Saturday, July 18, 2015

Article Abstract: CPA Contingency Fees

TITLE

CIRCULAR 230 UNDER ATTACK: COURT STRIKES DOWN RESTRICTION ON CPA CONTINGENT FEES

AUTHOR(S)

ROGER W. DORSEY

PUBLICATION

Practical Tax Strategies, Jul 2015

PUBLISHER

WG&L

ABSTRACT

In Ridgely v. Lew (2014), the court found the IRS exceeded its statutory authority when it prohibited tax practitioners (including CPAs) from charging contingent fees for preparing and filing "ordinary refund claims."

 

The IRS sought to regulate such refund claims under Circular 230 regulations and under 31 USC 330 which gives the IRS authority to regulate what that statute terms "representatives" of taxpayers who "practice before" the Treasury Department (which includes the IRS).

 

The same court had previously blocked the IRS' scheme for regulating unenrolled tax return preparers (Loving (2013)).

 

The court's theory was that simply preparing and filing ordinary refund claims similarly does not constitute acting as the "representative" of a taxpayer or "practicing before" the IRS. The court defined an "ordinary refund claim" as one "that practitioners file after a taxpayer has filed his original tax return but before the IRS has initiated an audit of the return."

 

Since the plaintiff was a CPA (unlike in Loving), a profession long-regulated under Circular 230, the Loving principles are now extended to the regulation of all manner of tax professionals, licensed and unlicensed, enrolled and unenrolled.

RESEARCH TAGS

Circular 230; Contingency Fees; Professional Regulation

 

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