I am a one person law firm, organized as an LLC. I pay the taxes on my personal 1040. Suppose I retain a client who pays me a fee to represent him. In the course of representing him, I need the help of another lawyer to answer questions, edit a brief, etc., and I pay my helper out of my pocket. I know that I cannot bill that expense to the client, but how do I account for the expense for tax purposes? Let's say the client pays me $1000; and I pay my helper lawyer $250.00. Can I claim only $750 as a fee (thus paying less tax) and account for the remainder as an amount advanced to the client? OR (and what I suspect is the correct answer) must I account for the $1000 as a fee (thus paying tax on the full amount of the fee negotiated with the client)? But what do I do with the $250?