Lawyer fees for a IRA Private letter ruling
Does anyone have any data on the fee that a lawyer would charge to compile and file for an IRS Private Letter Ruling to extend the IRA 60 day rollover rule? It is well documented that the 401k plan administrator made a mistake on taxable income and NUA requiring the need to rollover additional funds after the 60 day rule had expired. I live near Peoria Illinois.
Permalink Submitted by Alan Spross on Mon, 2011-10-17 16:56
Bruce Steiner, a tax attorney who posts here might be able to give you a rough ballpark.
But more detail might help. What funds did you receive that were NOT directly rolled to an IRA, and is there more assets still held with the 401k plan? Are you changing your mind about the NUA?
Permalink Submitted by Bruce Steiner on Mon, 2011-10-17 22:24
I’ve obtained about a half dozen private letter rulings allowing a rollover beyond 60 days. In the usual case, I would think the legal fees would be in the high 4 figures, not counting the IRS’ fee. But this one may be more complicated, for the reasons Alan suggests.
Permalink Submitted by Giles Sorrells on Tue, 2011-10-18 19:59
Here’s the story. I took a distribution of my 401K in Nov 2011. Part of the distribution was taxable that I rolled over to an IRA account the other portion was NUA which I deposited in a brokerage account. The amounts were defined in documentation from the plan administrator. In February I received the appropiate 1099. Then in March, I received a letter and a corrected 1099 from the plan administrator stating that they had made an error where the taxable amount was increased by $305,000 and NUA decreased by $305,000. Of course it was past the 60 day period where I could roll into an IRA. I then did an inquiry on what I needed to do. A Private Letter Ruling was recommended by this forum ( thanks, Ed). I contacted the plan administrator and they agreed to pay the fees (IRS and lawyer) to get the ruling. My lawyer put the documentation together and submitted it to the IRS in May. We recieved a favorable letter ruling in August and the $305,000 has been rolled over to an IRA.
Here’s the catch, the plan administrator has approved to the $3000 IRS fee, but only $450 ( 3 hours) of my lawyers bill which was basically $7650 (60 hoursX$150-15%). They denied $7200 indicating that they weren’t obligated to pay no more than 3 hours to type up the application.
I’m in the process of appealing the claim for the portion that was denied.
Permalink Submitted by Bruce Steiner on Tue, 2011-10-18 20:13
Congratulations on getting a favorable ruling. I look forward to seeing it when the IRS releases it. This one may have been more difficult than most, since the error was of a different type than most.
With the caution that it’s always hard to estimate the amount of time that a matter will take, especially one like this that doesn’t occur that often. But $7,560 seems reasonable. Probably about 3 hours for the secretary to type it is reasonable if the lawyer gave it to him/her on tape or in handwriting, but that doesn’t include the time it took the lawyer to gather the facts, research the issue, draft the ruling request, and deal with the IRS on it.
Permalink Submitted by Giles Sorrells on Wed, 2011-10-19 14:24
Thanks, I’ll include this in my appeal.