IOLTA interest remittance instructions and forms

The IOLTA account will carry the tax identification number of the Wisconsin Trust Account Foundation, Inc. (39-1555465), which has beneficial ownership of the interest or dividends generated on IOLTA accounts. The Foundation is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Accordingly, 1099 forms or other reports of interest or dividends should not be prepared or submitted to the IRS for IOLTA accounts. Because the Foundation's tax identification number will not match the lawyer/law firm's name on the account, unnecessary tax reporting on these accounts could cause difficulty. Financial institutions will simplify their administration of IOLTA and avoid difficulties with the Internal Revenue Service by using an appropriate code to suppress 1099 forms for IOLTA accounts.

However, if your data processing system cannot bypass tax reporting, be sure to identify the Wisconsin Trust Account Foundation, Inc. as the payee/recipient of the interest or dividends (tax identification number 39-1555465). Financial institutions that must issue 1099 forms for IOLTA accounts should use their "second address" capability for this purpose and send the forms directly to the Foundation rather than the lawyer or law firm.

Financial institution contact form
WisTAF requests that your financial institution complete a Financial Institution Contact Form on a regular basis in order to help WisTAF keep accurate records of IOLTA and management contacts. WisTAF will email a form for completion periodically to your IOLTA contact to gather accurate contact information. Please notify WisTAF of any IOLTA contact changes as they arise.

1099-INT for IOLTA accounts
1099 INT forms should not be issued for IOLTA accounts. Interest on IOLTA accounts is taxable to the Wisconsin Trust Account Foundation, Inc. (WisTAF) and there are no tax consequences for clients, lawyers, or law firms. The Internal Revenue Service has stated that the interest on nominal and short-term client advances which is paid over to a bar foundation pursuant to a court-established interest on trust accounts program is not includable in the gross income of clients. Because WisTAF is exempt from federal income tax under Section 501(a) of the Internal Revenue Code, 1099 forms or other reports of interest are not required to be prepared or submitted to the Internal Revenue Service for IOLTA accounts.

Fees and service charges
Consistent with Wisconsin Supreme Court Rule 20:1.15, there are a limited number of fees that can be charged against IOLTA interest. The allowable reasonable fees may be deducted from interest earned or dividends paid on an IOLTA account, such that charges shall be calculated in accordance with an IOLTA participating financial institution’s standard practice for non-IOLTA customers. If non-IOLTA customers are not charged some or all of the allowable fees, financial institutions are also required not to charge those fees to IOLTA accounts.  The only exception to this is an approved administrative fee (see below). 

Allowable fees

• Activity fees are limited to per check charges and per deposit charges
• Other allowable fees are limited to FDIC fees, sweep fees, and fees in lieu of minimum balance

Administrative fees are allowed but must be approved by WisTAF’s Executive Director. Please contact the Executive Director at (608) 257-2841 to request approval for an administrative fee.

Negative netting prohibited
Fees in excess of the interest earned or dividends paid on the IOLTA account for any month or quarter shall not be taken from interest or dividends of any other IOLTA accounts. Fees in excess of the interest earned or dividends paid on a monthly basis shall not be taken from interest or dividends of another month’s interest in that same quarterly reporting period.  No fees that are authorized under this policy shall be assessed or deducted from the principal of any IOLTA account. All other fees are the responsibility of, and may be charged to, the lawyer or law firm maintaining the IOLTA account though IOLTA participating financial institutions may elect to waive any or all fees on IOLTA accounts. For more information about charging the lawyer or law firm a non-allowable fee, please contact Wisconsin’s Office of Lawyer Regulation (OLR) at (877) 315-6941.

Business analysis accounts
The practice of using business analysis accounts for IOLTA accounts is a practice that could possibly violate attorney ethics rules by allowing the attorney/law firm to receive business benefits based on client funds they hold in trust. WisTAF strongly discourages banks from offering business analysis products as IOLTA eligible products in order to inadvertently appear of impropriety on an attorney’s or law firm’s part in handling funds held in trust for their clients. Please refer to SCR 20:1.15 (d)(4) for a description of the types of accounts allowed as IOLTA accounts.

E-banking changes
The Supreme Court of Wisconsin has issued an order amending SCR 20:1.15 and making minor amendments to SCR 20:1.0 and the comment to SCR 20:1.5(g).  The order becomes effective July 1, 2023.

Lawyers do not need to do anything at this time. The amendments do not require lawyers to take any affirmative steps or change how they handle client and third-party funds. Whether a lawyer currently has just one trust account, or they currently have a trust account and also an “E-Banking Trust Account,” they can continue to use such accounts.

If, however, a lawyer wants to begin accepting electronic payments to their trust account, or make electronic payments from the trust account, the amended trust account rule provides options to do so.

The amendments repeal SCR 20:1.15(f)(2)c. and SCR 20:1.15(f)(3), which prohibited electronic payments to and from trust accounts. In effect, lawyers will be allowed to engage in electronic transactions in their trust account without the having a second “E-Banking Trust Account” under current SCR 20:1.15(f)(3)b. or complying with the “Alternative to E-Banking Trust Account” under current SCR 20:1.15(f)(3)c.

Pursuant to amended SCR 20:1.15(f)(1), lawyers will be able to engage in electronic transactions so long as they are “directed by one or more lawyers authorized by the law firm or a person under the supervision of a lawyer having responsibility under SCR 20:5.3.” Written confirmation of authorization for electronic disbursements should be maintained by the attorney/law firm as part of complete trust account records.

Amended SCR 20:1.15(f)(1) further requires that in the event of any shortfall or negative balance caused by a chargeback, surcharge, or ACH reversal by a financial institution or card issuer, a lawyer must reimburse the trust account within three business days of receiving notice of such shortfall and must do so before disbursing any funds.

To protect trust funds, lawyers should arrange for any surcharges, fees, reversals, or chargebacks to be withdrawn from the operating account rather than from a trust account. Further, to the extent a lawyer intends to make a client responsible for any electronic payment processing fees, the lawyer should confirm this is permissible with their card payments processing provider and notify the client in writing beforehand, preferably in the fee agreement.

If a lawyer does not wish to accept electronic payments directly to their trust account, amended SCR 20:1.15(b)(6)b. creates a new option for lawyers to accept electronic payments for advanced fees or advanced costs directly to a non-trust account temporarily. Following receipt, lawyers will be required to transfer the funds into a trust account within two business days. This option will also allow lawyers to accept a single electronic payment for both earned fees and advanced fees and costs to their operating account, provided they promptly transfer the unearned portion to the trust account. 

Please note that the general duty under SCR 20:1.15(b)(1) to hold in trust all unearned fees and cost advances will apply to funds received pursuant to amended SCR 20:1.15(b)(6).   

Closing IOLTA accounts
If one or more of your financial institution’s IOLTA accounts closes, please note this with the letter “C” in the IOLTA remittance report under the “Account Status” field. Once WisTAF receives this notification, we will update IOLTA database records accordingly. Please ensure that all interest on the account has been paid to WisTAF before closing the account. See Record Layout of Template below for specific information.

Remittance frequency and requirements
An IOLTA participating financial institution must remit and report interest on at least a quarterly basis. Monthly reporting is encouraged, when possible. An IOLTA participating financial institution must do the following:

• Remit to WisTAF the interest or dividends, less allowable reasonable fees as allowed, on the average collected balance in the account. See Payment of Interest via ACH transmittal section below for specific information.
• Provide to WisTAF an electronic remittance report showing, for each IOLTA account, the name of the lawyer or law firm for whose account the remittance is sent; the rate and type of interest or dividend applied; the amount of allowable reasonable fees deducted, if any; the average account balance for the period for which the report is made; and the amount of remittance attributable to each IOLTA account.
• Provide to the depositing lawyer or law firm a remittance report in accordance with the participating financial institution’s normal procedures for reporting account activity to depositors.
• Respond to reasonable requests from WisTAF for information needed for purposes of confirming the accuracy of an IOLTA participating financial institution’s remittance report

Payment of interest via ACH transmittal
WisTAF requires that your financial institution set up an Automated Clearing House (ACH) disbursing (holding) account where the sum of the interest accrued for all of your IOLTA accounts will be deposited immediately prior to the remittance for a given period. Once you have established an ACH disbursing account for IOLTA use, please contact the WisTAF office to complete and submit an ACH Verification form.

Please note: Your financial institution’s ACH disbursing account can be a general ledger or a checking account. The account can be used for other vendors or customers – it need not be WisTAF exclusive. The ACH account cannot be an established trust account as the rule governing trust accounts does not allow for third party transactions.

Please deposit the total net IOLTA interest earned (on all IOLTA accounts) for the reporting period into your ACH disbursing account. Funds should be made available in the ACH disbursing account on the same day you submit your remittance report to WisTAF. WisTAF will initiate the ACH transfer of interest from your ACH disbursing account to WisTAF’s account. There is no need for the financial institution to initiate payment.

Your financial institution’s IOLTA contact will receive a confirmation email stating the date the IOLTA interest will be debited and the amount to be debited. This is an opportunity to contact WisTAF in case there is a debit discrepancy.

As of January 1, 2019, it is WisTAF’s policy to recover any fees charged against the Foundation by our banking partner in the event an IOLTA remittance is rejected due to an error on the part of the remitting IOLTA-participating financial institution. In such cases, the actual amount of the fee charged will be billed to the remitting IOLTA-participating financial institution for reimbursement to WisTAF.

Occasionally financial institutions overpay their IOLTA remittance due to internal error. Financial institutions requesting a refund of overpaid IOLTA interest must submit documentation that shows the trust account balances for the period in question, the interest rates paid during the period, the remitted amount of interest for the period and the amount of interest that should have been remitted. Financial institutions submitting valid refund requests of $10.00 or less will be instructed to deduct the exact amount of overpayment from the next remittance period. Refund requests in excess of $10.00 will be refunded via electronic funds transfer following validation.

Electronic reporting
WisTAF requires that your IOLTA participating financial institution submit its IOLTA remittance report electronically each month or quarter, depending on the remittance frequency your financial institution has chosen. WisTAF will email your IOLTA contact an electronic template file (in .csv file format) for you to complete and submit along with instructions in detail in the Financial Institution Manual.

 Uploading report securely
There are two options to send your file securely. 

Option 1: Password protect your .xls file and upload it to our secure website at www.wistaf.org
Option 2: Send an unprotected .csv file via secure email to tislam@wistaf.org

To upload to our secure website:

• Register your financial institution to access the file upload page. To register, click the “Registration” link in the upper right-hand corner of the WisTAF Web site homepage. Enter the required information.

Please note: user names and passwords must contain only alpha characters (a to z) and should not contain any spaces. Do not include numbers or special characters in your user name or password.

• Enter the user name and password you created when you first registered to access the file upload page. The login area can be found in the upper right-hand corner of the WisTAF Web site homepage.
• Once you have logged in, click on the “Upload files” link in the upper right area of the screen. Click the “Browse” button and locate the file you wish to upload (your completed remittance report in .csv file format). Next, click the “Upload document” button. You will now see your chosen file in the “My files” listing at the bottom of the page. Once you have uploaded your remittance report, WisTAF staff will download the file and process your remittance.
• Your IOLTA contact will receive an email confirming that WisTAF has received your report and the date your financial institution’s ACH disbursing account will be debited. This is an opportunity to double check that WisTAF is debiting the correct amount from your disbursing account.

Financial Institution Participation
Participating in the IOLTA program is voluntary and an IOLTA participating financial institution may withdraw from the program at any time. If your financial institution wishes to no longer participate in the IOLTA program, please follow the steps below:

• Immediately notify WisTAF of your financial institution’s decision in writing.
• Notify your affected attorney/law firm customers that your financial institution will no longer be offering the IOLTA program.
• Once your attorney/law firm customers have closed their accounts, please notify WisTAF of the date each IOLTA account was closed.

Financial Institution Mergers
If your financial institution is undergoing a merger with another financial institution, please follow the steps below:

• Immediately notify WisTAF in writing of your financial institution’s decision.
• Notify your affected attorney/law firm customers that your financial institution is merging with another financial institution.
• Send WisTAF an updated list of trust accounts, should the trust account numbers change during the merger.