Solutions For RealSolutions For Real
  • Home
  • News
  • Personal Finance
    • Savings
    • Banking
    • Mortgage
    • Retirement
    • Taxes
    • Wealth
  • Make Money
  • Budgeting
  • Burrow
  • Investing
  • Credit Cards
  • Loans

Subscribe to Updates

Get the latest finance news and updates directly to your inbox.

Top News

5 Things To Ask Aging Parents About Emergency Evacuations

June 21, 2025

A 16-Billion Password Leak Just Hit. Are You at Risk?

June 21, 2025

30 Best Stay-at-Home Jobs for Moms and Dads

June 21, 2025
Facebook Twitter Instagram
Trending
  • 5 Things To Ask Aging Parents About Emergency Evacuations
  • A 16-Billion Password Leak Just Hit. Are You at Risk?
  • 30 Best Stay-at-Home Jobs for Moms and Dads
  • Americans face vastly different retirement costs across states as Social Security cuts loom
  • The Best Defense Against Uncertainty Isn’t a Single Strategy — It’s a Mindset
  • Highly Profitable Corporations Amass Trillions In Cash And Pay Out Trillions In Dividends
  • Here’s What Will Happen When Social Security and Medicare Funds Run Dry
  • 10 Recession-Proof Jobs That Can Withstand a Downturn
Saturday, June 21
Facebook Twitter Instagram
Solutions For RealSolutions For Real
Subscribe For Alerts
  • Home
  • News
  • Personal Finance
    • Savings
    • Banking
    • Mortgage
    • Retirement
    • Taxes
    • Wealth
  • Make Money
  • Budgeting
  • Burrow
  • Investing
  • Credit Cards
  • Loans
Solutions For RealSolutions For Real
Home » Can CPAs Prepare Your Taxes For A Percent Of Your Tax Savings?
Taxes

Can CPAs Prepare Your Taxes For A Percent Of Your Tax Savings?

News RoomBy News RoomAugust 5, 20230 Views0
Facebook Twitter Pinterest LinkedIn WhatsApp Reddit Email Tumblr Telegram

Contingent legal fees are customary in personal injury cases. Increasingly, they are the norm in employment lawsuits too. Indeed, the variety of cases in which contingent legal fees are common is still expanding. These days, even large law firms may handle some cases on contingency. So, how about paying your tax adviser a percentage of the tax money he saves you? It should not be surprising that clients ask for this. Why wouldn’t a client want legal or accounting fees tied directly to the tax result?

The IRS doesn’t permit your annual tax returns to be done on contingency. It turns out that tax advice or representation for contingent fees is the exception, not the norm. One place where contingent fees may be especially useful is where the taxpayer is trying to get money back from the IRS in a lawsuit. Tax refund suits may lend themselves to contingent fees, and the IRS has approved contingent fees in that context. Yes, that’s right, this is an area regulated by the IRS.

So to start, whether your tax adviser can offer you services on a contingency depends on what contingent fees are allowed by the IRS. In regulations known as Circular 230, the IRS says that a practitioner cannot charge a contingent fee for services rendered in connection with any matter before the IRS, with three exceptions.

The first exception is that a contingent fee can be charged in connection with an IRS audit or challenge to (a) an original tax return; or (b) an amended tax return or refund claim, if it was filed within 120 days of the taxpayer receiving a written notice of the examination of, or a written challenge to the original tax return. Second, a contingent fee can be charged in connection with a refund claim filed for penalties or interest assessed by the IRS.

Third, a contingent fee can be charged in connection with any judicial proceeding arising under the Internal Revenue Code. The IRS would be happiest if your tax adviser sticks to these three permitted exceptions. However, in Ridgely v. Lew, 55 F. Supp. 3d 89 (D.D.C. 2014), a federal District Court held that the IRS had overstepped its authority with these rules. It is unclear where this leaves contingent fees, but the IRS still thinks it is right.

What’s an example of a fee that is clearly not OK in the IRS view? Tax return preparers cannot charge a fee tied to the size of your tax refund, to how many additional write-offs they find you, etc. Still, that leaves plenty of room. How do the IRS’s three exceptions apply in practice?

Say the IRS notifies Abe that he owes $1 million in taxes. Abe hires a lawyer or accountant to negotiate an offer in compromise for him. The fee is 30% of any tax savings. This seems fine, because the $1 million tax liability grows out of an IRS examination or challenge to a filed tax return.

What if Billy asks his lawyer to sue the IRS for a refund on a contingent fee basis. He filed his 2015 return reporting ordinary income on a big contract disposition. Later, he filed an amended 2015 return, claiming that it was capital gain. He didn’t get his refund, and now he wants to sue. Billy is suing, so a contingent fee is fine.

What if Billy wants a contingent fee before he files his amended return for 2015? With this timing change, a contingent fee might not be available, according to the IRS. However, under the Ridgely case, preparing an amended tax return, by itself, is not practice before the IRS. Ridgely suggests that the IRS can’t regulate this.

Tax audit disputes can be done on contingency too. Say that Dennis’s 2013 tax return was audited. His accountant represented him, but eventually, the IRS issued a Notice of Proposed Adjustment asking for $1 million in additional taxes. Can Dennis hire a tax adviser to represent him in a protest, and thereafter at the IRS Appeals Office, on a contingent fee basis? Sure, because it is about an IRS challenge to Dennis’s original return. In all of these situations, just be aware that the IRS has views about what is permitted.

Read the full article here

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Articles

Supreme Court Hears Landmark Tax Case—Here’s Why It Could Destroy Democrats’ Wealth Tax Plans

Taxes December 6, 2023

Taxing Carbon At The Border

Taxes December 5, 2023

In SCOTUS Moore Case, Taxation Without Receipt Of Cash Is Fair Game

Taxes December 3, 2023

Tax Court Finds That Silent Settlement Agreement Means Big Tax Bill

Taxes December 2, 2023

Bill In Congress Aims To Stop Kombucha From Being Taxed Like Beer

Taxes December 1, 2023

Building Housing Lowers Prices But “Supply Skeptics” Don’t Believe It

Taxes November 30, 2023
Add A Comment

Leave A Reply Cancel Reply

Demo
Top News

A 16-Billion Password Leak Just Hit. Are You at Risk?

June 21, 20250 Views

30 Best Stay-at-Home Jobs for Moms and Dads

June 21, 20250 Views

Americans face vastly different retirement costs across states as Social Security cuts loom

June 21, 20250 Views

The Best Defense Against Uncertainty Isn’t a Single Strategy — It’s a Mindset

June 21, 20250 Views
Don't Miss

Highly Profitable Corporations Amass Trillions In Cash And Pay Out Trillions In Dividends

By News RoomJune 20, 2025

Nonfinancial corporations continue to do very well. Recent data from the Federal Reserve, specifically its…

Here’s What Will Happen When Social Security and Medicare Funds Run Dry

June 20, 2025

10 Recession-Proof Jobs That Can Withstand a Downturn

June 20, 2025

How Building Gaming Tech Led Us to a Business Breakthrough

June 20, 2025
About Us
About Us

Your number 1 source for the latest finance, making money, saving money and budgeting. follow us now to get the news that matters to you.

We're accepting new partnerships right now.

Email Us: [email protected]

Our Picks

5 Things To Ask Aging Parents About Emergency Evacuations

June 21, 2025

A 16-Billion Password Leak Just Hit. Are You at Risk?

June 21, 2025

30 Best Stay-at-Home Jobs for Moms and Dads

June 21, 2025
Most Popular

15 Best Paid Survey Sites For Kids

December 12, 20231 Views

5 Things To Ask Aging Parents About Emergency Evacuations

June 21, 20250 Views

A 16-Billion Password Leak Just Hit. Are You at Risk?

June 21, 20250 Views
Facebook Twitter Instagram Pinterest Dribbble
  • Privacy Policy
  • Terms of use
  • Press Release
  • Advertise
  • Contact
© 2025 Solutions For Real. All Rights Reserved.

Type above and press Enter to search. Press Esc to cancel.