Contingent Fees and Tax Refund Claims.

Earlier this year, the D.C. Circuit ruled that the Department of the Treasury could not regulate return preparers; the basic rationale was that the preparation of tax returns is not “practice before” the Department. As a consequence, the Court ruled that the Department exceeded its authority in regulating preparers. Loving v. IRS, 742 F.3d 1013, 1016-1022 (D.C. Cir. 2014).

Section 10.27(b) of Circular 230 also limits the ability of a practitioner to render services on a contingent fee basis and bars contingent fees in the context of most tax returns. Given Loving’s holding that the Department of the Treasury cannot regulate the preparation of tax returns, the question then becomes whether its bar on contingent fees can hold up.… Read More

Federal Tax Liens-What the Contingent Fee Lawyer Needs to Know.

The federal tax lien is a very potent collection device: if someone owes money to the IRS, the lien attaches to everything they have any interest in, even property held by the entireties (with some limited exceptions).
But there are times when the federal tax lien is subordinate to another obligation, and a conversation I had this morning with another lawyer indicated that they may now be as well-known as they should be. This lawyer was concerned about a contingent fee matter where his client had a federal tax lien.
This is an issue that might lead an attorney to reject a viable case.… Read More

A Challenge to Circular 230’s Limitation on Contingent Fees Is Rejected.

Circular 230, 31 C.F.R. § 10.0 et seq., regulates the conduct of attorneys, certified public accountants and other professionals in practice before the IRS, including regulation of the fees that they can charge. Circular 230 only permits contingent fees in three specific contexts:

  • In connection with an examination of, or challenge to an original tax return or an amended return or claim for refund or credit where the amended return or claim for refund or credit 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.
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