Whose Fraud?

BY EDWARD J. SCHNEE

The statute of limitations does not protect a taxpayer from a deficiency assessment for fraudulent returns when the fraud was committed by a preparer, the Tax Court ruled.

In 2005, Vincent Allen was assessed a deficiency of $12,212 for income taxes in 1999 and 2000, based on false itemized deductions shown on copies of the returns the preparer provided to Allen. The preparer later pleaded guilty to 30 counts of fraud involving returns of other taxpayers.

Normally, the IRS has three years after a return is filed to assess a deficiency under section 6501(a), unless the return is false or fraudulent, in which case the time is unlimited. Allen unsuccessfully argued the exception applies only if the taxpayer had fraudulent intent. The preparer’s fraud was sufficient to permit the unlimited assessment period.

Allen v. Commissioner , 128 TC no. 4.

Prepared by Edward J. Schnee .

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