Whose Fraud Is It Anyway? The Expanding Reach of the Fraud Exception to the Statue of Limitations on Tax Assessment

Stephen Josey and Phillip Clifton explain that courts are split on whether the IRS can keep the tax assessment period open indefinitely when fraud on a return is committed by someone other than the taxpayer. They note that several courts now allow preparer or advisor fraud to trigger the fraud exception under Code Section 6501(c)(1), while the Federal Circuit holds that only the taxpayer’s own intent should matter. They conclude that this divide creates significant risk for taxpayers, who must carefully supervise their advisors because others’ wrongdoing can leave old tax years permanently open.