diff --git a/app/lib/smtp_server/client.rb b/app/lib/smtp_server/client.rb
index e38318e..2a70667 100644
--- a/app/lib/smtp_server/client.rb
+++ b/app/lib/smtp_server/client.rb
@@ -116,18 +116,19 @@ module SMTPServer
     private
 
     def proxy(data)
+      # inet-protocol, client-ip, proxy-ip, client-port, proxy-port
       if m = data.match(/\APROXY (.+) (.+) (.+) (.+) (.+)\z/)
         @ip_address = m[2]
         check_ip_address
         @state = :welcome
         logger&.debug "\e[35mClient identified as #{@ip_address}\e[0m"
         increment_command_count("PROXY")
-        "220 #{Postal::Config.postal.smtp_hostname} ESMTP Postal/#{id}"
-      else
-        @finished = true
-        increment_error_count("proxy-error")
-        "502 Proxy Error"
+        return "220 #{Postal::Config.postal.smtp_hostname} ESMTP Postal/#{trace_id}"
       end
+
+      @finished = true
+      increment_error_count("proxy-error")
+      "502 Proxy Error"
     end
 
     def quit
diff --git a/lib/postal/config_schema.rb b/lib/postal/config_schema.rb
index 99d39a3..528e21f 100644
--- a/lib/postal/config_schema.rb
+++ b/lib/postal/config_schema.rb
@@ -279,7 +279,7 @@ module Postal
       end
 
       boolean :proxy_protocol do
-        description "Enable proxy protocol for use behind some load balancers"
+        description "Enable proxy protocol for use behind some load balancers (supports proxy protocol v1 only)"
         default false
       end
 
diff --git a/spec/lib/smtp_server/client/proxy_spec.rb b/spec/lib/smtp_server/client/proxy_spec.rb
new file mode 100644
index 0000000..7ec633d
--- /dev/null
+++ b/spec/lib/smtp_server/client/proxy_spec.rb
@@ -0,0 +1,28 @@
+# frozen_string_literal: true
+
+require "rails_helper"
+
+module SMTPServer
+
+  describe Client do
+    let(:ip_address) { nil }
+    subject(:client) { described_class.new(ip_address) }
+
+    describe "PROXY" do
+      context "when the proxy header is sent correctly" do
+        it "sets the IP address" do
+          expect(client.handle("PROXY TCP4 1.1.1.1 2.2.2.2 1111 2222")).to eq "220 #{Postal::Config.postal.smtp_hostname} ESMTP Postal/#{client.trace_id}"
+          expect(client.ip_address).to eq "1.1.1.1"
+        end
+      end
+
+      context "when the proxy header is not valid" do
+        it "returns an error" do
+          expect(client.handle("PROXY TCP4")).to eq "502 Proxy Error"
+          expect(client.finished?).to be true
+        end
+      end
+    end
+  end
+
+end