Contingent legal fees are customary in personal injury cases. Increasingly, they are the norm in employment lawsuits too. Indeed, the variety of cases in which contingent legal fees are common is still expanding. These days, even large law firms may handle some cases on contingency. So, how about paying your tax adviser a percentage of the tax money he saves you? It should not be surprising that clients ask for this. Why wouldn’t a client want legal or accounting fees tied directly to the tax result?
The IRS doesn’t permit your annual tax returns to be done on contingency. It turns out that tax advice or representation for contingent fees is the exception, not the norm. One place where contingent fees may be especially useful is where the taxpayer is trying to get money back from the IRS in a lawsuit. Tax refund suits may lend themselves to contingent fees, and the IRS has approved contingent fees in that context. Yes, that’s right, this is an area regulated by the IRS.
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