Fees for CPAs and attorneys are recovered by taxpayers at the same rate.

• Author: Rea, Robert C.

The Tax Court has held that under Sec. 7430, the rate of an accountant's fees recoverable by taxpayers prevailing in a tax controversy is the same rate of fees that may be recovered for their attorney's services. In Cozean, 109 TC No. 10 (1997)--a case filed before changes made to the fee schedule by the Taxpayer Bill of Rights 2 (TBOR2)--the court concluded that the taxpayer's recovery of fees for services of both his attorney and accountant was limited to an adjusted rate of $104 per hour.

In 1995, after the Service determined deficiencies in Robert Cozean's returns for 1990-1992, Cozean filed a petition with the Tax Court. After the case was docketed but before trial, an IRS Appeals conference was held; eventually, the Service conceded the case. Cozean then filed a motion for an award of litigation costs. During the IRS's examination and at Appeals, Cozean had been represented by both an attorney and an accountant.

The parties agreed that Cozean had met the criteria--including the net worth limitation and prevailing party requirements--for an award of fees under Sec. 7430; the only question was the correct amount of fees recoverable. Cozean requested the court to award total litigation costs of about $24,000; of this amount, 65 hours were attributable to attorney's fees (at an hourly rate of $250) and 30 hours were for the CPA's fees (billed at an hourly rate of $170).

The Service contested the fees because they exceeded the adjusted $104 hourly rate cap then in effect. According to the IRS, Cozean had not shown that there were special circumstances warranting more than this hourly rate for his attorney's services...