Law Firm Partner Taxes: K-1s, Estimated Payments, and Ohio PTET
Once you're an equity partner in a firm taxed as a partnership, you report your share of the firm's income from a Schedule K-1 instead of receiving wages. Nothing is withheld from a K-1, so you pay the tax yourself through estimated payments.
A non-equity partner title, or an interest in a firm taxed as a corporation, can work differently. Confirm how your firm is taxed.
Draws and taxable income
Partners report their share of the firm's taxable income whether or not the firm pays out all of that cash. The payments you receive may be draws against profits or guaranteed payments under the partnership agreement.
Your bank deposits won't tell you what you owe. Ask the firm for a projection of your taxable income and expected distributions, and budget on what's left after tax.
In this example, the partner reports the same profit in both cases:
| For the same partner | Lower cash draws | Higher cash draws |
|---|---|---|
| Ordinary profit allocated to the partner | $300,000 | $300,000 |
| Cash draws received | $180,000 | $240,000 |
| Allocated profit not paid out | $120,000 | $60,000 |
The example assumes ordinary business profit only, no guaranteed payments or separately reported items, and enough tax basis (the partner's investment as adjusted under tax rules) that the draws don't trigger additional tax. The profit that wasn't paid out isn't always cash sitting in the firm.
Taking $60,000 less in draws doesn't change the $300,000 of profit the partner reports.
K-1 timing
A calendar-year partnership sends K-1s with its March filing. If the firm extends its return, the final K-1 can come as late as the September extended deadline. Your own return may need an extension while you wait.
The extension gives you more time to file, not more time to pay. You still have to estimate and pay your tax by the original deadline, usually April 15. A year-end projection from the firm lets your CPA calculate that payment before the final K-1 arrives.
Estimated payments
Without enough withholding from other income, you'll need to make estimated tax payments. Federal installments for calendar-year individuals are due in April, June, September, and the following January. State and local payments are separate.
The safe harbor is the usual way to avoid a federal underpayment penalty. You pay in 100% of last year's tax, or 110% if last year's adjusted gross income was over $150,000 ($75,000 if married filing separately). The prior-year return has to cover a full 12 months.
Paying 90% of the current year's tax also works, but it takes a reliable projection, and the payments have to be on time. Meeting the safe harbor avoids the penalty. You can still owe tax with the return.
A second example. The taxpayer files on a calendar year, had prior-year adjusted gross income above $150,000, filed a full 12-month prior-year return, and isn't married filing separately. Assume the tax amounts below, with no withholding, credits, or payments other than the four installments. These amounts aren't tied to the $300,000 example above.
| Federal tax calculation | Amount |
|---|---|
| Prior-year tax for safe-harbor purposes | $20,000 |
| 110% prior-year payment target | $22,000 |
| Each of four timely estimated payments | $5,500 |
| Total estimated payments | $22,000 |
| Current-year total tax | $30,000 |
| Balance due by the original payment deadline | $8,000 |
The four payments meet the prior-year safe harbor, so there's no underpayment penalty. The $8,000 balance is still due by the original deadline, usually April 15, even if the return is extended.
Have your CPA set a reserve amount for each draw. The percentage another partner uses may not fit your income, filing status, or other tax payments.
Self-employment tax
Active partners in a law firm commonly owe self-employment tax on their partnership earnings and guaranteed payments. The treatment depends on your role and the firm's structure.
For 2026, the Social Security portion applies to the first $184,500 of earnings, and W-2 wages count toward that limit. Medicare tax continues above it, and higher earners may owe Additional Medicare Tax.
Build these into your projection. Income tax brackets alone can leave you short.
Ohio PTET
Ohio's pass-through entity tax (PTET) lets a qualifying firm elect to pay Ohio income tax at the firm level, on Form IT 4738. The rate for 2026 is 3%.
That payment can reduce the federal income passed through to partners, which helps when your personal deduction for state and local taxes is capped. The 2025 tax law raised that cap, so have the savings recalculated for your situation.
Partners get an Ohio credit for their qualifying share of the entity tax. Ohio's business income deduction and the required return adjustments also affect the result, so the answer has to be calculated.
The firm makes the election for the year, it covers all owners, and it's binding for that year. Resident and nonresident partners can come out differently. For a calendar-year firm, 2026 PTET estimated payments are due April 15, June 15, September 15, and January 15, 2027.
What to do now
Get an income projection from the firm, put the payment dates on the calendar, and keep the tax reserve separate from spending money. Redo the projection if profits or distributions change during the year.
We work with law firms and partners in Columbus. If you're becoming a partner or your firm is looking at the PTET election, give us a call.
This is general information. Your firm's structure and your own situation determine the correct treatment, so get advice before setting payments or making an election.