California IOLTA Accounts: A CPA’s Guide for Law Firms
California IOLTA rules come from three sources: Business and Professions Code sections 6210 to 6228, Rule of Professional Conduct 1.15, and the State Bar’s annual CTAPP reporting. If your firm holds client funds, you need an IOLTA at an eligible bank and a written three-way reconciliation every month. Keep five years of records and complete the CTAPP filing by February 1. This guide covers each requirement, with an example reconciliation report and links to every official source.
California IOLTA rules have changed more in the past three years than in the previous thirty. After the Tom Girardi scandal, the State Bar tightened Rule 1.15 and launched the Client Trust Account Protection Program, known as CTAPP. Nearly every active lawyer in the state now reports on client trust accounts every year, including lawyers who never touch client money.
The requirements sit in three places at once: the Business and Professions Code, Rule 1.15, and the annual CTAPP filing. That spread is one reason the rules feel scattered, even to owners who take compliance seriously. This guide comes from a CPA firm that reconciles law firm trust accounts every month, and it puts the whole picture on one page.
Two resources will get you most of the way. The first is an example reconciliation report, because the State Bar describes its requirements in writing but never publishes a finished monthly report. The second is the set of official California sources, collected in the Resources section near the end of this post.
See an Example IOLTA Reconciliation Report First
California’s trust accounting rules read like a long list of duties. They make far more sense once you see the finished product: a complete monthly reconciliation package. The State Bar publishes a detailed trust accounting handbook with sample forms, but it doesn’t show a completed report the way your firm would produce one.
The team at Law Firm Velocity built an example IOLTA reconciliation report to fill that gap. Before you read further, we strongly encourage you to watch the short walkthrough below. It shows what the output should look like, how the three sets of records tie together, and what belongs in the package you keep on file each month.
Most attorneys we talk to have never seen a complete package before. Once they do, the written rules turn into a checklist they can follow. You can also request a copy of the example report by reaching out with a law firm email address.
What Is a California IOLTA Account?
A California IOLTA account is a pooled, interest-bearing trust account where lawyers hold client funds that are too small or held too briefly to earn net interest for the client. The bank sends the interest to the State Bar of California, which uses it to fund civil legal aid across the state.
IOLTA stands for Interest on Lawyers’ Trust Accounts. The program runs under Business and Professions Code sections 6210 to 6228, which let your firm pool many clients’ funds in one unsegregated account. The principal always belongs to your clients, and your books track each client’s share through a separate client ledger. Neither the firm nor the client keeps the interest.
That interest does real work. The State Bar approved $217.5 million for distribution to civil legal aid in 2026, and IOLTA revenue is a core source of that funding. Your firm doesn’t track or report any of it. The bank calculates the interest and remits it under the State Bar’s tax identification number.
Not every client deposit belongs in IOLTA. Funds large enough, or held long enough, to earn net interest for the client go into a separate non-IOLTA trust account. That account uses the client’s taxpayer identification, and the interest goes to the client. For background on how these accounts work in every state, our state IOLTA guides cover each jurisdiction.
Who Must Use an IOLTA Account in California?
Any California attorney or law firm that receives or disburses client trust funds must keep an IOLTA account. Business and Professions Code section 6211 requires deposits that are nominal in amount, or held for a short time, to go into IOLTA. Participation is mandatory, with no opt-out.
Typical IOLTA deposits include unearned retainers and advance fees, settlement money waiting on disbursement, and costs a client pays up front. The test is whether the funds could earn net interest for this client after bank costs. If they can’t, the money belongs in IOLTA.
If they can, set up a separate client trust account for that matter so the interest goes to the client. Contingency firms see this with large settlements that sit during lien resolution. The same trust accounting duties apply either way.
Earned fees and firm operating money never belong in IOLTA. The account holds other people’s money. The only exception is the small amount for bank charges that Rule 1.15 allows.
Two points trip up firm owners. First, the duty attaches the moment you receive or disburse trust funds; a single retainer creates the obligation. Second, lawyers who hold no client funds at all still complete the State Bar’s annual trust account reporting, which we cover below.
California IOLTA Rules: What Rule 1.15 Requires
Rule 1.15 of the California Rules of Professional Conduct governs funds and property you hold for clients and other parties. The current version, amended effective January 1, 2023, carries deadlines that older summaries miss. Four duties matter most in daily practice.
Keep client money separate. Client funds go into the trust account, and your own funds stay out. The one exception is an amount reasonably needed to cover bank charges. Anything more is commingling, which means mixing firm money with client money.
Tell people their money arrived. When you receive funds or property for a client or a third party, notify them within 14 days. The clock starts at receipt, not at disbursement.
Pay out undisputed funds within 45 days. Once a person’s right to funds is fixed and undisputed, the rule presumes a violation if the money isn’t out within 45 days, absent good cause. A written agreement to keep holding the funds rebuts that presumption. Personal injury firms should build lien resolution timelines around this clock.
Keep complete records for five years. Keep an account journal for each trust account, a client ledger for each client, bank statements with cancelled checks, and a written record of each monthly reconciliation. A client ledger is a running record of every deposit, payment, and balance for one client. Keep all of it for five years after the final distribution of funds.
One more nuance matters for flat-fee practices. Rule 1.15(b) lets a flat fee paid in advance go into your operating account, but only after written disclosures to the client, and a flat fee over $1,000 also needs the client’s signed agreement. When in doubt, run it through trust.
These duties don’t change month to month. They reward a routine, and the next two sections lay that routine out.
What Is CTAPP and What Do You Report Each Year?
CTAPP is the State Bar of California’s Client Trust Account Protection Program. Almost every California lawyer must register their IOLTA and other trust accounts each year, complete a 12-question self-assessment, and certify compliance with Rule 1.15. The filing runs through My State Bar Profile and is due February 1.
The program comes from California Rules of Court, rule 9.8.5, and rule 2.5 of the State Bar Rules. Three steps repeat every year.
Registration. You report each IOLTA and non-IOLTA trust account, including its year-end balance on December 31 of the reporting period. Firms can submit account information for their attorneys through Agency Billing.
Self-assessment. You answer 12 questions about your trust account practices. One asks whether you complete a written monthly reconciliation, so the assessment doubles as a checklist for this guide.
Certification. You certify that you understand and comply with Rule 1.15. Lawyers who held no client funds still file; they confirm they had no accounts and complete the rest.
The obligation doesn’t end on February 1. If you open, close, or change an account during the year, update your registration in My State Bar Profile within 30 days.
Miss the deadline, and the State Bar assesses a noncompliance penalty, and continued noncompliance leads to inactive enrollment. That means you can’t practice law until you’re reinstated. The State Bar can also select licensees for a compliance review of their trust accounting records. Treat the filing like a court deadline, and CTAPP stays an administrative task instead of a license problem.
How Often Do You Reconcile a California IOLTA Account?
California requires a written three-way reconciliation of each IOLTA and client trust account every month. You match three numbers: the adjusted bank statement balance, the account journal balance, and the total of all client ledger balances. Keep the written record of each monthly reconciliation for five years.
Three-way reconciliation means proving that three independent records agree. When they match, every dollar in the account ties to a named client. When they don’t, you’ve found an error or a shortage, and you found it weeks after it happened instead of years later.
A complete monthly package has four parts: the bank statement with cleared items, and a reconciliation page showing outstanding checks and deposits in transit. Add the account journal for the month and a client ledger report with each client’s starting balance, activity, and ending balance. The CTAPP self-assessment asks you to affirm this work each year, so the State Bar expects to see it on request.
When the three numbers don’t match, the usual causes are checks that haven’t cleared, deposits in transit, transactions posted to the wrong client ledger, and bank fees that never hit the books. Resolve the difference in the same month. A client ledger that goes negative, even briefly, means one client’s money covered another client’s payment.
Run the reconciliation even in months with little or no activity. A quiet account still needs the written record, and skipped months are the first thing a reviewer notices.
We’ve written a full walkthrough of the three-way IOLTA reconciliation process. If your firm would rather not build this in-house, our law firm bookkeeping team prepares these packages every month, with the client ledgers and written records the State Bar expects.
Opening an IOLTA Account at a California Bank: Interest and Fees
You can’t open an IOLTA just anywhere. Business and Professions Code section 6212 requires an eligible institution, and the State Bar maintains the list of eligible banks on its site. If your bank isn’t listed, the bank can contact the IOLTA program to become eligible.
Leadership institutions pay the highest IOLTA rate and waive account fees. Their rate is 68 percent of the federal funds rate or 0.68 percent, whichever is higher. Established Compliance Rate (ECR) institutions pay the same rate but may charge fees, and comparable banks pay rates in line with similar non-IOLTA accounts. If two banks serve your firm equally well, the State Bar encourages choosing a Leadership institution, since the higher rate flows straight to legal aid.
Open the account under the State Bar’s taxpayer identification number, and title it clearly as a client trust account. The bank calculates and remits the interest, and no Form 1099 is involved because the State Bar is tax exempt. Reasonable service charges, like monthly maintenance or per-check fees, may come out of the interest, but never out of client principal. Banking costs of doing business, like check printing, wire fees, and insufficient funds charges, are the firm’s to pay.
Two housekeeping items finish the setup. Report the new account through My State Bar Profile once it’s open, and report later changes within 30 days. Starting January 1, 2026, banks must collect attorney bar numbers and report trust account information to the State Bar under Business and Professions Code section 6091.3. Expect your bank to ask for yours.
One habit ties this section to the last one. Move earned fees out of trust promptly, because money you’ve earned is firm money, and leaving it in the account is commingling.
Conclusion
Three things to hold onto. An IOLTA at an eligible bank is mandatory once your firm receives client funds that are nominal or short-term. A written three-way reconciliation is due every month, with five years of records behind it. And CTAPP reporting is due February 1 every year, even in years you hold no client money.
We currently support more than 120 law firms with IOLTA trust accounting, including monthly reconciliations, client ledger management, and report packages built for State Bar review. For owners who want financial leadership on top of clean books, our fractional CFO services connect trust accounting to the rest of the firm’s numbers.
Schedule a consultation to talk through your firm’s setup. You can also reach out with a law firm email address to request the example reconciliation package.
Resources: Official California Sources
These are the official sources behind this guide. The first three answer most day-to-day questions.
• Client Trust Accounting & IOLTA, State Bar of California
• Rule 1.15, California Rules of Professional Conduct (PDF)
• Handbook on Client Trust Accounting for California Attorneys
• Client Trust Account Protection Program (CTAPP)
• CTAPP Registration: Step-by-Step Guide
• CTAPP Frequently Asked Questions
• CTAPP Reporting Instructions
• IOLTA-Eligible Financial Institutions
• Trust Account Banking Guidelines for Attorneys
• IOLTA Frequently Asked Questions
• Business and Professions Code Section 6211
Frequently Asked Questions
Is an IOLTA account mandatory in California?
Yes. Business and Professions Code section 6211 requires any attorney or firm that receives client trust funds to keep an IOLTA for deposits that are nominal in amount or held for a short time. Funds that can earn net interest for the client go into a separate trust account instead, with the interest paid to the client.
Do I have to complete CTAPP reporting if I didn’t hold client funds?
Yes, with very few exceptions. Almost every active California lawyer completes the annual CTAPP filing by February 1 through My State Bar Profile, even with no trust accounts to register. You confirm that you held no accounts, answer the self-assessment, and submit the certification.
Who keeps the interest on a California IOLTA account?
The bank sends it to the State Bar of California, which grants the money to nearly 100 nonprofit legal aid organizations across the state. The principal always belongs to your clients. Neither the firm nor the client pays tax on the remitted interest, because the account carries the State Bar’s taxpayer identification number.
How long do California attorneys keep IOLTA records?
Keep them for five years after the final distribution of the funds involved. That covers the account journal, each client ledger, bank statements, cancelled checks, and the written record of every monthly three-way reconciliation under Rule 1.15.
Can I deposit my own money into a California IOLTA account?
Only an amount reasonably needed to cover bank charges. Anything beyond that is commingling under Rule 1.15, and so is leaving earned fees in the account. Withdraw fees promptly once they’re earned and undisputed.