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•

You meet the net worth requirements, discussed

review. For this purpose, individuals filing a joint re-

later.

turn are treated as separate individuals.

•

For estates — your net worth does not exceed $2

You will not be treated as the prevailing party if the

million as of the date of the decedent’s death.

United States establishes that its position was substan-

•

tially justified. The position of the United States is pre-

For charities and certain cooperatives — you do not

sumed not to be substantially justified if the IRS:

have more than 500 employees as of the filing date

•

of your petition for review.

Did not follow its applicable published guidance

•

(such as regulations, revenue rulings, notices, an-

For all other taxpayers — as of the filing date of

nouncements, private letter rulings, technical advice

your petition for review, your net worth does not

memoranda, and determination letters issued to the

exceed $7 million, and you must not have more than

taxpayer) in the proceeding (This presumption can

500 employees.

be overcome by evidence.), or

•

Qualified offer rule. You can also receive reasonable

Has lost in courts of appeal for other circuits on

costs and fees and be treated as a prevailing party in a civil

substantially similar issues.

action or proceeding if:

The court will generally decide who is the prevailing

•

You make a qualified offer to the IRS to settle your

party.

case,

Reasonable litigation costs. These include the follow-

•

The IRS does not accept that offer, and

ing costs.

•

The tax liability (not including interest, unless interest

Reasonable court costs.

is at issue) later determined by the court is equal to

•

The reasonable costs of studies, analyses, engineer-

or less than the amount of your qualified offer.

ing reports, tests, or projects found by the court to be

You must also meet the remaining requirements, including

necessary for the preparation of your case.

the exhaustion of administrative remedies and the net

•

The reasonable costs of expert witnesses.

worth requirement, discussed earlier, to get the benefit of

•

the qualified offer rule.

Attorney fees that generally may not exceed $150

per hour for calendar year 2005. The hourly rate is

Qualified offer. This is a written offer made by you

indexed for inflation. See Attorney fees, later.

during the qualified offer period. It must specify both the

offered amount of your liability (not including interest) and

Reasonable administrative costs. These include the

that it is a qualified offer.

following costs.

To be a qualified offer, it must remain open from the

•

Any administrative fees or similar charges imposed

date it is made until the earliest of:

by the IRS.

•

The date it is rejected,

•

The reasonable costs of studies, analyses, engineer-

•

The date the trial begins, or

ing reports, tests, or projects.

•

90 days from the date it is made.

The reasonable costs of expert witnesses.

•

Attorney fees that generally may not exceed $150

Qualified offer period. This period begins on the day

per hour for calendar year 2005. See Attorney fees,

the IRS mails you the first letter of proposed deficiency that

later.

allows you to request review by the IRS Office of Appeals.

It ends 30 days before your case is first set for trial.

Timing of costs. Administrative costs can be awarded

for costs incurred after the earliest of:

Attorney fees. For the calendar year 2005, the basic

rate for attorney fees is $150 per hour and can be higher in

•

The date the first letter of proposed deficiency is

certain limited circumstances. Those circumstances in-

sent that allows you an opportunity to request ad-

clude the level of difficulty of the issues in the case and the

ministrative review in the IRS Office of Appeals,

local availability of tax expertise. The basic rate will be

•

The date you receive notice of the IRS Office of

subject to a cost-of-living adjustment each year.

Appeals’ decision, or

Attorney fees include the fees paid by a taxpayer

•

The date of the notice of deficiency.

TIP

for the services of anyone who is authorized to

practice before the Tax Court or before the IRS.

Net worth requirements. An individual taxpayer may

In addition, attorney fees can be awarded in civil actions for

be able to recover litigation or administrative costs if the

unauthorized inspection or disclosure of a taxpayer’s re-

following requirements are met.

turn or return information.

•

Fees can be awarded in excess of the actual amount

For individuals — your net worth does not exceed

$2 million as of the filing date of your petition for

charged if:

Page 10

Publication 556 (Rev. August 2005) - Examination Of Returns, Appeal Rights,and Claims For Refund Page 10

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