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Law Firms: Year-End Payroll Checklist (2026)
Year-end payroll for law firms is W-2s and any 1099-NEC to employees and contractors by January 31, the fourth-quarter 941 and annual 940, and the law firm items that decide which boxes are right: IRS Paying yourself, IRS Publication 541, Guaranteed Payments and IRS Publication 15 (2026). BEG: $45 per employee per month inside the payroll software you already use, live in 3 to 5 days.
Law firm items that shape the W-2 and 1099s
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.
Guaranteed payments are amounts paid to a partner for services or capital without regard to partnership income. They are not subject to income tax withholding; the partnership generally deducts them on Form 1065 line 10 and the partner reports them as ordinary income on Schedule E.
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.
The January calendar
W-2s and W-3 to the SSA and copies to employees by January 31; 1099-NEC for each contractor paid $2,000 or more in the year, the threshold for tax years after 2025, by the same date; Form 940 and the fourth-quarter 941 by January 31 as well, with a 10-day extension where all deposits were on time. Ten or more information returns of any kind, counted together, must be filed electronically. For law firms the reconciliation that matters is that the pay codes for billable hours tracking, partner draw vs. salary and attorney bonus structures landed in the right W-2 boxes for every employee.
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.
- 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]
- Guaranteed payments are amounts paid to a partner for services or capital without regard to partnership income. They are not subject to income tax withholding; the partnership generally deducts them on Form 1065 line 10 and the partner reports them as ordinary income on Schedule E. [IRS Publication 541, Guaranteed Payments]
- 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)]
Read the full guide to how to handle year-end payroll and W-2s, and the rest of the law firm payroll library.
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Frequently Asked Questions
Year-end for law firms: 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.
Year-end for law firms: IRS Publication 541, Guaranteed Payments
Guaranteed payments are amounts paid to a partner for services or capital without regard to partnership income. They are not subject to income tax withholding; the partnership generally deducts them on Form 1065 line 10 and the partner reports them as ordinary income on Schedule E.
When are W-2s and 1099s due for a law firm?
January 31 for both, to the recipient and to the SSA or IRS. The 1099-NEC threshold is $2,000 for tax years after 2025, and 10 or more information returns of any type must be e-filed.
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: Understanding Employment Taxes
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