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

[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.

Ok. They probably get like no deductions at all, you do realize that, right? So maybe you can say thank you. These people at the bottom of the highest tax brackets are funding your tax benefits.

[Anonymous]

Anonymous wrote:

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.

Um been at a partner at several biglaw firms and never had that. Different at every firm.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

Um been at a partner at several biglaw firms and never had that. Different at every firm.

Not aware of a single firm that does not have quaterly tax distributions.

[Anonymous]

Anonymous wrote:

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.

My firm mandates that you use one of the Big 3. Cost is 5-7k. Gets taken out of year end distribution.

[Anonymous]

Keep the same lower income budget and save the rest or dump some of it into paying off the house faster. You don't need to spend more because you have more.

[Anonymous]

Talk to an accountant / financial advisor for heaven sake.

And please, speaking from experience - don’t go around thinking you’re the same old person as before. You are not. It will annoy and offend your friends if you try and pretend that you are living in the same world.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

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.

My firm mandates that you use one of the Big 3. Cost is 5-7k. Gets taken out of year end distribution.

That’s nuts, for multiple reasons. I’ve never paid more than $2500 for my tax return, always using a smaller firm/sole practitioner who does many of my partners’ returns.

[Anonymous]

OP here. Thanks for the replies!

DH doesn’t want to do an financial advisor right now, and I’m okay with that. He has spoken to numerous other parters at his firm, and they all are doing something different. Many have financial advisors, but many don’t. And the financial advisors we have spoken to don’t appear to be offering any advice we haven’t already considered (and much of it we are already following). Also, my issue has been taken care of with the free advice offered on DCUM (plus the idea of doing 529s at the end of the year!).

We do have an accountant, though.

We have an account with money we set aside last year to give us a financial buffer for this year, and DH said he’ll transfer all our extra money into that account each time he gets one of his bigger checks. So our regular checking account balance wont’ show any money we shouldn’t be touching. I think this is going to take care of my issue. I figured this had to be a pretty simple fix.

[Anonymous]

Anonymous wrote:Find a financial advisor who doesn’t invest your money for you, or want to sell you insurance. We were SO happy we found Lori Atwood - she does this for us (with much, much , much less money!). Good luck, OP

OP here, and thanks for the recommendation.

[Anonymous]

I’m one of the PPs who also has a first year partner DH - totally agree that financial advisors aren’t helpful, but I do strongly recommend some tax expertise!!

[Anonymous]

Anonymous wrote:I’m one of the PPs who also has a first year partner DH - totally agree that financial advisors aren’t helpful, but I do strongly recommend some tax expertise!!

OP here and ha DH and I would never dream I’d trying to do taxes by ourselves now! DH is really savvy and likes to DIY everything but not that.

[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.

That's because you don't understand it either -- if you did, you'd contribute a helpful comment. Do you even know how law partnerships are taxed?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I’m one of the PPs who also has a first year partner DH - totally agree that financial advisors aren’t helpful, but I do strongly recommend some tax expertise!!

OP here and ha DH and I would never dream I’d trying to do taxes by ourselves now! DH is really savvy and likes to DIY everything but not that.

One of the PPs here and yea, financial advisor seems like a complete waste of time but the tax help is a lifesaver.

[Anonymous]

Anonymous wrote:OP here. Thanks for the replies!

DH doesn’t want to do an financial advisor right now, and I’m okay with that. He has spoken to numerous other parters at his firm, and they all are doing something different. Many have financial advisors, but many don’t. And the financial advisors we have spoken to don’t appear to be offering any advice we haven’t already considered (and much of it we are already following). Also, my issue has been taken care of with the free advice offered on DCUM (plus the idea of doing 529s at the end of the year!).

We do have an accountant, though.

We have an account with money we set aside last year to give us a financial buffer for this year, and DH said he’ll transfer all our extra money into that account each time he gets one of his bigger checks. So our regular checking account balance wont’ show any money we shouldn’t be touching. I think this is going to take care of my issue. I figured this had to be a pretty simple fix.

Just fyi, there was no extra money from our quarterly draws after tax payments. Sadly. And make sure you understand how much medical will be. It was 4-5k per month for us, so a high chunk out of the monthly paycheck. Made it hard to save during the year.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the replies!

DH doesn’t want to do an financial advisor right now, and I’m okay with that. He has spoken to numerous other parters at his firm, and they all are doing something different. Many have financial advisors, but many don’t. And the financial advisors we have spoken to don’t appear to be offering any advice we haven’t already considered (and much of it we are already following). Also, my issue has been taken care of with the free advice offered on DCUM (plus the idea of doing 529s at the end of the year!).

We do have an accountant, though.

We have an account with money we set aside last year to give us a financial buffer for this year, and DH said he’ll transfer all our extra money into that account each time he gets one of his bigger checks. So our regular checking account balance wont’ show any money we shouldn’t be touching. I think this is going to take care of my issue. I figured this had to be a pretty simple fix.

Just fyi, there was no extra money from our quarterly draws after tax payments. Sadly. And make sure you understand how much medical will be. It was 4-5k per month for us, so a high chunk out of the monthly paycheck. Made it hard to save during the year.

I was just thinking that it’s kind of cute how so many here assume that a first year partner automatically makes more money. It’s not uncommon for first year partners to take home less than they did before after buy in & other new expenses are taken into account.