Paul W. Carlson, CPA (00:00):
Hi, this is Paul Carlson, CPA, with Law Firm Velocity. The next video in this series is we're going to walk through the details of a case study that then we're going to run all the transactions through CosmoLex.
(00:12):
First, we have an example matter. It's $6,000 in prepaid flat fees for services. We're going to have an 800 and a $500 filing fee for a grand hold of $7,300, which the client paid on a single credit card charge.
(00:27):
A couple of details we need to discuss is first the treatment of prepaid flat fees. The IOLTA accounting rules for prepaid flat fees vary from state to state. Some states have processes where the full prepaid flat fee can be deposited directly to the firm's operating account. Other states require prepaid flat fees stay in IOLTA until all work is complete or milestones are met. Our friends in Texas are in this situation.
(00:57):
For the example matter, the firm is in a state where prepaid flat fees can be deposited into operating. They get paid and they can put that funds into operating right away.
(01:08):
The other concept we need to talk about is the treatment of mixed IOLTA funds. Earned fees are always deposited into the firm's operating account. Unearned fees are deposited into IOLTA. Mixed payments contain a combination of earned and unearned fees. The process here is the full deposit is placed into the IOLTA account, and the earned fees are transferred into operating once the initial deposit clears.
(01:35):
In our case study, the client paid us a total of $7,300, which will need to be completely deposited to the IOLTA account. Once that payment clears, the firm will transfer the $6,000 fee into the operating account since the firm is in a state where prepaid flat fees can be deemed earned upon receipt, that they can be transferred into operating right away.
(02:03):
That's a little bit of background for our case study. The next videos, we'll jump into CosmoLex. If you need any help with your immigration firm's accounting, please check us out at Law Firm Velocity. Bye-bye.
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