IRS Sets New Guidelines for Contingent Fees

December 7, 2007 

IRS Sets New Guidelines for Contingent Fees

In the past, the IRS has taken a strong stance against all forms of contingent fees. The recently released circular 230 revisions issued by the Treasury Department allow tax professionals to charge based on contingent fees only in the following circumstances:

· For services rendered in connection with an IRS examination of an original tax return

· For services rendered in connection with an IRS examination to an amended return

· For services rendered in connection with an IRS examination on a claim for refund or credit

· For services rendered in connection with any judicial proceeding arising under the Internal Revenue Code

· For services rendered in connection with interest and penalty reviews

The final regulations apply to fee arrangements entered into after March 26, 2008. Additional restrictions apply see Internal Revenue Bulletin 2007-45 dated November 5, 2007 for further information. Internal Revenue Bulletin 2007-45 can be found at http://www.irs.gov/irb/2007-45_IRB/ar10.html.

The reasons for the continued strict stance against contingent fees by the Internal Revenue Service and United States Treasury Department's is the belief that if practitioners are allowed to charge based on a percentage of refund they would have a vested interest in obtaining larger refunds.

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William B. Riccio, CPA/CITP is a certified public accountant. He is president of Riccio & Associates and can be reached at (216) 255-6913 or by e-mail at william@ohiocpa.net.