Work with skilled attorney to build strong tax case, obtain IRS award of fees, P.1
When an individual is targeted by the IRS for nonpayment of taxes, there can be significant costs involved. The guidance and advocacy of experienced legal counsel is indispensable when facing a tax audit, or charges of tax negligence or fraud, but there are costs associated with legal representation.
This is especially the case when the IRS is mistaken in its allegations and a taxpayer is required to secure the services of an attorney to fight the IRS on charges of tax negligence in the tax appeals process, or in Tax Court. Fortunately, taxpayers are able to collect attorney fees from the IRS in some circumstances, and this can help a great deal in covering the costs of representation.
One of the requirements for obtaining attorney fees from the IRS is that the taxpayer must have been the prevailing party in the dispute. This doesn’t mean that the taxpayer has to have been successful on every issue raised in the dispute, but that he or she either won on the most significant of the tax issues, or that he or she won with respect to at least half of the overall amount in controversy. The latter can happen when the taxpayer is successful in proving that he or she does not owe at least half the amount the IRS claimed he or she owed.
Another important requirement for obtaining attorney fees is that the IRS must be able to prove that its position was reasonable based on the facts of the case and the requirements of tax law. If the IRS cannot show this, the taxpayer may be entitled to attorney fees. According to some tax attorneys, taxpayers can sometimes be successful in highlighting the different points of view IRS agents take at different points of the dispute—particularly between the appeals process and Tax Court. Careful attention to the details of the case can help uncover the reasoning that goes into the IRS’ position, and how that reasoning changes at different stages of the process. If these points of view are drastically different, there may be a stronger case that the IRS’ position is not reasonable.
In our next post, we’ll continue looking at this issue, and how an experienced attorney can help a taxpayer successful argue for IRS payment of attorney fees.