expenses billed to client

Forum|Forum|6 years ago
August 24, 2020
8 replies
72 views

Attorney bills client for expenses . Should these reimbursements be reported in gross receipts in Sch C and then deducted in Cost of goods sold ( Other costs line 39 Part III)? Or in gross receipts and in Part II expenses of Schedule C? Or not reported since they net to 0?

Thank you for your advice!

ProSeries Professional

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T

TaxGuyBill

If they are reimbursements under an Accountable Plan, they are not reported anywhere.

Otherwise, they are reported as gross income and then report the expense in the appropriate category (travel, office supplies, etc.).

sjrcpa

Level 15

Research Client Costs Advanced.

The more I know the more I don’t know.

qbteachmt

Level 15

One significant issue is Timing. That's why Advanced Costs are held as an asset, to be reimbursed by the client, which washes them away. You don't include them as COGS or any type of Expense under these conditions, and the reimbursement is not Income (not gross or net). Think about the lawsuit that drags on over 3 or more years.

Your State Bar Association should be able to provide you with good attorney accounting references, to help you understand how operations are handled, client prepayment (retainers) are handled, IOLTA funds are handled, and case costs are handled.

If this is new to you, get some mentoring, too.

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J

jgcpaAuthor

Level 5

thank you all. I found the Internal Revenue Manual for Attorneys which had my answer.

qbteachmt

Level 15

It would be great if you post a link to that info; it helps the community, which is peers. Thanks.

Don't yell at us; we're volunteers

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