November 12, 2010 12:00 am

No Recovery of Attorney

If a taxpayer fights the IRS and wins, under certain circumstances, the taxpayer is entitled to recover attorney’s fees from the federal government. Conditions for recovery:

  • Be the prevailing party in a civil litigation on a tax matter in any federal court (a U.S. district court, the U.S. Claims Court, or the U.S. Tax Court). This means that a taxpayer substantially prevailed with respect to the amount in controversy or the most significant issue or set of issues presented.
  • Exhaust administrative remedies. Under IRS rules, for example, it is necessary that a taxpayer ask for an appeals office conference prior to commencing a suit for refund or a Tax Court petition in order to satisfy this requirement.
  • Show that the IRS’s position was not “substantially justified.” Generally, this means that the government knows its position is incorrect but continues to pursue it.
  • Request a recovery of attorney fees and litigation costs in a court action; a court will not award such fees on its own initiative.

If a taxpayer represents himself, can he recover costs based on what he would have had to pay an attorney? An appellate court recently said no. The language of the law allows a recovery only for the services of an attorney paid or incurred in connection with the court proceeding. Since a taxpayer representing himself does not pay any fees, there can be no recovery.

Source: Paul S. Hudson; No. 09-3600

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