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If a taxpayer undergoes an IRS audit, appeal, refund claim or collection matter and the IRS takes an unreasonable position against them, they may be able to recover some of the costs of the procedure. Costs that may qualify for reimbursement would be reasonable administrative and litigation costs, which could include attorney fees, CPA fees and other administrative fees incurred to provide analyses or document preparation for the procedure. 

To qualify for reimbursement, the taxpayer must be able to prove the following: 

  • Net worth at the time of proceeding does not exceed $2 million for an individual or $7 million for a partnership, corporation, association, local government or unincorporated business and have no more than 500 employees
  • Must be the prevailing party in the proceeding
  • Must show that the position of the United States government was not substantially justified
  • Must show that the taxpayer exhausted all administrative remedies, and 
  • Must show that the taxpayer did not unnecessarily protract the proceeding, meaning that the taxpayer must have properly communicated with the IRS and supplied any necessary records to the IRS

If the above items are met, the taxpayer must apply within 90 days after the date of the final decision in order to be reimbursed any costs. Any recoverable fees are currently limited to a maximum of $200 per hour, unless the court finds that there are special circumstances to the case. Those circumstances could be a significantly higher cost of living or limited availability of qualified practitioners, or complex cases which require specialists.