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December IOLTA: Closing the Year Clean
Don’t let a sloppy trust account ruin your year.
If you’re a law firm owner, December isn’t just about billing and taxes—it’s your final opportunity to clean up your IOLTA account and close the year without risking disciplinary action or compliance violations.
Whether you’re in California, Florida, Texas, or any state with random audits, this checklist will help you:
Reconcile trust accounts accurately Avoid the most common year-end violations Start January with peace of mind and clean booksLet’s break down what you need to do now, what you need to document, and why you can’t afford to push this off into next year.
First—Why December IOLTA Reconciliation Is High-Risk
Throughout the year, most bar associations require monthly trust reconciliations. But in December, the risk is higher:
- Errors are compounded: Mistakes made in Q1 can go unnoticed until now.
- Client balances roll into 2026: You need accuracy before any funds carry forward.
- Bar audits look at year-end reports: Random or triggered audits often start with December statements.
In states like California, you must file an annual trust compliance declaration. In Florida, lawyers who don’t reconcile monthly are subject to immediate scrutiny. In Massachusetts, failure to maintain complete records can result in public discipline.This isn’t a paperwork issue—it’s a license protection issue.
Your December IOLTA Compliance Checklist
Here’s the complete list of actions you need to complete before January 1.
1. Complete Your Final Monthly Three-Way ReconciliationThree balances must match exactly:
- Bank ledger balance
- Individual client ledger totals
- Your trust account checkbook or transaction log
If they don’t reconcile:
- Investigate and resolve immediately
- Document any corrections
- Never carry discrepancies into the new year
2. Review All Open Client MattersCheck for:
- Residual balances on closed files
- Inactive matters with untouched funds
- Overdrafts or negative balances (never allowed)
Close out matters, return excess funds, and clearly document client authorizations for any remaining balances.
3. Clear Stale Transactions- Reissue checks older than 90 days
- Follow unclaimed funds procedures per state rules
- Return any unearned retainers or deposits
Florida requires you follow Rule 5-1.2(d) for dealing with dormant funds. California’s Rule 1.15 requires diligent efforts to return client property. 4. Audit Your Transaction LogReview every trust-related transaction in 2025:
- Check for improper use of trust funds (e.g., paying firm expenses from IOLTA)
- Verify only client-related payments were made from the account
- Confirm all deposits are documented with client names and file references
If you used generic “retainer” or “deposit” descriptions without clear attribution, update your records now. 5. Prepare for a Potential AuditYou should be able to produce:
- Monthly three-way reconciliations for each month in 2025
- Individual client ledgers with clear transaction history
- A running transaction journal
- Signed statements verifying monthly review (required in MA, CA, and more)
Even if you’re a solo attorney, you are the one responsible—not your bookkeeper.
Common Mistakes to Avoid (Especially in December)
Let’s be real: most trust account violations aren’t malicious—they’re sloppy.
Here are the top errors we see when closing the year:
- Client funds deposited into operating account
- Uncleared balances carried into the new year
- Firm expenses paid from IOLTA account
- No documentation of monthly reviews
- Comingling funds by mistake (especially with flat fees or subscription models)
If you’re unsure whether you’ve made one of these mistakes, December is the time to catch and correct it.
How to Roll Balances Into 2026
Once your books are reconciled:
- Carry forward only verified client balances
- Flag old matters for closure or follow-up
- Create a January ledger template using these balances
- Archive all 2025 trust reports for at least 6 years (depending on your state)
Not Sure Where to Start? Here’s a Simple Rule:
If you can’t answer yes to all of these questions, your firm may be out of compliance:
- Have you reconciled every trust account through November 2025?
- Can you produce client ledgers for every matter?
- Do all your balances match as of December 1?
- Are you prepared to handle a random bar audit in January?
If the answer is “no” or “I think so,” now is the time to get professional help.
CTA: Fix My Trust Account Before 2026
At Prestige Accounting & Consulting, we specialize in IOLTA cleanup and compliance for attorneys. Our team knows how to help you close out 2025 cleanly and confidently.
Avoid audits. Protect your license. Start 2026 stress-free.
