Whose Fraud Extends the Statute of Limitations on Assessment?

The IRS generally has 3 years to assess additional tax after a return is filed. Code Section 6501(a).However, an important exception is Code Section 6501(c)(1). Under that provision, if there is fraud in regard to the preparation of a return, there is no statute of limitations for assessment of tax relating to that return.

Clearly, if the taxpayer commits the fraud, the extended statute of limitations provision applies.

A recent case reminds us that if it is the return preparer, and not the taxpayer, that commits the fraud in regard to a return, the extended statute still applies. Seems a little unfair, but c'est la vie.

Finnegan v. Commissioner, T.C. Memo. 2016-118 (June 16, 2016)