QuickBooks for Legal Firms: IOLTA Set Up and Tracking

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QuickBooks is a powerful program used by small to mid-sized companies.  It is a program used by many different industries.  QuickBooks usually needs to be tweaked a bit to work with your industry.

Attorneys are unique due to the American Bar Association’s specific accounting rules for the use of retainer (IOLTA) accounts.

When setting up QuickBooks for the first time you can choose a default chart of accounts for a legal firm. Here’s how you set up and track an IOLTA account.

Setting Up Tracking for IOLTA Account in QuickBooks

  1. Set up bank account for each physical IOLTA account
  2. Set up current liability account  for each physical IOLTA account
  3. Every transaction should include Customer: Job (Client)

Receiving IOLTA Funds

  1. Deposit funds to the IOLTA Account – Banking – Make Deposits
  2. Make sure Deposit To Box is filled with the IOLTA Account
  3. Received from box is always the client
  4. The From Account is always the liability account that matches the IOLTA account
  5. Fill in other sections as appropriate

Invoice The Client

  1. Generate an invoice that reflects the time and expenses for the matter – Customer – Create Invoice
  2. Write a check to your firm.  
  3. The account will be the liability account
  4. Include the client name under Customer/Job
  5. Receive payment on the invoice – Customer – Receive Payment
  6. Go to Banking – Make Deposits to deposit the check.

Tracking the IOLTA Balance

  1. Click on Reports – Customer Reports – Summary
  2. Change Dates to All
  3. Change Display rows by to Customer
  4. Click Advanced and change Display Rows to Non-Zero
  5. Click on Filters Tab and change the Account to Trust Liability
  6. Click on Header/Footer Tax to give the report a meaningful title
  7. Click OK to open the report
  8. Memorize Report

Creating Detail Report to Track IOLTA Balance

  1. Click on Reports – Custom Reports – Transaction Detail
  2. Change Dates to All
  3. Change Total by to Customer
  4. Under Columns, scroll down to uncheck Clr.
  5. Click on the Filters tab and change the Account to Client IOLTA Liability
  6. Click on the Header/Footer tab and give the report a meaningful title
  7. Click OK to open the report
  8. Memorize report

Sheltra Tax & Accounting does extensive Quickbooks training for all industries and company sized. We can teach a whole classroom of students, or provide individual training.  

Diana Sheltra, EA is advanced certified in the desktop version of QuickBooks as well as the online version. We have a staff of qualified QuickBooks trainers.  Contact us to make an appointment for a free consultation or just book your training so you can get started, or improve your existing bookkeeping system.