Law firm trust accounting · IOLTA setup in QuickBooks
How to set up an IOLTA trust account in QuickBooks, separate from operating, with client ledgers.
Trust money belongs to clients until it is earned, so the books have to show it that way from the first entry: a trust bank account kept apart from the operating account, a matching client-trust liability, and a ledger for every client or matter that adds up to that liability. This page sets out that structure in QuickBooks Online, how each kind of trust entry posts, and the checks to run before the first deposit. It is a bookkeeping reference, not legal advice — trust-account rules are set by each state, and a few are quoted below from the state’s own text. Independent firm, not affiliated with Intuit Inc.
Setting up IOLTA in QuickBooks takes three pieces working together. A trust bank account in the chart of accounts, separate from the operating bank account and holding only client money. A client-trust liability account recording the same total as money owed to clients, because it is not the firm’s income. And a ledger for every client or matter whose balances add up to that liability. Deposits post to the trust bank and the liability together; an earned fee leaves trust only with that client’s trust balance reduced alongside it; disbursements are charged to the client they are paid for. Before go-live, the trust bank balance, the liability and the sum of the client ledgers should agree to the cent. Which records you must keep, and how often you must reconcile, depends on your state’s rule — confirm with your state bar or your own counsel.
Maintained by TechBrot, an independent bookkeeping and advisory firm — not a law firm, and not affiliated with Intuit Inc. Reviewed by a Certified QuickBooks ProAdvisor (QuickBooks Online Level 2, Payroll). Bookkeeping reference, not legal advice.
IOLTA setup, in five questions.
How do I set up an IOLTA trust account in QuickBooks?
Add the trust bank account to the chart of accounts as its own bank account, separate from the operating account. Add a client-trust liability account that carries the same total. Then keep a ledger for each client or matter by naming the client on every trust entry. Before the first deposit, the trust bank balance, the liability balance and the sum of the client ledgers should agree to the cent.
What accounts does an IOLTA setup need in QuickBooks?
Three. The trust bank account, which holds client money only. The client-trust liability, which records the same total as money owed to clients. The operating bank account, which holds the firm’s own money. Each bank account is reconciled to its own bank statement.
How do client ledgers roll up in QuickBooks?
Every trust entry names the client it belongs to, so the client-trust liability can be read back one client at a time with a report filtered by customer. Added together, the client balances must equal the liability balance, and the liability must equal the reconciled trust bank balance. A single negative client balance is a problem even when the total looks right.
How is an earned fee moved from trust to operating in the books?
Two things are recorded. That client’s trust balance and the trust bank go down; the operating bank goes up and the fee becomes the firm’s income. A plain bank-to-bank transfer moves the cash but leaves the client’s liability untouched, so the entry has to reduce the client’s trust balance as well. When a fee is earned is the attorney’s decision.
Are trust-account rules the same in every state?
No. Each state’s bar or high court sets its own. California’s record-keeping standards call for a monthly reconciliation; Florida’s Rule 5-1.2 requires a monthly reconciliation and a monthly comparison with the client ledgers; Illinois’s Rule 1.15A requires three-way reconciliation reports at least quarterly. Confirm your own state’s rule with your state bar or your own counsel.
Two kinds of money, two sets of accounts.
Money in a law firm’s bank accounts falls into two kinds. Operating money is the firm’s own: fees it has earned, capital, loans, and the cash it spends on rent, payroll and software. Trust money belongs to a client or a third person and is held by the firm for them — an advance fee, a deposit for costs, settlement proceeds waiting to be paid out. The three state rules quoted further down each start from the same instruction in their own words: keep that money in a separate, identifiable trust account, and do not mix the firm’s own money with it.
IOLTA stands for Interest on Lawyers’ Trust Accounts: a pooled trust account for client funds, run under a program in each state. That program’s rules on enrollment and interest are separate from the conduct rules and come from the state’s own program. For the books, an IOLTA is a trust bank account like any other — its balance is client money, not firm money.
In QuickBooks that separation shows up in three places: a separate bank account that says where the money is, a liability that says it is owed, and a ledger that says to whom. The rest of this page builds each one, shows how each kind of trust entry posts, and lists the checks to run before the first deposit.
IOLTA setup in QuickBooks, account by account.
The three accounts, how client ledgers roll up to the liability, how deposits, earned fees and disbursements post, the five checks before go-live, and where the bookkeeper’s role stops — set out in full below.
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The full explanation, section by section — the accounts, the client ledgers, how entries post, the go-live checks and how state rules differ.
How do I set up an IOLTA trust account in QuickBooks?
To set up IOLTA in QuickBooks, add the trust bank account to the chart of accounts as its own bank account, separate from operating. Add a client-trust liability that carries the same total. Keep a ledger for each client or matter by naming the client on every trust entry. Before the first deposit, the trust bank, the liability and the client ledgers should agree to the cent.
Two kinds of money, two sets of accounts
Money in a law firm’s bank accounts comes in two kinds. Operating money is the firm’s own: fees it has earned and the cash it runs on. Trust money belongs to a client or a third person: an advance fee, a deposit for costs, settlement proceeds waiting to be paid out. IOLTA stands for Interest on Lawyers' Trust Accounts, a pooled trust account run under a program in each state. On the books, its balance is client money.
The trust bank account
The first account is the trust bank account: one account in the chart of accounts for each trust bank account the firm holds, named so nobody mistakes it for operating. Intuit’s help page lists Bank among the account types you add from the chart of accounts, with an opening balance and an as-of date. The operating bank account stays separate. Both can sit in one company file, each reconciled to its own bank statement.
The client-trust liability
The second account is the client-trust liability, carrying the same total as the trust bank account. Intuit’s help pages say the account type decides whether an account reports on the Balance Sheet or the Profit and Loss. A liability keeps client money on the Balance Sheet as an amount owed, not as income. Every trust deposit increases it, and every trust payment reduces it.
One ledger per client, or per matter
A client ledger is the running record of one client’s money in trust: each receipt with its date, amount and source, each disbursement with its payee and purpose, and the balance after each entry. California’s record-keeping standards call for a ledger for each client. Florida’s Rule 5-1.2 calls for a card or page for each client or matter. A ledger per matter stops money held on one file from paying costs on another.
Where the ledger lives in QuickBooks
In QuickBooks Online, the ledger lives in the entries. Intuit’s deposit screen gives each line a Received From name and an account, so a trust deposit names the client and posts to the liability. Reports can be filtered by customer, which reads one client’s ledger back out. Intuit lists its projects feature, which can hold a matter, in QuickBooks Online Plus, Advanced and Intuit Enterprise Suite.
A client deposit into trust
Every trust entry moves the trust bank and one client’s balance together, by the same amount. A client deposit raises the trust bank and the liability, with the client named, and nothing touches income. Record it straight to the trust bank account. A disbursement paid for a client lowers both, carries the payee and purpose, and is charged only to that client, up to what that client holds.
An earned fee moving from trust to operating
An earned fee moving to operating needs two things in the books. The client’s trust balance and the trust bank go down; the operating bank goes up, and the fee becomes income. Intuit describes a transfer as one transaction that affects both accounts, so a bank-to-bank transfer alone leaves the client’s liability untouched. The entry has to reduce that client’s trust balance too. When a fee is earned is the attorney’s decision.
What never to do in the trust ledger
Three things never happen in the trust ledger. No commingling, in either direction: California’s Rule 1.15 and Florida’s Rule 5-1.1 each keep the lawyer’s own money out of trust, with narrow exceptions such as enough to pay bank charges. No firm bills paid from trust: Illinois’s Rule 1.15 bars using client funds for the lawyer’s own purposes, even temporarily, without authorization. No client ledger below zero, because another client’s money paid its costs.
Five checks before the first trust deposit
Five checks come before the first trust deposit. Match every bank account the firm holds to one account in QuickBooks. Set opening balances from source documents. Load each client’s opening trust balance, with the document behind it. Point every bank feed and integration at the right account. Then reconcile the trust bank and compare it with the liability and the client ledgers. All three agreeing is the baseline.
How state rules differ, in each state’s own words
Trust-account rules come from each state’s bar or high court, and they differ. California’s standards call for a monthly reconciliation. Florida’s Rule 5-1.2 requires a monthly reconciliation and a monthly comparison with the client ledgers. Illinois’s Rule 1.15A requires three-way reconciliation reports at least quarterly. Records are kept at least five years after final distribution in California, six years after each representation ends in Florida, and seven years after it ends in Illinois.
Where TechBrot’s role stops
TechBrot keeps the records, and the trust account stays with the firm. The firm opens and controls its account and deals with its bank. TechBrot never holds client money, never signs on the account, never deposits to it or disburses from it, and never decides when a fee is earned. It sets up the structure in the firm’s own QuickBooks file, keeps the client ledgers and reconciles, as bookkeeping, with no legal advice.
Get the trust structure checked before it carries client money
Get the trust structure checked before it carries client money. Book the discovery call, or send the file for a free review, and we look at the trust bank account, the liability and the client ledgers. Once setup is live, the monthly trust reconciliation checklist takes over, and the trust accounting errors page shows what a broken ledger looks like. Send this to whoever will keep your firm’s trust books, and subscribe for the rest of the series.
The three accounts to create in QuickBooks.
Two bank accounts and one liability. The trust bank account says where client money is; the liability says it is owed; the operating account holds only what the firm has earned.
The trust bank account
One account in the chart of accounts for each trust bank account the firm actually holds, named so nobody can mistake it for operating — for example “IOLTA Trust – bank name – last four digits”. Intuit’s help page lists Bank among the account types you can add from the chart of accounts, with an opening balance and an “as of” date. Only client money is recorded here, and it is reconciled to its own bank statement.
The client-trust liability
A liability account — for example “Client Trust Funds Held” — that carries the same total as the trust bank account. Intuit’s help pages say the account type decides whether an account reports on the Balance Sheet or the Profit and Loss; a liability keeps client money on the Balance Sheet as an amount owed, and off the income statement. Every trust deposit increases it and every trust payment reduces it.
The operating bank account
The firm’s own account, where earned fees land and firm expenses are paid. Keep it as its own bank account in QuickBooks, with its own reconciliation, so no entry can be made against “the bank” without saying which one. Unearned client money does not go here unless your state’s rule allows it — California’s, for example, allows an advance flat fee into operating only with written disclosure to the client.
A note on subaccounts. Intuit’s help page on subaccounts describes a “Make this a subaccount” checkbox and suggests locking a parent account so entries can post only to its subaccounts. One approach is to hang one subaccount per client under the trust liability. Check Intuit’s own help page for its current subaccount limits before choosing that route. The per-client ledger described next does not depend on subaccounts.
Per-client ledgers, and how they roll up to the liability.
The liability says how much the firm owes clients in total. The ledgers say how much it owes each one — and the two have to agree.
One ledger per client, or per matter
A client ledger is the running record of one client’s money in trust: each receipt with its date, amount and source; each disbursement with its date, amount, payee and purpose; and the balance after each entry. California’s record-keeping standards list those same elements for the ledger kept for each client, and Florida’s Rule 5-1.2 calls for a card or page “for each client or matter”. Where one client has several matters, a ledger per matter stops money held on one file from paying costs on another. Whether your state requires per-matter ledgers is a question for your state’s rule.
Where the ledger lives in QuickBooks
In QuickBooks Online, each trust entry names the client. Intuit’s deposit screen gives each line a “Received from” name and an Account, so a trust deposit line can name the client and post to the client-trust liability. Intuit’s report help says reports can be filtered by account and by customer, which is how one client’s ledger is read back out of the liability account. Where a matter needs its own record, Intuit’s projects feature groups transactions for a single customer; Intuit lists it in QuickBooks Online Plus, QuickBooks Online Advanced and Intuit Enterprise Suite. If the firm’s practice-management software keeps the client trust ledgers instead, QuickBooks still has to agree with it, client by client.
The roll-up test. Add up every client ledger balance. That total has to equal the balance of the client-trust liability account, and both have to equal the reconciled balance of the trust bank account. If one client’s balance is below zero, the total can still look right while that client’s costs have been paid with someone else’s money — which is why the test is run client by client and not only in total. Illinois’s Rule 1.15A sets out this comparison as a three-way reconciliation; the monthly trust reconciliation checklist walks through it step by step.
How deposits, earned fees and disbursements are recorded.
Every trust entry moves the trust bank and a client’s trust balance together, by the same amount, with the client named. If an entry moves only one of them, the ledgers stop adding up.
A client deposit into trust
The trust bank account goes up and the client-trust liability goes up by the same amount, with the client named on the line. Nothing touches income: an advance fee is still the client’s money. Record the deposit straight to the trust bank account, not through an account shared with operating receipts, so the books show the money arriving where the bank shows it arriving. The client’s ledger now shows the receipt, its date and source, and the balance held.
An earned fee moving from trust to operating
Two things happen and the books must show both. The client’s trust balance and the trust bank go down, recorded against that client; the operating bank goes up and the fee becomes the firm’s income, against the bill it pays. Intuit describes a Transfer as a single transaction that affects the two accounts it moves money between — so a bank-to-bank transfer on its own moves the cash but leaves the client’s liability where it was. The entry, or pair of entries, has to reduce that client’s trust balance too. When a fee is earned, and whether it is in dispute, is the attorney’s decision under the state’s rule; the books record it once it is made.
A disbursement paid for a client
A filing fee, an expert’s invoice or a settlement payout paid from trust reduces the trust bank and that client’s trust balance, with the payee and purpose on the entry. It is charged only to the client it was paid for, and only up to what that client has in trust. Florida’s Rule 5-1.2(e), for example, limits electronic transfers out of trust to money paid to or for a client, expenses properly incurred for the client, earned fees not in dispute, and transfers between trust accounts.
Bank charges. A bank fee on the trust account is the firm’s cost, not a client’s. California’s Rule 1.15(c) and Florida’s Rule 5-1.1(a)(1)(A) each allow a lawyer to keep in trust an amount of the lawyer’s own money reasonably sufficient to pay bank charges. One way to record that cushion is as a firm-owned line in the trust ledger, so the client ledgers still add up; the State Bar of Arizona’s trust-account guidance, for example, speaks of reconciling “the total of all individual ledgers (i.e. client and administrative)”. Confirm the treatment your own state expects.
What never to do in the trust ledger.
Commingle, in either direction
Firm money in trust beyond what the rule allows, or client money in operating, is commingling. California’s Rule 1.15(c) bars the lawyer’s own funds from trust except bank-charge money and funds partly owned by the lawyer, and requires the lawyer’s portion to be withdrawn at the earliest reasonable time after the lawyer’s interest becomes fixed — so under that rule an earned fee left sitting in trust is a problem too, not only a fee taken early. In the books, every entry on the trust bank account should name a client, or the firm’s own permitted bank-charge line.
Pay the firm’s bills from trust
Rent, payroll, software and every other firm expense are paid from operating. If a firm bill is paid from trust by mistake, the books record it as it happened rather than hiding it inside a client’s ledger; the shortage then shows in the roll-up, and the attorney decides how the account is made whole. Illinois’s Rule 1.15(a) says a lawyer must not use client funds for the lawyer’s own purposes “even temporarily” without authorization. Florida’s Rule 5-1.1(a)(1)(B) allows a lawyer’s own deposit to replenish a shortage and requires immediate notice to the bar of the shortage, its cause and the replenishment.
Let a client ledger go negative
A client balance below zero means another client’s money paid that client’s costs. In the books, the entries are recorded as they happened and the shortfall is flagged; moving money to cover it is the attorney’s decision, not the bookkeeper’s. The error patterns that lead here, and how each one shows up in the numbers, are on the trust accounting errors page.
Five checks before the first trust deposit.
Run these in order on the start date. The last one sets the baseline every later reconciliation is measured against — see QuickBooks reconciliation for how the bank side is done.
Match the bank accounts to the books
List every trust and operating account the firm holds at its bank, and check that each has exactly one bank account in the QuickBooks chart of accounts, with the trust accounts clearly labeled as trust. An account the bank has that QuickBooks does not, or the other way round, is fixed before anything is entered.
Set opening balances from source documents
Intuit’s help page lets you enter an opening balance and an “as of” date when you add a Bank or liability account. For the trust bank account that figure comes from the bank statement on the start date; for the client-trust liability, from the sum of the client balances on the same date. If the two do not agree on day one, the difference is found and explained before go-live, not carried forward.
Load each client’s opening trust balance
Every client or matter with money in trust on the start date gets its opening balance, with the document behind it: the deposit record, the prior ledger, the settlement statement. The sum of those balances is the liability’s opening balance from the step before.
Point every feed and integration at the right account
Bank feeds, card processors and practice-management sync each post to a specific account. Check that the trust bank feed posts only to the trust bank account, and that retainer payments and payments of earned invoices each land in the account they belong to.
Run the first three-way comparison
Reconcile the trust bank account in QuickBooks to its statement — Intuit’s reconcile tool is finished when the Difference reaches $0.00, and it saves a reconciliation report. Intuit describes reconciling as matching QuickBooks with the bank statement, which covers two of the three balances; then compare that reconciled balance with the liability balance and with the sum of the client ledgers. All three agreeing on the start date is the baseline every later month is measured from.
Setting up trust books, or taking over ones already in use?
Send us the file first. We review how the trust bank account, the liability and the client ledgers are set up and tell you what we would change. Bookkeeping only — you control the trust account.
How state rules differ, in each state’s own words.
Trust-account rules come from the bar or high court of each state where the lawyer is licensed, and they are not uniform. Each row below is taken from the state’s own published text, read on 26 September 2026 and linked so you can read it yourself. The rows are examples, not a survey: your state may say something different, and a firm licensed in more than one state may answer to more than one rule. Confirm with your state bar or your own counsel.
| State and rule | Ledgers and reconciliation | Records kept | Read it |
|---|---|---|---|
| California — Rule 1.15 (effective January 1, 2023) and the State Bar’s record-keeping standards under it | A written ledger for each client, a written journal for each bank account, the bank statements and cancelled checks, and “each monthly reconciliation (balancing)” of the three. The State Bar’s guidelines say a firm with two or more licensees designates one “designated licensee” for each trust account, responsible for performing or supervising the monthly reconciliations. | No less than five years after final appropriate distribution of the funds (Rule 1.15(d)(5)). | Rule 1.15 and standards · State Bar guidelines |
| Florida — Rules Regulating The Florida Bar, chapter 5 (version dated June 30, 2026) | Rule 5-1.2(b)(7): a ledger with an individual card or page for each client or matter. Rule 5-1.2(d)(1): a monthly reconciliation of each trust account, and a monthly comparison of the total of reconciled trust balances with the total of the client ledger cards, with any difference explained; (d)(2) adds an annual list of the balance held for each client or matter. Rule 5-1.2(c)(1): a firm with more than one lawyer keeps a written plan naming who reconciles. | 6 years after the final conclusion of each representation (Rule 5-1.2(f)). | Chapter 5, Rules Regulating Trust Accounts |
| Illinois — Rule 1.15A, Illinois Rules of Professional Conduct (effective July 1, 2023) | Receipts and disbursements journals, contemporaneous ledger records for each trust client, and three-way reconciliation reports of all client trust accounts “on at least a quarterly basis”. The rule’s comment adds that banks may allow only 30 days from the statement date to report errors. | Seven years after termination of the representation (Rule 1.15A(a)). | Rule 1.15A · Rule 1.15 |
| Arizona — Rule 43 and Rule 42 ER 1.15, per the State Bar of Arizona | We read the State Bar’s trust-account page, not the rule text, so no frequency is stated here. The page’s reconciliation tip: reconcile the total of all individual ledgers (client and administrative), the general ledger balance, and the bank statement balance adjusted for outstanding transactions. | Not stated here — read Rule 43 itself. | State Bar of Arizona, trust accounts |
What this table is not. A state missing from it is missing because we have not read its rule text for this page, not because it has no rule. The American Bar Association’s Model Rule 1.15 is a model: it binds no lawyer until a state adopts its own version, which is why every row above names a state. For your jurisdiction, the authority on the rule is your state bar or high court, and how it applies to your firm is a question for your own counsel. Nothing here is legal advice.
Where TechBrot’s role stops.
We keep the records. The trust account, the money in it and every decision about that money stay with the firm. We do not, ever:
- Open, hold or control a trust account. The firm opens it with its bank and controls it; we never take custody of client money.
- Sign on the account. We are never a signatory and have no authority on it.
- Deposit to it or disburse from it. The firm deposits and pays; we record what the firm did and reconcile it.
- Decide when a fee is earned or a transfer is made. That is the attorney’s decision under the state’s rule; we record it once it is made.
- Give legal advice or certify compliance. We do not interpret bar rules or tell a firm it complies. When a rule question comes up, we say that it is one and send it to your state bar or your own counsel.
What we do is the bookkeeping: set up the trust structure in your own QuickBooks file, keep the client ledgers current, and perform the three-way reconciliation, with any break flagged to the attorney. TechBrot is an independent bookkeeping and advisory firm, not a law firm and not affiliated with Intuit Inc. For the wider picture of trust recordkeeping, see the law firm trust accounting hub.
Questions about IOLTA setup in QuickBooks.
Can trust and operating accounts live in the same QuickBooks company file?
Why does trust money need a liability account instead of an income account?
Should the trust ledger be kept per client or per matter?
Do I need QuickBooks Online Plus or Advanced to set this up?
How is a retainer recorded when it lands in the IOLTA account?
Can the firm keep some of its own money in the trust account?
How long do trust accounting records have to be kept?
Will TechBrot open the IOLTA account or deal with the bank for us?
Before the first deposit
Get the trust structure checked before it carries client money.
Book a discovery call, or send the file for a free review first. We look at the trust bank account, the liability and the client ledgers and tell you what would need to change. Bookkeeping only: you control the trust account, and rule questions stay with your state bar and your own counsel.