Preparer’s fraud means no deadline for IRS assessment
Murrin v. Commissioner, No. 24-2037, 2025 BL 373163 (3d Cir. Oct. 17, 2025), Court Opinion
The Third Circuit held that the section 6501(c)(1) “false or fraudulent return with the intent to evade tax” exception does not require the taxpayer’s own fraudulent intent, so the IRS may assess at any time when a return is fraudulent due to a third party, such as a preparer.
Holding
The court affirmed the Tax Court. Section 6501(c)(1) applies when a false or fraudulent return is filed with an intent to evade tax, regardless of whether the intent is held by the taxpayer or by another person, such as a return preparer. Because the taxpayer’s preparer inserted false entries intending to evade tax for 1993 through 1999, the IRS’s 2019 notice of deficiency was not time-barred.
Why It Matters
Confirms in the Third Circuit that the indefinite limitations period in section 6501(c)(1) is triggered by anyone’s intent to evade tax tied to a fraudulent return.
Aligns with Tax Court precedent and the Second Circuit’s formulation, and departs from the Federal Circuit’s BASR decision.
Distinguishes between the collection of correct tax under section 6501 and fraud penalties that turn on taxpayer intent under sections 6663 and 6664.
Signals compliance exposure for historical years where preparer misconduct is established.
Timeline
1993–1999: Taxpayer’s preparer inserts false or fraudulent entries on returns, causing underpayments.
2019: IRS issues notice of deficiency for 1993–1999; taxpayer petitions the Tax Court.
Tax Court: Holds section 6501(c)(1) applies based on the preparer’s fraudulent intent; statute of limitations is open.
April 30, 2025: Case argued in the Third Circuit.
October 17, 2025: Third Circuit affirms the Tax Court.
Key Facts
Taxpayer: Stephanie Murrin.
Years at issue: 1993 through 1999.
Misconduct: Preparer Duane Howell placed false or fraudulent entries with the intent to evade tax.
Amounts: Taxpayer stipulated to $65,318 of underpaid tax and a $13,064 accuracy-related penalty; interest not adjudicated.
Dispute on appeal: Whether section 6501(c)(1) requires the taxpayer’s own intent to evade tax to trigger the unlimited assessment period.
Statutory or Regulatory Framework
Section 6501(a) sets a three-year assessment period from the return filing. Section 6501(c)(1) creates an exception where a “false or fraudulent return with the intent to evade tax” is filed, permitting assessment “at any time.” Fraud penalty provisions, including sections 6663 and 6664(c)(1), and the litigation burden rule in section 7454(a), expressly tie fraud consequences to the taxpayer’s intent, in contrast to section 6501(c)(1), which does not specify an actor.
Arguments
Taxpayer argued:
Section 6501(c)(1) should be limited to the taxpayer’s intent to evade tax.
The reference to the taxpayer’s “return” in section 6501(a) implies that the “intent” in section 6501(c)(1) must be the taxpayer’s.
Reading section 6501(c)(1) to include third-party intent creates unfairness, uncertainty, and conflicts with longstanding practice and cases.
IRS argued:
The text of section 6501(c)(1) uses the passive voice and does not specify whose intent is required.
The statutory context shows Congress knows how to limit provisions to taxpayers when it chooses, as in sections 6663, 6664, and 7454, but did not do so in section 6501(c)(1).
Supreme Court authority on passive-voice statutes and prior Tax Court and circuit precedent support the application based on preparer fraud.
Court’s Reasoning
The court began with the text of section 6501(c)(1) and found no express limitation to taxpayer intent; the phrase “false or fraudulent return with the intent to evade tax” focuses on the event, not the actor.
Congress’s use of passive voice indicates agnosticism about who harbored the intent, consistent with the Supreme Court’s reading of similar passive-voice language in Bartenwerfer.
Context confirms the reading: where Congress intended to make fraud consequences turn on the taxpayer’s intent, it said so, as in sections 6663(c), 6664(c)(1), and 7454(a); section 6501(c)(1) contains no such qualifier.
The court rejected the argument that section 6501(a)’s reference to the taxpayer’s “return” imports a taxpayer-only limitation into section 6501(c)(1); different words in neighboring provisions are presumed to have different meanings.
Precedent supports the interpretation: Badaracco requires strict construction of section 6501(c)(1) in favor of the government; Tax Court cases like Allen and decisions recognizing preparer fraud satisfy the exception; the court distinguished Asphalt Industries as not deciding whose intent can satisfy section 6501(c)(1).
The court acknowledged and declined to follow the Federal Circuit’s BASR view that taxpayer intent is required, relying instead on text and context.
Forward-Looking Implications
In the Third Circuit, preparer fraud will keep the assessment period open indefinitely for the affected returns, even if the taxpayer lacked fraudulent intent.
Taxpayers can still contest penalties by showing reasonable cause and good faith under section 6664(c)(1), but they cannot rely on the three-year bar if a return was fraudulent due to a third party.
The decision sharpens a circuit split with the Federal Circuit, which may affect venue strategy in refund and deficiency litigation.
Practitioners should document preparer relationships and maintain contemporaneous records, since later establishment of preparer fraud can reach decades-old years.
Agencies and courts may consider this reasoning when evaluating related provisions that use the passive voice, including section 6161(b)(3).
Result
The Tax Court's judgment was affirmed; the IRS’s 2019 notice of deficiency for 1993–1999 was not time-barred under section 6501(c)(1).
The Takeaway
Within the Third Circuit, the IRS can assess at any time when a return is fraudulent with an intent to evade tax, even if the taxpayer did not intend to evade tax. Fraud penalties still require taxpayer intent, but the statute of limitations for assessment does not.
List of Citations
I.R.C. § 6501(a): Establishes the three-year assessment period.
I.R.C. § 6501(c)(1): Creates the no-limitations exception for a false or fraudulent return intending to evade tax.
I.R.C. §§ 6663, 6664(c)(1): Fraud and accuracy-related penalty framework that ties relief and imposition to taxpayer intent and reasonable cause.
I.R.C. § 7454(a): Assigns the burden of proof to the government on taxpayer fraud issues.
I.R.C. § 6161(b)(3): Payment extension prohibition where a deficiency is due to fraud with intent to evade tax, noted for contextual symmetry.
Badaracco v. Commissioner, 464 U.S. 386: Strict construction of section 6501 in favor of the government; fraudulent return keeps period open.
Bartenwerfer v. Buckley, 598 U.S. 69: Passive-voice reading supports actor-agnostic interpretation.
Allen v. Commissioner, 128 T.C. 37: The Tax Court held that preparer fraud triggers section 6501(c)(1).
City Wide Transit, Inc. v. Commissioner, 709 F.3d 102: The Second Circuit acknowledges that preparer fraud can extend the limitations period.
BASR Partnership v. United States, 795 F.3d 1338: Federal Circuit requires taxpayer intent; cited as contrary view.
Asphalt Industries, Inc. v. Commissioner, 384 F.2d 229: Distinguished; did not decide whether third-party intent suffices for section 6501(c)(1).