Compliance Question of the Week
November 7, 2011
November 8, 2011
Is an Interest on Lawyers’ Trust Account (IOLTA) subject to an IRS levy against the lawyer?
No. Generally, the IRS is authorized to levy any property or rights to property that belong to the taxpayer. The money a lawyer deposits into an IOLTA is not the property of the lawyer. IOLTA is a program where small amounts of money from several clients are pooled so that the funds can earn a greater amount of interest. The funds are placed in a trust account separate from the lawyers’ own money. The interest earned from the money held in the account is used to provide civil legal aid to the poor and support improvements to the justice system. Therefore, since the money in an IOLTA is not the property of the lawyer, the account is not subject to an IRS levy against the lawyer.
26 CFR 301.6331-1(a)
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