Theoretically, it is possible to get the IRS to pay your attorney fees and costs if you prevail in a dispute with the agency. Such fees and costs can include both administrative costs and litigation costs.

Administrative Costs

Administrative costs are costs you incur while dealing with the IRS internally, before your case goes to court. These include fees you pay to CPAs, enrolled agents, or attorneys. The costs are recoverable only for services after the IRS sends you a formal notice of its decision or a notice of deficiency.

Generally, you cannot recover administrative costs for collection actions, such as the IRS issuing a lien or levy. However, you can recover costs for the court portion of a collection dispute.

Litigation Costs

Litigation costs are expenses for bringing a court case—whether in the U.S. Tax Court, a U.S. district court, or the Court of Federal Claims. These costs include attorney fees and other litigation fees and expenses.

In practice, collecting fees and costs from the IRS is notoriously difficult. To collect, you must overcome seven hurdles.

Hurdle 1: You Must Satisfy Net Worth Limits

First, if your net worth is too high, you can’t collect any fees or costs from the IRS, even if you meet all the other requirements. If that’s the case, you don’t need to read the rest of this article.

For individuals, the net worth limit is $2 million. Married taxpayers filing a joint return are treated as one taxpayer with a joint cap of $4 million.

For businesses, including corporations, LLCs, and partnerships, the net worth limit is $7 million—plus the business can have no more than 500 employees.

For these purposes, assets like real estate are valued based on their acquisition cost.

The net worth limits date back to 1985. They became part of the limits on attorney fees in 1988. That’s 38 years ago. They have not been adjusted for inflation. As a result, each year fewer and fewer taxpayers are able to collect fees and costs from the IRS.

Hurdle 2: You Must Be the Prevailing Party

You must be the “prevailing party” in the underlying tax dispute. This means that you substantially prevailed as to the amount in controversy or the most significant issue(s) involved in your case.

You do not necessarily have to win everything to be the prevailing party. You can substantially prevail even if the IRS wins on some issues or you receive less than the full amount you requested.

There is no magic percentage, but winning 50 percent of the disputed tax, penalty, or refund claim is usually sufficient.

You can lose on some issues and still be the prevailing party if the issue or issues you won are the most significant.

Hurdle 3: The IRS’s Position Was Substantially Justified

Even if you are the prevailing party, you cannot collect fees and costs if the IRS’s position in the underlying action was “substantially justified.” This is often the hardest hurdle to overcome. But there can be a way around it.

The IRS’s position is substantially justified if it had a reasonable basis in both law and fact.The IRS doesn’t have to be right. All that matters is that a reasonable person could think it correct when the position was taken.

A significant factor in determining whether the IRS was substantially justified is whether the taxpayer presented all relevant information and legal arguments to the agency. For example, if the IRS disallows a deduction because you failed to provide records and you later produce the records after the notice of deficiency, the IRS likely would have been substantially justified when it acted. You might win your tax case but lose your fee request.

Your best chance of showing that the IRS was not substantially justified is to build a strong record early. Provide the IRS, during the examination or appeals process, with the relevant documents, legal arguments, and citations to controlling authority. If the IRS continues to press a position after you have supplied proof and law showing it to be wrong, your fee claim will be much stronger.

Key point. The Bradford Tax Institute articles you read contain footnotes that reference the controlling authority. This gives you a great head start on proving your position.

The IRS’s position is presumed not to be substantially justified if it failed to follow applicable published guidance. This includes regulations, revenue rulings, revenue procedures, notices, and announcements published in the Internal Revenue Bulletin. It can also include a private letter ruling, technical advice memorandum, or determination letter issued to you but not to other taxpayers.

There can be a way around the substantial justification hurdle: a qualified offer. This is a formal, written settlement offer you make to the IRS. If you make a valid qualified offer and ultimately the court’s judgment is equal to or less than the amount you offered, you are treated as the prevailing party for purposes of fee recovery.

This allows you to recover fees and costs even if the IRS argues that its position was substantially justified.

 A qualified offer must be in writing; identify the tax years and liabilities involved; be designated as a qualified offer; specify the offered amount excluding interest; and remain open until it’s rejected by the IRS, trial begins, or 90 days lapse.

You can make a qualified offer anytime after the IRS first sends a notice of proposed deficiency (or similar determination), up until 30 days prior to the date set for trial in Tax Court or another federal court.

However, the qualified offer rule does not apply if you enter into a settlement with the IRS—that is, if you settle, you won’t be able to get a fees award if the IRS’s position was substantially justified.14 Thus, qualified offers encourage the IRS to settle.

Hurdle 4: You Must Exhaust Your Administrative Remedies

You cannot recover fees and costs unless you first exhaust all available administrative remedies within the IRS. This means you must have participated in an Independent Office of Appeals review if one was offered, and you must have followed all internal IRS procedures to resolve the dispute before filing a lawsuit.

But there are exceptions. For example, if the IRS does not give you an opportunity for Appeals review, or if the IRS tells you in writing that further administrative steps are unnecessary, you will be treated as having exhausted your remedies.

Hurdle 5: You Must Not Unreasonably Prolong the Case

You cannot recover fees or costs for any portion of a proceeding that you unreasonably protracted (delayed). Examples of “unreasonable protraction” include

• failing to provide documentation to an Appeals officer;

• refusing for four months to accept a fair concession from the IRS; and19

• failing to review calculations before settling, leading to months of unnecessary quarreling20

Hurdle 6: Your Fees and Costs Must Be Actually Paid and Be Reasonable

You can only recover your “reasonable” costs and fees. Attorney fees are subject to an hourly cap that is adjusted annually for inflation.

For 2026, the cap is $260 per hour. This is much lower than the market rate for experienced tax attorneys. To get

a higher rate, you must prove a “special factor” exists, such as the extreme difficulty of the issues involved or a lack of qualified local tax experts. Courts apply these exceptions narrowly.

Reasonable administrative costs include only costs incurred on or after the earliest of 

• the date you receive the IRS Independent Office of Appeals notice of its decision,

• the date of the notice of deficiency, or

• the date the IRS sends the first letter of proposed deficiency (the “30-day letter”).

You must prove the amount of the fees and costs. Your attorney or other tax professional should keep detailed billing records showing the date, time spent, work performed, person performing the work, and hourly rate.

You can be reimbursed only for fees you actually paid or incurred.

Pro se taxpayers. If you represent yourself (even if you are a lawyer or CPA), you cannot recover “fees” for your own time because you didn’t actually pay anyone.

Spousal representation. A taxpayer was unable to recover fees for work performed by her attorney husband who represented them both, even after receiving a concession from the IRS that they owed no deficiency. Even though the taxpayer formally hired and wrote a check to her husband’s law firm, the court viewed it as “payment back to the same household,” which did not count as an actual out-of-pocket expense.

Hurdle 7: You Must File Your Request on Time

Finally, you must ask for fees and costs by the applicable deadline.

If you are seeking administrative costs from the IRS, you must file an application with the IRS before the 91st day after the IRS mails its final decision on the tax, interest, or penalty. This means you have a 90-day window.  If the IRS denies your request, you have 90 days to appeal to the Tax Court.

If your case goes to court, you must file a motion for fees and costs as part of the litigation. In Tax Court cases, you must file your motion

• within 30 days after the Tax Court serves a written opinion,

• within 30 days after service of the relevant transcript pages containing oral findings or opinion, or

• after the parties settle all issues except costs.

Your motion should show that you satisfy all the requirements. Attach billing records, declarations, proof of payment or obligation to pay, and relevant correspondence.

Takeaways

Here are five takeaways from this article:

1. Taxpayers who prevail against the IRS can obtain an award for their fees and costs. These can include administrative costs for dealing with the IRS internally as well as litigation fees and costs for bringing a court case.

2. Only taxpayers whose net worth is $2 million or less ($4 million for married taxpayers) can obtain a fees award. For businesses, the net worth limit is $7 million, plus the business can have no more than 500 employees.

3. To recoup fees and costs, a taxpayer must be the prevailing party, and the IRS’s position must not have been “substantially justified.” If a taxpayer makes a qualified offer to settle the case, the IRS will not be substantially justified if the ultimate judgment is equal to or less than the offer.

4. Taxpayers must also exhaust available IRS administrative remedies, usually by participating in an appeals process if that option is offered. And they cannot unreasonably drag out the case.

5. Taxpayers who overcome all these hurdles may be entitled to reimbursement for fees and costs actually paid or incurred, provided they are reasonable and properly documented. But you can’t obtain fees for the time you spend representing yourself or your spouse, even if you’re a lawyer or CPA. Also, attorney fees awards are capped. For 2026, the maximum hourly rate is $260 unless narrow exceptions apply.