IOLTA FAQS – How do we handle client over payments?

Client received a $1,560 invoice from your law firm.  Client decided to round off the amount and mailed a check for $2,000.

Options for depositing the $2,000 check.

• Deposit the full $2,000 to the operating account.  Incorrect.  The $2,000 check includes $440 of funds the firm has not earned.  Unearned funds are never deposited to the operating account.
• Split the deposit via banker voodoo.  $1,560 is deposited to operating and $440 is deposited to IOLTA.  The state trust accounting guides advise against this process.  While the funds to end up in the correct bank account, the audit trail is messy.
• Deposit the full $2,000 to the IOLTA account, wait for funds to clear, and transfer $1,560 from IOLTA to the operating account.  Correct.

If your law firm does not have an IOLTA account, return the payment to the client and request a payment for $1,560.  Or quickly open an IOLTA account.