06-9166, December 18, 2006, Rule 4, Deposit of Certain Client Funds, (“(T)he funds covered by this rule shall be subject to withdrawal upon request and without delay.) Some states have held that the lawyers’ obligation is simply to return unearned fees promptly, but Texas appears to take the position that unearned fees must be deposited in trust accounts. Texas Disciplinary Rule 1.14 (“Such (client) funds shall be kept in a separate account…”), Order Amending Rules Governing the Operation of The Texas Access to Justice Foundation, Texas Supreme Court Misc. While IOLTA appears to allow deposit of credit card fees to a trust account, both IOLTA and trust account rules prohibit lawyers from paying their operating expenses out of trust accounts and replenishing the trust account later. When clients have made payments to lawyer trust accounts through a credit card, Paypal or Square, some lawyers have simply deposited an additional amount sufficient to cover the amount deducted by the third party processor as shown on a monthly statement. “No funds belonging to the attorney or law firm, except funds reasonably sufficient to pay for fees or obtain a waiver of fees or to keep the account open, may be deposited in such an account.” Texas Foundation for Equal Justice rules for trust accounts subject to IOLTA states that: Chargebacks potentially threaten other client funds in the trust account if it is tied to a credit card, Paypal or Square. Fees may be deducted from the transaction that would otherwise have gone to the lawyer’s trust account. This is not necessarily the case for independent credit card services, Paypal and Square. When a lawyer has a trust account with a bank as well as a credit card merchant account, banks can often arrange to charge all transaction fees against the lawyer’s operating account rather than the trust account. Unearned fees and unincurred expenses, however, present a more difficult challenge because the funds must be kept in a trust account. When the funds advanced by the client pay the lawyer for fees already earned, credit cards present an issue of whether fees can be passed along to the client. Lawyers pay for these services through a combination of per transaction and percentage of the transaction fees. Lawyers increasingly accept credit cards and other payment services such as Paypal and Square for payment of fees. P.s.Can You Pay Credit Card and PayPal Fees From Trust Accounts? Technology *Note: This isn’t sponsored, I just happen to think this feature is the bomb diggity. Do you use an invoicing software to bill clients? Which one? ![]() Interested? You can check out Freshbooks right here. Alternatively, if you want to be extra frugal, you could turn credit card payments off altogether and only use PayPal Business Payments, allowing clients to pay with their checking account and giving you more money in your pocket. #winning. ![]() But if anyone pays through this special PayPal feature (there’s always some who do!), then you’ll be saving a whole lot of moo-lah in the long run. If your client pays with a credit card, you’ll still be subjected to the usual expenses. Now, this doesn’t mean that none of your invoices go fee-free. That little checkbox is all you need! Woop woop! Take a look at how setting up an invoice looks below: The monthly fee I pay for Freshbooks more than pays for itself in the money I save from this option. Instead of being charged that 2.9% + $0.30 fee, you’re charged only 50 cents. I’d known about Freshbooks, but never signed up because there’s a monthly fee you have to pay (it starts at $19.95/month) and I figured I could just continue using PayPal fo’ “free.” Anyways, Freshbooks has a feature where instead of collecting standard PayPal payments, you can collect them as PayPal Business Payments. The “secret” is that I started using an invoicing software called Freshbooks. Can you think of any other service you used last year that cost you that much money?! Luckily, I figured out a way to bypass these fees and I’m kicking myself that I didn’t discover this sooner. Holy Moly! It was one of my largest business expenses. Sound small? Last year I paid over $1,000 in fees to PayPal. PayPal charges 2.9% + $0.30 for every transaction you invoice. Namely, the fees you’ve grown accustomed to paying every time you make any money. If you’re a freelancer, blogger, or anyone who makes money in the online world, you’re probably familiar with PayPal.
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