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Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
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Experience:  30 years of corporate, litigation and international law
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I had a potential issue with the IRS about payment of payroll

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I had a potential issue with the IRS about payment of payroll taxes and I spoke with my CPA regarding the issue. He gave his best guess answer (statue of limitations would run out on collection of taxes). However, he said he wanted to get the advice of a tax attorney he knew in another (much larger) city. He stated to my husband "he will charge you" and got my husband's agreement that would be okay. No mention was made of amount. When the attorney finally gave an opinion, he spoke to my CPA and followed up with a four sentence e-mail to the CPA. The CPA told me the attorney's opinion on the phone. I asked for my CPA to forward the e-mail opinion for my files. I was surprised by a bill from the attorney with basically no detail in the amount of $459 plus tax. It did not give his hourly rate or the breakout of what he worked on. I sent a letter stating that I wanted clarification on his hourly rate, and the amount of time spent on the tasks. And stated that I wanted to the attorney to confirm that he was representing me when he provided advice to my CPA since there was no letter of representation. The attorney sent back an hourly rate of $270 and that he spent 1.5 hours reviewing the information and 2/10's of an hour discussing my conclusions with the CPA and sending the e-mail. I can't question how long he took, but this was a pretty simply straight forward question and I think the CPA led the attorney in the research. He enclosed the e-mail from the CPA in his response. I responded with a letter confirming that I understood he represented us when he provided the opinion, said that if I had know the details of the hourly rate and been given an estimate of the amount of time it took to address our issue, we would have pursued a different path, and that we should have been made aware of the attorneys fees and estimated time prior to researching the case. I cited the NM Rules of Professional Conduct 16-105 - Fees (B) Basis or Rate of Fees. "When the lawyer has not regularly represented the client, the basis or rate of the fee shall be communicated to the client, preferably in writing, before or within a reasonable time after commencing the representation." I send a check for an amount I thought was reasonable amount. I stated "Based on this information, we have enclosed a check for $350. We believe this is fair given the circumstances surrounding the lack of communication to us regarding your fees and estimated time. If we do not hear from you by September 6, 2013 we will consider this matter closed." In hindsight I should have put it the latter if you cash this check, I will consider this matter closed. I did put on the check "payment in full" however I know this really doesn't hold water. They cashed my check and sent me a bill for the balance. No additional information. Should I go ahead and pay the difference or do I have further grounds to stand on. I don't believe the CPA has any idea what this individual charges. I thought about paying the difference and cc: the bar association and the CPA with my displeasure on how this was handled . Your advice?

bizlaw :

Hello, I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for. You are correct that you should have been informed of the hourly rate or whatever basis the fee would be based upon prior to the engagement. The confusion I am sure comes from the fact that the CPA contacted the attorney and authorized him to do the work. How that interaction went is unknown. The $270 per hour is not an unreasonable rate for a tax specialist. Also, since the CPA did not know the answer, the issue must have had some complexity to it. The fact that an "opinion" was requested and provided also has significance because opinions as opposed to general advice create special liability for an attorney and generally cost more. At this point there is a $109 issue. I do not think this amount is worth pursuing so I would pay the balance. However, this is a lesson learned and you should make sure you are clear with whoever you are dealing on what the cost will be. If your CPA needs to check something that you will be charged for, you need to make sure that you know how you will be charged. If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.


I do think it is a lesson learned. Unfortunately, my husband agreed to the fee without the details. It is a small amount left I agree. The rate isn't unreasonable....I just don't like the way it happened. It was very sloppy. I think it would be worth talking to the CPA and informing him of the transaction for future reference. We live in a small town and costs are in general lower (ie the CPA did our taxes which included a farm operation for less than would the attorney charged.) I assumed the CPA would have taken this into consideration when using his buddy in a larger town. So cc: the bar would be pointless?


I looked at the e-mail and he doesn't state an opinion. Those were my words in my letters. The entire note read:


"As we discussed, our advice is that we wait to see whether the IRS assesses the payroll taxes. They cannot assess prior to 90 days after they issued the Notice of Determination. At that point, the statute of limitations will be a problem for the IRS. Pursuant to Reg 31.6205-1(a)(6)(iii), we wouldn't qualify for an interest free adjustment after the Notice of Determination was issued."

bizlaw :

On the opinion my comment should be disregarded. The email is just general advice. However, I still say that you should pay the difference and clarify the issue with the CPA for the future. The fact that your husband agreed without knowing the details only strengthens the obligation to pay the full bill. I can understand your frustration but I do not think it should be pursued further other than to make sure with your CPA that it does not happen again. If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.


I agree. We should have handled it differently. Thank for your assistance.

Richard - Bizlaw and other Business Law Specialists are ready to help you
Hi Kim:

I'm just following up with you to see how everything is going. Did my answer help?

Let me know,if you have any more questions.

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