IOLTA FAQS – How do we handle client over payments?Jul 05, 2018
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.
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