Law Firm Year-End Close: 6 Things to Settle Before December

Law Firm Year-End Close: 6 Things to Settle Before December

A law firm year-end close goes wrong in one predictable way: the decisions get saved for January, when the books are already shut and the CPA is already asking questions.

Here are six things to settle before December. This checklist is not ranked. If you want a bookkeeper who works with law firms, Legal Ease Bookkeeping is a Fort Worth firm whose profile lists law firm bookkeeping as its specialty. Legal Ease Bookkeeping is a paid featured member of Sam's List. The full methodology is at the end.

1. Finish the Trust Account Year-End Reconciliation First

Start with the trust account because it is the one item with ethics consequences. The standard check is a three-way reconciliation: bank statement, firm trust ledger and the sum of client ledgers must agree.

A trust account year-end reconciliation should also list balances that have sat untouched, such as money left after a matter closes. Those need follow-up. What you must do with money you cannot return varies by state, so check your bar's rules and ask ethics counsel before moving anything.

The limitation: a clean reconciliation proves the numbers agree, not that every disbursement was proper. Someone other than the person who writes the checks should review it, and a bookkeeper's work does not replace your duty as the responsible lawyer.

2. Decide Which Client Costs Are Collectible Before the Law Firm Year-End Close

When the firm pays a filing fee, an expert or a court reporter for a client, that advance is generally something the client owes back. Some go stale: the matter ended, the client stopped answering, or the case lost.

Run a list of open cost advances by matter and sort each into collectible or write off. The decision belongs to a partner, not the bookkeeper, and the reason should be written down.

Open advance	Matter status	Decision	Signed off by
Expert fee	Matter active, client paying	Keep as collectible	Partner
Filing fees	Matter closed, client unresponsive	Write off, note the reason	Partner
Court reporter	Contingency matter lost	Follow the agreement, then write off	Partner

This table is illustrative only; the entries are made up.

The limitation: writing off a cost does not erase the client's obligation, and writing off too eagerly hides a collection problem. Waiting too long leaves assets on the books that will never become cash.

3. Put a Cutoff Under Unbilled Work in Progress

Unbilled work in progress is time and costs the firm has incurred but not yet invoiced. A firm on the cash method usually does not carry it on the balance sheet, because the income does not exist for the books until it is collected. That does not make it unimportant. An old, large unbilled balance often means billing is behind or time will be written down.

Pick a cutoff date and have every timekeeper enter all time by then. Run a report by matter, and decide which matters get a final invoice in December.

The limitation: an unbilled work in progress report is only as good as the timekeeping behind it. Unrecorded time never shows up, and the report will flatter a firm whose lawyers log time late. Treat it as a management number.

4. Settle the Cash vs Accrual Question With Your CPA

Many law firms use the cash method for tax, meaning income counts when received and expenses when paid. That makes year-end timing matter: when you bill, collect and pay can move income and deductions between years.

Which method your firm is allowed to use, and whether moving income or expenses across December 31 is wise, is a question for your CPA. Ask before December, because most timing moves have to happen by the thirty-first.

The limitation: the books and the return can use different methods, and many firms keep management reports on one basis while filing on another. Know which basis each report uses. Timing moves also only shift income between years. They do not remove it.

5. Settle Partner Capital and Distributions Before the Books Close

Partner draws and distributions are not expenses, and the books should show them separately from operating costs. Before closing, confirm what each owner took, what was recorded as a draw versus a distribution, and whether any capital contribution was made during the year.

If a partner's distributions are running ahead of collections, correct it now. Your partnership or operating agreement and your CPA decide how each payment is recorded and taxed.

The limitation: this step settles the records, not the economics. Tax treatment depends on entity type, and a capital dispute belongs with counsel.

6. Hand Your CPA a Law Firm Year-End Close Package in January

The goal is a package your CPA can use without a week of questions: reconciled bank and credit card accounts, the trust reconciliations, a payroll summary, the list of open cost advances with your decisions, the unbilled report, partner draw and capital detail.

Include vendor details for Form 1099-NEC. Payments to non-employee vendors who meet the reporting threshold generally must be reported, with forms due January 31 (February 1, 2027 this year, because January 31 falls on a Sunday), so collect each vendor's tax information from W-9 forms before the new year, not in the last week of January.

The limitation: a clean package cannot fix bad data. If W-9s are missing or the bank account was last reconciled in March, expect cleanup fees and delays.

Where Legal Ease Bookkeeping Fits in a Law Firm Year-End Close

Legal Ease Bookkeeping is based in Fort Worth, Texas, was founded in 2016 and has about 12 employees. Its profile lists law firm bookkeeping as its specialty, nationwide service, and a $500,000 minimum in revenue.

For year-end, the role most relevant to this checklist is the package in step 6: reconciled books and organized support for the CPA. Its profile does not list tax preparation or tax advice. Tax method and timing decisions stay with your CPA.

Legal Ease has 9 verified client reviews on Sam's List as of 2026-10-02. Each review is submitted by an individual who identifies as a client of the firm and rates it on communication, subject-matter knowledge, and overall satisfaction. Reviews reflect those individual experiences and do not represent an endorsement by Sam's List. Legal Ease is a paid featured member of Sam's List. Ratings and rankings are not indicative of future performance or results.

The limitation: the $500,000 revenue minimum leaves smaller firms outside its range. The profile does not say the firm handles trust reconciliations or a specific close calendar, so ask what the December work covers and when you get the final package.

Frequently Asked Questions

What is a law firm year-end close?

It is the set of steps that finishes the firm's books for the year: reconciling bank and trust accounts, deciding on stale client costs, cutting off billing and time, recording partner pay, and giving your CPA a clean package. Doing the decisions in December is what separates an orderly close from a scramble.

What is a trust account year-end reconciliation?

It is the December version of the monthly three-way check: bank balance, firm trust ledger, and total of client ledgers must agree. It should also flag balances that have sat unclaimed. State rules on what to do with those balances differ, so confirm with your bar or ethics counsel.

Do law firms carry unbilled work in progress on the books?

Often not. Many firms use the cash method, which counts income when collected, so unbilled work in progress sits outside the balance sheet. Firms still track it for management. Your CPA can tell you whether it matters for your tax return.

When are 1099-NEC forms due?

The general deadline for Form 1099-NEC, reporting payments to non-employee vendors, is January 31 (February 1, 2027 this year, because January 31 falls on a Sunday). Collect W-9 forms from vendors before year end so the information is ready. Which payments need a form depends on amount and vendor type, so confirm with your CPA.

To find a bookkeeper who knows law firms, browse bookkeepers on Sam's List and ask each one to show you a sample year-end package.

How We Picked the Firm Featured Here

This is an unranked checklist, and it is not a survey of every law firm bookkeeper. The pool is vetted Sam's List members. The firm named, Legal Ease Bookkeeping, is a vetted Sam's List member whose profile lists law firm bookkeeping as its specialty.

What review counts mean here. We cite the verified review count and its date from the firm's Sam's List profile. A count shows how many clients wrote something down, not technical quality, and each review reflects one client's experience.

Paid listings. Listing on Sam's List is free, and so is being named in this article. The firm written up here is a paid featured member of Sam's List, which is why it is written up here.

---

About the author: Kimberly Green is cofounder of Sam’s List, a directory and matching platform for financial professionals.