swap). But if your DH has handled savings/investing in the path, and you handle household/variable/discretionary spending (either with a strict budget or by just keeping an eye on things), I'm not sure why you think you're expected to be responsible for calculating and setting aside taxes under the new system? My guess based on the way you've been managing things is he's already putting estimated taxes aside and leaving you with what's available. That's what I would do.

Well there isn’t a lot to be involved in. We max out 401K, put a certain percentage in other investments, DH has some he just plays around with, and there is the mandatory retirement. We haven’t put aside any for quarterlies. I think his feeling is that we have plenty of money and we aren’t big spenders (relatively speaking) and he just isn’t worried about not having enough set aside for taxes.

Okay, that would make me nervous. In that case I would aim to put at least 30% of what you see every month aside for quarterlies. That way his "we aren't big spenders" assurance will be satisfied, because you can't spend it. After the first year (and the first big disbursement) you should have a better idea of what you'll owe, and a bigger cushion to make those payments from.

It's absolutely worth sitting down with a tax professional in this circumstance to get a better understanding of what's to come, and if his firm didn't provide one then someone in his practice group can certainly recommend theirs.

At most firms you do not need to put anything aside for quaterlies. The firm makes a distribution to you for that. You just need to see if that amount covers you based on expected income or last year's income.

[Anonymous]

Anonymous wrote:Good god people are being awful to you OP.

My DH is also in his first year as a partner and it’s confusing. Thankfully his firm springs for tax advice for new attorneys, but the person upthread who said it feels like a paycut after quarterlies and before EOY is spot on.

It makes perfect sense to me why this would be confusing if you’re used to a system where you pay bills and otherwise budget based on the money that ends up deposited post-tax. This is totally different and we are going through the same thing. I’m thankful to have professional help

We are in the same boat as you too and I agree with PP - we are using an accountant who works with dozens of partners at his firm. The advice has been invaluable, but really, at the end of the day he agrees it’s just impossible to know exactly what you’ll have coming in for budgeting purposes.

I hope it gets easier to figure out as the years go by!

[Anonymous]

Anonymous wrote:

Anonymous wrote:For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

A large portion of DH's income comes at the end of the year (combination of clients paying bills in December and end-of-year bonus). If this is what happened to you then you've got to use that bonus/bigger distribution to pay your tax bill. Not uncommon. If you use the annualized installment method on your taxes or pay the safe harbor amount, you should be able to avoid a penalty for underpayment.

I love how your tax bill is greater to an 97% of the US income, and you can’t figure out your taxes.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:For my final estimated quarterly tax payment last year we were anticipating something like 40k-50k, based on our accountant’s projections. He popped up several days before the due date and said we should pay $250k+. Insanity. We did have a massive year and some unexpected income, but even with that it’s clear he just had us underpaying throughout the year.

Moral of the story: find a really, really good CPA who understands your firm’s approach and documents.

A large portion of DH's income comes at the end of the year (combination of clients paying bills in December and end-of-year bonus). If this is what happened to you then you've got to use that bonus/bigger distribution to pay your tax bill. Not uncommon. If you use the annualized installment method on your taxes or pay the safe harbor amount, you should be able to avoid a penalty for underpayment.

I love how your tax bill is greater to an 97% of the US income, and you can’t figure out your taxes.

Because partnership tax is it's own beast. It's not like filing a 1040EZ. It's not a problem I have, but I completely understand how it's confusing.