What a law firm CPA does
A law firm CPA keeps the firm’s operating books and trust records consistent with the bar’s rules and prepares the firm’s and partners’ tax returns.
- Trust accounting: setting up and reviewing three-way reconciliations of the trust (IOLTA) account: bank statement, trust journal and client ledgers. ABA Model Rule 1.15 sets the model; each state bar adopts its own version, so requirements vary.
- Case costs: a consistent policy for client cost advances on contingency matters.
- Partner tax: Form 1065 and K-1s, partner draws and compensation, and pass-through entity tax elections such as Virginia PTET and Maryland PTE tax.
- Multi-state filings for partners who work or live in several states. See clients in multiple states.
See our law firm accounting services.
How to verify a law firm CPA’s license
- License. Search the CPA and firm on NASBA CPAverify or through NASBA’s state board directory.
- Tax credentials. The IRS explains credentials and its public directory on Choosing a tax professional.
- Peer review for attest work. If the firm will review or audit your financial statements, look up its report in the AICPA Peer Review public file.
Questions to ask a law firm CPA before hiring
- How do you support monthly three-way trust reconciliations under my state’s Rule 1.15?
- How do you treat client cost advances on contingency cases?
- Do you prepare Form 1065 and K-1s, and advise on pass-through entity tax elections?
- How do you handle partner draws, guaranteed payments and origination credit in the books?
- Have you helped a firm prepare for a bar trust-account review?
- Which practice management and accounting systems do you work with?
Free checklist
Monthly Three-Way Trust Reconciliation Checklist
Red flags
- Trust and operating funds are mixed in the books.
- Case costs are expensed or capitalized inconsistently, with no written policy.
- The CPA is unfamiliar with your state’s trust-account rule.
- No experience with partnership returns, K-1s or partner compensation.
- Trust reconciliations compare only the bank and the checkbook, never the client ledgers.
Why clients choose Your Virtual CPA
- A licensed CPA firm working with law firms nationwide, virtually.
- Law firm accounting, partnership returns and pass-through entity tax planning.
- Transparent fees quoted upfront, in writing.
- A free initial consultation before any work starts.
How it works with us
Best for: solo practices and small to mid-size law firms with trust accounts and partners.
- Free initial consultation. Tell us your practice areas, trust activity, entity type and systems.
- Fees quoted upfront, in writing. An engagement letter before work starts.
- Books and trust review. We check the chart of accounts, trust records and case cost policy.
- Monthly close. Operating books plus three-way trust reconciliation support.
- Tax. Firm and partner returns, estimates and PTE elections.
Practice management software vs bookkeeper vs law firm CPA
| Task | Practice management software | Bookkeeper | Law firm CPA |
|---|---|---|---|
| Trust transactions by client | Records them | Records them | Reviews the setup |
| Three-way trust reconciliation | Reports to support it | Prepares it | Prepares or reviews it |
| Case cost policy | Tracks costs | Records costs | Sets the policy and tax treatment |
| Partner draws and compensation | No | Records them | Structures and reports them |
| Form 1065, K-1s and PTE elections | No | No | Yes |
| Multi-state partner filings | No | No | Yes |
Expert CPAs. Personal attention.
Trust reconciliations not tying out, or partner tax getting complicated? Bring your trust records to a free initial consultation and talk to a CPA.
Frequently asked questions
It compares three records for the trust (IOLTA) account: the bank statement balance, the trust account journal or checkbook balance, and the total of the individual client ledgers. All three should agree. How often you must do it, and what records you keep, depends on your state’s version of Rule 1.15.
Model Rule 1.15 requires lawyers to hold client and third-party property separate from their own, keep complete records of trust funds, and deposit their own funds in the trust account only to cover bank charges. Each state adopts its own version, so check your state bar’s rule.
A CPA or bookkeeper can prepare and review the reconciliation, but the lawyer remains responsible for the trust account under the state’s rules. A good CPA sets up the process so the three balances tie every period and exceptions are flagged early.
It helps. Law firms have trust accounting rules, client cost advances and partner compensation that general CPAs may not see often. A CPA who works with law firms knows how these affect your books and your partnership or PLLC tax returns.
Firms handle advanced case costs differently, for example as an expense or as a receivable, and the tax treatment can differ. Pick a written policy with your CPA and apply it consistently.
Yes. Your Virtual CPA is a licensed CPA firm that works with law firms nationwide, virtually, from your practice management and accounting data.
It depends on the number of partners, trust account activity and the services you need. We quote fees upfront, in writing, after a free initial consultation.
Sources
- ABA Model Rule 1.15: Safekeeping Property
- IRS: About Form 1065, U.S. Return of Partnership Income
- IRS: Choosing a tax professional
- NASBA CPAverify
- NASBA: State boards of accountancy
General information as of October 20, 2026. Tax rules change; talk to a CPA about your situation.