Guarantee of Contingency Fee

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    Lauren Massie


    I’m curious as to what tools are available to guarantee that a client will have the funds available to pay me upon favorable resolution of allowable contingency fee arrangement? For example, let’s say there is a possibility that I can get $300K in penalties abated and I charge a 10% contingency fee (or $30K). Before doing the work, what tools can be used to guarantee that the funds are available immediately upon favorable resolution (i.e., escrow account, etc.)? Anybody have any third-party companies that they can recommend to use for such cases?


    Gary Massey

    Lauren, can we do contingency fees? I thought there was a prohibition for CPA’s. Would be happy to hear what others say on this.

    Lauren Massie

    Contingent fees are allowed in certain circumstances. Here is an excerpt from the NC Board of CPA Examiners (21 NCAC 08N .0303 (d).

    (d) Acceptance of a Contingent Fee.

    (1) The offering or rendering of professional services for, or the receipt of, a contingent fee by a CPA shall not be prohibited except for engaging to render or rendering by a CPA:

    (A) of professional services for any person for whom the CPA also performs attest services, during the period of the attest services engagement, and the period covered by any historical financial statements involved in such attest services; and

    (B) for the preparation of original or amended tax returns or claims for tax refunds.

    (2) Fees shall not be regarded as being contingent if fixed by courts or other public authorities or, in tax matters, if determined based on the results of judicial proceedings or the findings of governmental agencies.

    Eric Green

    There are no contingency fees allowed under Circular 230 – See Section 10.27.

    Lauren Massie

    Thanks for the clarification! This is good to know. Glad to brainstorm on this forum.

    Lauren Massie

    Curious still after re-reading Cir. 230 10.27 Fees. It reads, in part, that except for as provided in paragraph (b)(3) the following. Would charging a contingent fee for penalty abatement/contesting CSED meet the definition below and thus allow for remuneration on a contingency basis? Just need more clarification.

    (3) A practitioner may charge a contingent fee
    for services rendered in connection with a claim
    for credit or refund filed solely in connection with
    the determination of statutory interest or penalties
    assessed by the Internal Revenue Service.

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