There are no tax consequences to the client, attorney, or law firm. No one will pay any taxes on this money. The IRS has ruled that the interest generated on these accounts is not taxable to the lawyer, law firm, or client. Any lawyer who receives a 1099 for interest earned on the IOLTA account should contact the IOLTA Committee immediately to reconcile the problem. Financial institutions are instructed to report the income to the IRS as received by the IOLTA Committee. Attorneys have no tax withholding or reporting responsibilities as to the interest earned on IOLTA accounts.