By If you successfully challenge the IRS, you may be able to recover your attorney fees and other professional costs—but only if you meet several strict requirements.
One of the biggest hurdles is your net worth. Individuals generally qualify only if their net worth does not exceed $2 million. Married couples filing jointly have a $4 million limit. Businesses, including corporations, partnerships, and LLCs, generally qualify only if their net worth is $7 million or less and they have no more than 500 employees.
Meeting the net worth test is only the beginning. You also must substantially prevail in your dispute with the IRS, and the IRS’s position generally must not have been “substantially justified.” In addition, you must cooperate throughout the examination by providing requested records, pursuing available IRS appeals, and avoiding unnecessary delays.
One of the best ways to improve your chances of recovering fees is to build a strong record from the start. By providing complete documentation and the legal authority supporting your position during the audit or appeals process, you not only strengthen your tax case but also improve your claim that the IRS should reimburse your professional fees. In some situations, making a properly drafted qualified settlement offer can further strengthen your position.
Even when you qualify, reimbursement is limited to reasonable fees actually paid, and the law caps the hourly rate at $260 an hour, unless a narrow exception applies. If you want to discuss collecting fees from the IRS, please call me directly at 408-778-9651