Additionally, the rules encourage practitioners to establish data security policies to safeguard sensitive information and create a response plan for potential data breaches.
Historical Context and Legal Considerations
The proposal follows a 2014 D.C. federal court decision that limited the IRS’s authority to prohibit contingent fees for ordinary refund claims. Unlike earlier iterations, the proposed regulations do not hinge on whether a practitioner’s activities constitute practice before the IRS, broadening their potential impact.
Practitioners currently may charge contingent fees in specific scenarios, such as handling whistleblower claims, determining penalties and interest, or representing clients in judicial proceedings. The new rules, however, would tighten these allowances significantly.
Next Steps
A public hearing on the proposed regulations is scheduled for March 6, providing an opportunity for stakeholders to weigh in. If finalized, the regulations would reshape how tax professionals handle contingent fee arrangements and require adjustments to practice standards, particularly in data security and technological understanding.
