How to set up IOLTA trust accounting in QuickBooks Online

To set up IOLTA trust accounting in QuickBooks Online, create a trust bank account, create a matching trust liability account, and add a sub-account under the liability for each client or matter. Record client money as a liability, never as income, and reconcile three ways every month so the bank balance, the trust liability, and the sum of all client ledgers agree to the penny. QuickBooks Online supports this structure, but it does not do the trust bookkeeping for you.

Step 1: Create the IOLTA trust bank account

Go to Settings, then Chart of accounts, then New, and create the account.

• Account type: Bank, or Cash and cash equivalents

• Detail type: Client trust account

• Name: IOLTA Trust Account

Connect it to the real IOLTA bank feed if you use bank feeds. One rule matters more than any other here: never classify client trust money as income when it comes in. It is money you owe the client.

Step 2: Create the trust liability account

Create a second account. This is the mirror of the bank account and represents what you owe clients.

• Account type: Other Current Liabilities

• Detail type: Trust Accounts

• Name: Client Funds Held in Trust

Step 3: Add a sub-account for each client or matter

Under Client Funds Held in Trust, create a sub-account for each client, or preferably each matter if your state or practice needs matter-level detail. This is what gives you the individual client trust ledger.

Client Funds Held in Trust  ├─ Smith, 2026-001  ├─ Jones, 2026-002  └─ Patel, 2026-003

Step 4: Record a client trust deposit

Suppose Smith sends a $10,000 retainer that must stay in trust. The entry increases trust cash and increases what you owe Smith. No income is recognized.

After this entry, trust cash is up $10,000, the amount owed to Smith is up $10,000, and firm income is unchanged.

Step 5: Record earned fees

When you earn $3,000 of that retainer, you do two things: reduce Smith's trust liability by $3,000, and move $3,000 from the IOLTA account to the operating account, where it becomes fee income. Client money only becomes firm money once it is earned and transferred.

Step 6: Reconcile three ways every month

This is the step the account setup exists to support. Every month, three numbers must match to the penny.

• The trust bank statement balance

• The Client Funds Held in Trust liability balance in QuickBooks Online

• The sum of all individual client trust ledgers

If they do not agree, there is an error to find and fix, and it is far better to find it yourself than to have a bar auditor find it.

The catch: QuickBooks Online supports this, but does not do it for you

QuickBooks Online gives you the accounts. It does not maintain your per-client trust ledgers, run your monthly three-way reconciliation, or catch a mistake before it becomes a bar problem. Worth knowing: Intuit's own Full-Service Bookkeeping does not record IOLTA account sub-ledgers within QuickBooks Online for a law firm. So the software can hold trust accounts, but the trust bookkeeping is still on you.

Trust rules also vary by state, including naming, reconciliation frequency, overdraft handling, and which transactions are permitted, so the setup above is a starting point, not a substitute for your state bar's requirements.

The done-for-you alternative

Numetix sets up IOLTA in QuickBooks Online and runs it for you. That means the trust and liability accounts, the per-client sub-ledgers, the deposit and fee entries, and the monthly three-way reconciliation, all maintained by a legal-specific bookkeeper.

Numetix serves small law firms of 3 to 20 attorneys, closes the books by the 15th of the following month, and prices on a flat monthly fee with trust accounting included. If you would rather not own the reconciliation yourself, this is the part Intuit's service will not do.

Frequently asked questions

Should client retainers be recorded as income?

No. Money held in trust is a liability, not income. A retainer that must stay in trust is a credit to the client's trust liability sub-account, not revenue. Recording it as income is one of the most common and most serious trust bookkeeping errors.

Does Intuit's bookkeeping service handle IOLTA sub-ledgers?

No. Intuit's Full-Service Bookkeeping does not record IOLTA account sub-ledgers within QuickBooks Online for a law firm. The software supports the structure, but maintaining per-client ledgers and the three-way reconciliation is a job for a legal-specific bookkeeper.

What is the three-way reconciliation?

It confirms three numbers match every month: the trust bank balance, the trust liability balance in QuickBooks Online, and the sum of all client trust ledgers. If they do not agree to the penny, there is an error to find before a bar auditor does.

Want IOLTA in QuickBooks Online set up and reconciled for you?Per-client sub-ledgers, three-way reconciliation every month, closed by the 15th.

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