Will the IRS Pay Your Attorney Fees If You Win a Tax Dispute?

You disagreed with the IRS. You hired a tax professional or attorney, spent months fighting the issue and ultimately proved that your position was correct.

Now there's another question:

Can you make the IRS pay the professional fees you incurred fighting them?

Under certain circumstances, yes. Federal tax law allows qualifying taxpayers who prevail in disputes with the IRS to recover some administrative and litigation costs.

But winning your tax case doesn't automatically mean the IRS picks up your legal bill.

There are several requirements you have to satisfy, and one of the biggest obstacles is proving that the IRS's position wasn't substantially justified.

Can You Recover Attorney Fees From the IRS?

Potentially. The tax code allows qualifying taxpayers to seek reimbursement for certain reasonable costs associated with an IRS dispute.

These expenses generally fall into two categories:

• Administrative costs incurred while dealing with the IRS before the dispute reaches court; and
• Litigation costs associated with taking the dispute to court.

Administrative costs can include qualifying fees paid to attorneys, CPAs and enrolled agents.

However, the timing matters. Generally, administrative costs don't become recoverable simply because you hired a professional when the IRS first contacted you. The rules limit reimbursement to qualifying expenses incurred after certain formal IRS actions, such as a notice of deficiency or other specified determination.

Litigation costs can include qualifying attorney fees and other expenses associated with proceedings in U.S. Tax Court, federal district court or the Court of Federal Claims.

So reimbursement is possible. But first, you need to get through several hurdles.

1. Your Net Worth Can't Be Too High

Before examining who won the tax dispute, the law imposes a financial eligibility test.

For an individual taxpayer, the applicable net-worth limit is generally $2 million.

For married taxpayers filing jointly, the spouses are generally treated as one taxpayer with a combined $4 million limit.

For qualifying businesses, including corporations, LLCs and partnerships, the net-worth limit is generally $7 million, and the business generally cannot have more than 500 employees.

These limits have existed for decades without inflation adjustments. That means taxpayers can be completely successful in their dispute with the IRS and still be ineligible to recover their costs simply because their net worth exceeds the statutory limit.

2. You Generally Need to Be the Prevailing Party

Next comes the obvious requirement: you generally need to prevail in the underlying dispute.

But that doesn't necessarily mean you have to win every single issue.

A taxpayer may qualify as a prevailing party by substantially prevailing with respect to the amount in controversy or with respect to the most significant issue or issues involved in the case.

For example, imagine the IRS asserts that you owe $100,000 in additional tax and penalties. After the dispute, that amount is substantially reduced.

The fact that you didn't eliminate every dollar doesn't automatically mean you lost for purposes of seeking reimbursement.

Likewise, a case can involve several tax issues. You might lose a smaller issue but prevail on the issue responsible for most of the disputed tax.

The overall result matters.

3. Winning Isn't Enough If the IRS Had a Reasonable Position

This is one of the most important—and potentially frustrating—parts of the rule.

You can win your tax case and still not recover your attorney fees.

Generally, the IRS can avoid paying your costs if its position was "substantially justified."

In simplified terms, that means the IRS had a reasonable basis in both law and fact for taking the position it did.

The IRS doesn't necessarily have to have been correct.

That's an important distinction.

Suppose the IRS disallows a significant business deduction because you haven't supplied adequate records. You challenge the determination and later produce documentation establishing that the deduction was legitimate.

You may ultimately win the tax issue.

But if the IRS didn't have that evidence when it made its determination, its original position may have been reasonable based on the information available at the time.

That could make recovering your professional fees much more difficult.

Good Documentation Can Matter Twice

This creates another reason to respond properly to an IRS examination from the beginning.

Your documentation can help establish that your original tax position was correct.

But providing the IRS with the relevant documentation and legal support early can also help establish that the IRS continued pursuing an unreasonable position after it had the information necessary to evaluate the issue.

If you wait until much later to provide your strongest evidence, you may eventually win the tax dispute while weakening your argument that the IRS should reimburse your costs.

The paper trail you create during the examination and appeals process can therefore matter well beyond the underlying tax issue.

What If the IRS Ignored Its Own Published Guidance?

The taxpayer may have a stronger argument when the IRS takes a position contrary to applicable published guidance.

That can include IRS regulations, revenue rulings, revenue procedures, notices and announcements published through official IRS channels.

The law can also take into account certain taxpayer-specific guidance issued by the IRS.

This doesn't mean every disagreement with an IRS employee makes the government responsible for your attorney fees. But whether the IRS followed applicable authority can become important when determining whether its position was substantially justified.

What Is a Qualified Offer to the IRS?

There is another potentially powerful provision taxpayers involved in significant disputes should understand: the qualified offer rule.

A qualified offer is a formal written settlement offer that meets specific statutory requirements.

If you make a valid qualified offer and the court ultimately determines that your tax liability is equal to or less than the amount you offered, special rules can treat you as the prevailing party for purposes of recovering qualifying costs.

This can be particularly important because the qualified-offer rules can potentially overcome the government's argument that its position was substantially justified.

But this isn't an informal "I'll pay you $20,000 and we'll call it even" conversation.

A qualified offer must satisfy technical requirements. Among other things, it must:

• be in writing;
• identify the applicable tax years and liabilities;
• specifically identify itself as a qualified offer;
• state the amount being offered, excluding interest; and
• remain open for the required period.

There are also strict rules governing when the offer can be made.

If enough money is at stake that you're considering a qualified offer, this is not something to improvise without professional guidance.

4. You Generally Must Use the IRS Appeals Process First

You usually can't bypass the IRS's administrative process, head straight to court and then expect the government to reimburse your litigation costs.

To qualify for reimbursement, taxpayers generally must exhaust the administrative remedies available through the IRS.

That typically means participating in an IRS Independent Office of Appeals review when one is available.

There can be exceptions—for example, when the IRS doesn't provide an opportunity for Appeals or tells you that additional administrative steps aren't necessary.

But as a general rule, you need to give the administrative process an opportunity to resolve the dispute.

5. Don't Be the Reason the Tax Dispute Drags On

The government isn't required to reimburse costs that resulted from a taxpayer unnecessarily prolonging the dispute.

That makes cooperation and responsiveness important even when you strongly disagree with the IRS.

Problems can arise when a taxpayer:

• fails to provide requested documentation;
• creates unnecessary delays;
• refuses to respond reasonably to concessions; or
• allows avoidable errors to extend the dispute.

You don't have to agree with the IRS simply to move the case along. You do, however, want the record to demonstrate that you handled your side of the dispute reasonably and efficiently.

6. The IRS Won't Necessarily Reimburse Everything You Paid

Even when you qualify for reimbursement, that doesn't necessarily mean you'll receive a dollar-for-dollar reimbursement of your attorney's bill.

The law limits recovery to reasonable costs actually paid or incurred.

For 2026, recoverable attorney fees are generally subject to a statutory cap of $260 per hour.

That's considerably less than the hourly rate charged by many experienced tax attorneys.

Higher rates may sometimes be allowed when special factors exist, but those exceptions are interpreted narrowly.

So if your attorney charges $500 per hour, qualifying for an award doesn't automatically mean the IRS reimburses you at $500 per hour.

Keep Detailed Records of Professional Fees

If you're going to seek reimbursement, you'll also need to substantiate the expenses.

Your attorney, CPA or other tax professional should maintain detailed billing records documenting items such as:

• the date services were performed;
• the amount of time spent;
• the work performed;
• who performed the work; and
• the hourly rate charged.

Remember that only qualifying costs incurred during the appropriate stages of the dispute are potentially recoverable.

Good billing records can help distinguish eligible work from professional services that fall outside the reimbursement period.

Can I Charge the IRS for Representing Myself?

No.

If you represent yourself in a tax dispute, you generally can't assign an hourly value to your time and ask the IRS to reimburse you for it.

That applies even if you happen to be an attorney or CPA yourself.

The reimbursement provisions apply to qualifying fees and costs that were actually paid or incurred.

7. There Are Deadlines for Requesting Reimbursement

Winning the dispute doesn't automatically trigger a check from the IRS.

You have to request reimbursement, and there are deadlines.

For qualifying administrative costs, a taxpayer generally must submit the application to the IRS within 90 days after the IRS mails its final decision regarding the tax, interest or penalty.

If the IRS denies the request, additional deadlines apply for seeking Tax Court review.

When the underlying dispute is litigated, the request for fees and costs becomes part of the court proceeding and is subject to the applicable court rules and deadlines.

Missing the deadline can mean losing the opportunity to recover expenses even if you otherwise satisfied the requirements.

Will the IRS Pay My Attorney Fees After an Audit?

Possibly, but the answer isn't simply based on whether you "won the audit."

To recover qualifying attorney and professional fees, several things generally need to line up:

• You satisfy the applicable net-worth requirements.
• You substantially prevail in the dispute.
• The IRS's position wasn't substantially justified, or another applicable provision such as the qualified-offer rule applies.
• You exhausted the available IRS administrative remedies.
• You didn't unreasonably prolong the dispute.
• The fees were actually incurred and are reasonable under the applicable rules.
• You properly document the costs.
• You request reimbursement within the required deadline.

That's a much higher bar than simply proving that the IRS's original tax adjustment was wrong.

The Best Strategy Starts Before You Win the IRS Dispute

If you're already in a significant dispute with the IRS, don't wait until the case is over to ask whether your professional fees might be recoverable.

How you handle the examination and appeals process can affect your ability to seek reimbursement later.

Providing documents promptly, putting important arguments in writing, identifying the authority supporting your position, participating in available administrative appeals and maintaining detailed professional billing records can all become important.

Most importantly, don't assume that an IRS notice automatically means the IRS is correct—or that winning automatically means the IRS pays the cost of proving it wrong.

Ken-Mar Tax can help you understand an IRS notice, organize the documentation supporting your tax position and determine the appropriate next steps before a manageable tax issue becomes a much larger dispute.