On August 18, 2025, the Third Circuit Court of Appeals issued its opinion in the matter of Murrin v. Commissioner, Docket No. 24-2037. In that opinion, the Court held that there was no deadline to assess additional taxes on a taxpayer when her income tax return preparer, without her knowledge, had fraudulently underreported her tax liabilities.
Generally, Section 6501(a) of the Internal Revenue Code (IRC) gives the IRS three years from the date that a taxpayer files their return within which to assess additional taxes. A statutory exception found in Section 6501(c) however can apply, and this deadline is suspended, when the return filed is “false or fraudulent with the intent to evade tax.” In those situations, the IRS can assess the additional taxes “at any time.” The statute, however, does not explain whose intent is required for the return to be false or fraudulent. Is it only the taxpayer’s intent which counts? Or can the intent be that of someone else, such as the taxpayer’s income tax return preparer? That was the issue that was before the Third Circuit in Murrin.
The facts in the case were not in dispute. The taxpayer, Stephanie Murrin, underpaid her taxes for the years 1993 to 1999 because her income tax return preparer, Duane Howell, without her knowledge or consent, made false or fraudulent entries on her returns for those years. Relying upon the exception found in section 6501(c), over 20 years later, in 2019, the IRS issued the taxpayer a notice of deficiency seeking to assess the underpayments of taxes on those returns including a 20% accuracy-related penalty. Although the taxpayer agreed with the IRS that she had underreported her taxes for those years and did not dispute the penalties, she argued that the IRS could not rely upon the exception found in section 6501(c) and thus was time-barred from assessing and recovering the amounts due, because she was not the one who had placed the false or fraudulent entries on the tax returns with an intent to evade tax; rather it was her former return preparer that had done so. Accordingly, she filed a Petition with the United States Tax Court disputing the adjustments proposed on the grounds they were time-barred. The Tax Court, however, disagreed with her and said that the exception found in section 6501(c) applied even though it was her tax return preparer who placed the false and fraudulent entries on the return and had done so without her knowledge. The taxpayer appealed.
In her appeal, Murrin argued that the US Court of Appeals for the Third Circuit, should apply the regular three-year deadline to her case (section 6501(a)), and not allow the IRS to rely on the exception for false and fraudulent returns found in section 6501(c), because it was her former return preparer, not herself, who was responsible for placing the false and fraudulent entries on the return. The IRS countered by stating that the exception in question did not turn on whether it was the taxpayer or the return preparer who intended to evade tax, but whether the return itself was intentionally fraudulent.
Although sympathetic to the taxpayer’s plight, after looking to the statute’s history, the Third Circuit rejected her argument. The Third Circuit found that “because the statute is agnostic about who must intend to evade tax, we hold that taxpayer intent is not required.” Moving forward, therefore, it is now clear (at least in the Third Circuit) that the intent required for the filing of a false or fraudulent return with intent to evade taxes no longer needs be attributable solely to the taxpayer but can now be imputed to the taxpayer’s return preparer.
So, what does this mean for taxpayers? First, thoroughly review your returns before you sign off on them. Remember, if something seems too good to be true, it probably is. Second, if you get a notice of audit hire representation right away! Trust our former IRS attorneys to negotiate on your behalf to reduce both tax and penalties.