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Run the Payroll Fee Auditor →Blog · Payroll Management · Law Firm
Law Firms: Integrating Benefits with Payroll (2026)
Benefits integration for law firms means every benefit deduction and every employer contribution flows through payroll with the right pre-tax or post-tax treatment, the ACA count runs from payroll hours, and the law firm items cited here, IRS Publication 15 (2026) and IRS Paying yourself. BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Benefit rules that reach law firms
Attorney and staff bonuses are wages subject to Social Security, Medicare, FUTA and income tax withholding. Bonuses paid separately from regular wages are supplemental wages withheld at a flat 22 percent, rising to 37 percent on an employee's supplemental wages above $1 million in a calendar year.
Partners are not employees and should not be issued a Form W-2 for distributions or guaranteed payments from the partnership. Those amounts are reported to the partner on Schedule K-1 of Form 1065.
What integration actually does
Section 125 pre-tax premiums come off before FICA and income tax; 401(k) deferrals come off before income tax only; Roth and most voluntary deductions are post-tax. Employer contributions are recorded per employee for the 401(k) census and Form 5500. Payroll hours feed the ACA full-time and full-time-equivalent count, and at 50 or more the offer of coverage is documented on Form 1095-C from that same data. For law firms with billable hours tracking, the benefit base has to be defined per plan document, because the plan decides whether that pay counts as compensation.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Attorney and staff bonuses are wages subject to Social Security, Medicare, FUTA and income tax withholding. Bonuses paid separately from regular wages are supplemental wages withheld at a flat 22 percent, rising to 37 percent on an employee's supplemental wages above $1 million in a calendar year. [IRS Publication 15 (2026)]
- Partners are not employees and should not be issued a Form W-2 for distributions or guaranteed payments from the partnership. Those amounts are reported to the partner on Schedule K-1 of Form 1065. [IRS Paying yourself]
Read the full guide to benefits deductions in managed payroll, and the rest of the law firm payroll library.
Managed Payroll, Handled.
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Frequently Asked Questions
Benefits and law firm payroll: IRS Publication 15 (2026)
Attorney and staff bonuses are wages subject to Social Security, Medicare, FUTA and income tax withholding. Bonuses paid separately from regular wages are supplemental wages withheld at a flat 22 percent, rising to 37 percent on an employee's supplemental wages above $1 million in a calendar year.
Benefits and law firm payroll: IRS Paying yourself
Partners are not employees and should not be issued a Form W-2 for distributions or guaranteed payments from the partnership. Those amounts are reported to the partner on Schedule K-1 of Form 1065.
Does billable hours tracking count as compensation for a 401(k) match?
Only if the plan document says so. Plan compensation definitions vary, and payroll has to apply the definition the plan uses, not the one that seems natural. A mismatch is one of the most common plan failures found on audit.
What does managed payroll cost for a law firm?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Billable hours tracking, partner draw vs. salary and attorney bonus structures are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Law Firms. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: IRS: Affordable Care Act for Employers
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