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Funds that you received for benefit of your clients should never get anywhere near your personal income tax return.
If your law firm received funds that represented the gross proceeds of a settlement, including both your firm's fees and the funds that belong to your client, the gross proceeds should have been deposited to your Trust Account, and recorded on the firm's books as a Trust Account Liability. You would subsequently disburse your fees to your firm's operating account (at which time you would record income) and disburse the net proceeds to your client, thus discharging the Trust Account Liability.
Having completed that exercise, your now have the LLC only showing income in the amount of your fees. Those fees, in the aggregate, are reported on Schedule C (Form 1040), along with your business expenses, to determine your business income.
Funds that you received for benefit of your clients should never get anywhere near your personal income tax return.
If your law firm received funds that represented the gross proceeds of a settlement, including both your firm's fees and the funds that belong to your client, the gross proceeds should have been deposited to your Trust Account, and recorded on the firm's books as a Trust Account Liability. You would subsequently disburse your fees to your firm's operating account (at which time you would record income) and disburse the net proceeds to your client, thus discharging the Trust Account Liability.
Having completed that exercise, your now have the LLC only showing income in the amount of your fees. Those fees, in the aggregate, are reported on Schedule C (Form 1040), along with your business expenses, to determine your business income.
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