Summary: This is a shortened version of the article What You Should Consider Before Hiring A Tax Attorney on The Sacramento Attorney Blog. In brief, tax attorney fees can be expressed as either a (1) retainer fee and hourly rate or (2) flat fee. Some tax attorneys offer payment plans for their fees, but consider whether the tax attorney’s services are contingent upon payment in full. Lastly, consider the cost of the attorney’s services against the likely outcome of representation.
Flat Fee vs. Retainer + Hourly Rate
Tax attorneys have a similar fee structure to many consumer-oriented attorneys. In essence, tax attorneys charge either a retainer fee and bill against the retainer fee according to their hourly rate or a flat fee.
Retainer Fee & Hourly Billing
Traditionally, attorneys charge a retainer fee which acts as a security deposit for services. As the attorney works on the client’s case they bill against the retainer fee according to their time multiplied by their hourly rate. For instance, if the attorney worked 10 hours on the client’s case and their hourly rate is $300 per hour, they would pay themselves $3,000 by deducting that sum from the client’s retainer fee. If the matter is concluded or the representation terminated, any balance of the retainer fee remaining is refunded to the client. On the other hand, if the retainer fee runs low during representation the client may need to pay an additional amount to “replenish” the retainer fee.
Flat Fee
Sometimes attorneys charge a flat fee for specific legal services. Usually, a flat fee is appropriate when the amount of work required is easily estimated at the beginning of representation. In terms of tax law, many tax attorneys charge flat fees for tax account review, installment agreements, and even offers in compromise.
Attorney Fee Payment Plans
Many tax attorneys offer payment plans for their attorney fees. Payment plans are more common when tax attorneys charge flat fees. In practice, the client will pay an initial amount to retain the attorney and monthly installment payments until the agreed-upon flat fee is paid in full. However, performance of the legal service is usually contingent upon payment in full. As a result, if the client falls behind on their monthly installment payment the tax attorney may simply withdraw from representation, leaving the client with little to show for their payments. Accordingly, clients should be cautious of attorney fee payment plans and consider the potential risks should they fall behind on future installment payments.