Tax IDs for IOLTAs

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Question:

We currently have three IOLTAs. One was a brand new attorney's office while the other two attorneys had existing bank accounts that we subtitled IOLTA. They all have their tax ID number for reporting purposes. Do I need to change these?

Answer:

You must avoid year-end reporting of interest earned on these accounts under the law firm or attorney's TIN. There are two ways of getting around that, depending on the capabilities of your system.

One alternative is to suppress reporting on the account altogether. If you can suppress reporting, be sure you don't do so at the customer level, in case the law firm or attorney has other interest-bearing accounts on which you want to do reporting.

The second alternative is to set IOLTA accounts up with the TIN of the appropriate IOLTA administrative body for the state. This is often included in the IOLTA program requirements, and based on observation of bankers' posts in BOL Bankers' Threads, the alternative most often chosen.

First published on BankersOnline.com 9/27/10