Can we charge for more work?

[taxea]

to me an unconsciouable fee would be what the "let us get you pennies on the dollar" companies charge the client....$6000. to do an OIC or IA

Proceeds from a lawsuit is not the same thing as increasing the refund. The law allows attornies to take a percentage of the settlement....If the additional refund comes from a tax court case perhaps one would not have to follow the rule about not basing the fee on the client refund. But I doubt it.

just a thought. taxea

[Black Bart]

Otis and taxea

So, I ran out and re-read Circular 230. It describes some rules which became effective March 2008 about fees. It says that "unconscionable" fees are never allowed. It also says that "contingency fees" are allowed only under certain circumstances. Contingency fees "include" fees which are a percentage of the refund obtained; I guess that the best description would be "fees based upon the outcome".

The circumstances under which contingency fees are allowed are #1. in connection with IRS examinations, #2. claims filed solely for the abatement of interest and/or penalties, and #3. judicial proceedings. #1 and #2 leave a lot of room for value-based pricing by tax professionals!

Taxea is right about the outrageous fees of the "pennies on the dollar" bunch and Otis has nailed down above for us what's allowed.

While I never price a tax return based on refund amount and my abatement case mentioned earlier would be okay under Otis' rule #2, the 230 limitations (audits, abatements, court cases) still seem too narrow.

For instance, box cases of prior years' unfiled/misfiled returns are frequently such an overwhelming maze of mixed up papers, out-of-date IRS correspondence, disregarded delinquencies, incomplete/non-existent documentation, half-eaten sandwiches, and virtually insoluble problems and trouble, that you aren't even sure you can get it fixed. Sometimes we do extraordinary over-and-above digging to extract them from a really deep hole; then you just can't hardly get enough to make it worth your while under regular pricing. If eventually (these things can take months) we're successful and they come out smelling like a rose, I feel like we are entitled to a greater share of the benefits gained.

[OtisMozzetti]

Hourly Fees vs. Contingency Fees

...
For instance, box cases of prior years' unfiled/misfiled returns are frequently such an overwhelming maze of mixed up papers, out-of-date IRS correspondence, disregarded delinquencies, incomplete/non-existent documentation, half-eaten sandwiches, and virtually insoluble problems and trouble, that you aren't even sure you can get it fixed. Sometimes we do extraordinary over-and-above digging to extract them from a really deep hole; then you just can't hardly get enough to make it worth your while under regular pricing. If eventually (these things can take months) we're successful and they come out smelling like a rose, I feel like we are entitled to a greater share of the benefits gained....

It would seem that there are some taxpayer situations where it makes sense to price the tax professional's services on an hourly fee basis, and some situations where it makes sense to price the tax professional's services based upon some measure(s) of the outcome which is developed. For one project, it might even be both.

Another approach is the "per form" or "per job" approach.

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One issue which gnaws at me is (are?) the words in Circular 230 which say that a contingency fee for work getting penalties and/or interest abated is OK only if that claim is filed "solely" to get penalties and/or interest abated. Would it not be true that most such representations made to the IRS involve a mixture of the substance about the tax liability with the request that penalties and/or interest ought to be abated?

[taxea]

Can we charge for more work?

I also charge more for this type of work but I don't base it on how much I am able to get the IRS to waive on the client's behalf. I have set fees that depend on the amount of work that will be required to address the issue, be it CP2000, compliance or anything other than a current year preparation of my client's taxes.
What I don't like is that clients tend to think that we made a mistake on their return whenever they get a notice from the IRS. And, I really don't like charging them for clearing the issue when it is actually an IRS mistake. taxea