Nearly everyone looking to hire a tax attorney wants to know how much the attorney will charge. Unfortunately, most California tax attorneys don’t advertise their fees online. To find out how much the attorney will charge, a prospective client usually has to pick up the phone and ask for a quote. Even worse, sometimes the attorney can’t give a quote over the phone and instead requires a paid consultation. Unsurprisingly, finding out how much a tax attorney will charge for representation can be a bit of a hassle, but this article will help you understand the basics of tax attorney billing.
The Traditional Hourly Fee
If your tax case involves litigation, a tax attorney will probably charge a retainer fee and bill by the hour. In brief, the retainer fee will act as a security deposit that the attorney will hold in a trust account. Each month, the attorney will send an invoice that shows how much time they spent working on the case multiplied by their hourly rate. For instance, if a tax attorney spent 5 hours working on a case and their hourly rate is $250, the attorney will send an invoice for $1,250. (5 hours x $250 = $1,250). The attorney then deducts that amount from the retainer fee. If the retainer fee runs out the attorney will ask the client to pay an additional retainer fee so they may continue working on the case. If the client does not replenish the retainer fee, the attorney will usually withdraw.
Most clients don’t like the retainer fee & hourly billing model. For the client, there’s no certainty that the retainer fee will be enough to accomplish the objective of representation. Also, hourly billing can lead to unscrupulous attorneys over-billing clients by spending more time on tasks than is necessary.
Most tax clients prefer the flat fee model. In a flat fee model, the client pays a specific amount of money for a particular task. For instance, a Sacramento tax lawyer may charge a flat fee of $2,500 to secure an installment agreement with the IRS. By charging a flat fee, the attorney is guaranteed a certain amount of money to accomplish a particular service, and the client knows they’ll only pay that flat fee; no more, no less.
Flat fees are common when tax attorneys can estimate how much time will be required to accomplish the objective of representation. Accordingly, flat fees are common for routine tax matters such as offers in compromise, installment agreements, non-collectible status, and audit representation. In contrast, when there is uncertainty as to how much time will be required, such as in the case of litigation, hourly billing is the norm.
As is evident from this brief guide to tax attorney fees, most tax attorneys charge flat fees for routine tax resolution cases. However, cases involving litigation or businesses with high tax debt may warrant a retainer fee and hourly billing model. With that said, a minority of tax resolution cases require retainer fees and hourly billing.
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