A preparer’s fraud gives the IRS unlimited time to assess tax and penalties. The IRS has 3 years to make adjustments to your income tax return; however, the three- year statute of limitations doesn’t apply in this situation. Even though the tax preparer (not the tax payer) was responsible for issuing a fraudulent income tax return. The Tax Court addressed this in a 2007 case (Allen, 128 TC No. 4) and recently an appeals court delved into this topic again. Both cases held that a return preparer’s fraud is enough to trigger the fraud exception, which says that the three year window to make assesments is suspended in the case of a false or fradulent return with the intent to evade tax.
Tax Preparer fraud made the IRS’ “Dirty Dozen” list of scams for 2019 and they warn how important it is to choose a tax preparer carefully. For a list of tips on how to avoid fraudsters click the button bellow.
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