Quatloos!

jcolvin2 wrote:

Arthur Rubin wrote:[It should can be pointed out that Circular 230 prohibits tax preparers from basing fees for an original return on the amount of refund; it's allowed for amended returns, appeals, and court.

Circular 230 does not appear to allow contingent fees for amended returns, except when such returns are subject to examination (or the original return is under examination).

My mistake.
Section 10.27 of Circular 230 provides:

jcolvin2 wrote: As the D.C. Circuit held in Loving v. IRS, 742 F.3d 1013 (D.C. Cir. 2014), that the preparation of tax returns is outside the scope of "practice before the IRS," it is possible that this bar no longer has any meaning. See Ridgely v. Lew, 55 F. Supp. 3d 89 (D. D.C. 2014) ("IRS lack[s] statutory authority to promulgate contingent fee restrictions on those preparing and filing ordinary refund claims pursuant to Section 10.27 of Circular 230").

EAs and AFSPs are subject to Circular 230.

Arthur Rubin wrote: EAs and AFSPs are subject to Circular 230.

I am an attorney and likewise subject to Circular 230 when I am practicing before the IRS.

Ridgely was a CPA - also subject to Circular 230 when he was engaged in "practice before the IRS." Despite this, the holding in Ridgely v. Lew was that this particular provision of Circular 230 could not be enforced (and the IRS was in fact enjoined from so doing) against Ridgely.

I do, however, think that charging contingent fees for a tax return that may or may not be examined could violate other ethical obligations outside of Circular 230 under the right circumstances. As a legal professional, I know that the ABA Model Rules (which most states have adopted in some form or another) prohibit unconscionable fees. If the chances are that a return or amended return will not be examined (the audit rate is painfully low) before the refund is paid, and a substantial contingent fee is sought that would dwarf a customary rate or hourly charge, the state licensing authorities may consider that fee to be "unconscionable." I have never charged a contingent fee for something that was not already under scrutiny by the IRS.

I should have said EAs and AFSPs have agreed to follow Circular 230.