A federal court ruling makes clear: if your preparer filed a fraudulent return, the IRS can audit you decades later, even if you had no idea what was happening.

By Jessica Irving Marschall, CPA

March 19, 2026

The Case That Should Get Every Taxpayer’s Attention

Here is a case out of Tax Court that should help keep CPAs awake at night as well as clients who rely upon their CPAs. Imagine filing your tax returns for years, trusting the professional you hired to do them correctly, only to receive a notice of deficiency from the IRS more than two decades later. That is exactly what happened to Stephanie Murrin.

From 1993 to 1999, Murrin’s tax preparer made false and fraudulent entries on her returns with the intent to evade tax. Murrin did not know. She had no intent to evade anything. But in 2019, the IRS sent her a notice of deficiency for those years, over 20 years after the fact.

Murrin argued, reasonably, that the standard three-year statute of limitations under Sec. 6501(a) should protect her. The Tax Court disagreed. The Third Circuit, in a ruling issued October 17, 2025, agreed with the Tax Court: because her preparer filed fraudulent returns, the unlimited lookback period under Sec. 6501(c)(1) applied, regardless of whether Murrin herself had any fraudulent intent whatsoever.

As reported in the Tax Matters column of the Journal of Accountancy, January 2026, the Third Circuit held that the ‘intent to evade tax’ language in Sec. 6501(c)(1) is not limited to the taxpayer’s intent. It is enough that someone, including a paid tax preparer, filed a false or fraudulent return with intent to evade tax. The clock never starts. The IRS can come back any time.

What the Ruling Actually Says

The Third Circuit examined the statutory text of Sec. 6501(c)(1), which states that in the case of a false or fraudulent return with intent to evade tax, the tax may be assessed at any time. The court noted that Congress drafted Sec. 6501(a), the standard provision, using the term ‘taxpayer’ explicitly, but deliberately omitted that word from Sec. 6501(c)(1).

The court applied the passive voice canon from the Supreme Court’s analysis in Bartenwerfer v. Buckley (2023), finding that the statute ‘pulls the actor off the stage’ and focuses only on whether there was a fraudulent return with intent to evade, not who held that intent. The statute of limitations does not apply, the court concluded, ‘when someone intends to evade tax in the filing of a false or fraudulent return, taxpayer or not.’

The court acknowledged that this outcome may seem deeply unfair to Murrin. The Third Circuit’s own words: ‘while Congress has limited imposing fraud penalties against a taxpayer without a taxpayer’s intent, [Sec.] 6501(c)(1)’s text, context, and precedent establish that Congress was agnostic about whether the taxpayer intended to evade tax for purposes of the IRS’s full and accurate assessment of taxes.’

In plain terms: you can be entirely innocent, and still face no statute of limitations protection if your preparer was not.

The Practical Danger for Everyday Taxpayers

This ruling has implications well beyond the facts of Murrin’s case. Most taxpayers who use a paid preparer assume that the preparer’s errors, even significant ones, are at most a negligence issue. This case makes clear that a preparer’s fraudulent intent can strip the taxpayer of time-limit protections entirely.

And it is not just exotic tax shelters or offshore schemes. This same principle has been applied by the Tax Court to multiple clients of the same preparer Murrin used. Fraudulent preparers often work patterns across many returns. If you were one of their clients, you may have had no idea, and you may still have no protection.

IRS Audit Lookback Periods at a Glance

3 years  –  Standard period for assessment (Sec. 6501(a))

6 years  –  If more than 25% of gross income is omitted, or foreign financial assets over $5,000 are unreported

7 years  –  For claims related to worthless securities or bad debt deductions

Indefinite  –  If no return is filed

Indefinite  –  If a fraudulent return is filed, whether or not the taxpayer knew about the fraud (Murrin, 3d Cir. 2025)

This is not a theoretical concern. Consumer tax software has made it easier than ever for taxpayers to prepare their own returns, but it has also made it easier to unknowingly make mistakes that an unscrupulous preparer might have exploited. If you ever used a paid preparer for your Schedule C or Schedule E and later learned they had problems with other clients, you should take the Murrin ruling seriously.

What You Should Do

The most direct lesson from Murrin is this: if the IRS can come back indefinitely in fraud cases, the only real protection is documentation. You cannot defend a return you can no longer reconstruct.

Keep everything, digitally, for as long as possible

The IRS’s own recordkeeping guidance suggests a minimum of three years for standard returns, extending to six or seven years in certain circumstances. But as Murrin demonstrates, when fraud is in the picture, there is no floor and no ceiling. In our practice, we scan and maintain complete digital records for all clients, and we recommend the same approach to taxpayers managing their own files.

• Keep copies of every filed return, federal and state
• Retain all supporting documents: W-2s, 1099s, 1098s, brokerage statements
• For any deduction claimed, keep the receipt or invoice, organized by year
• For Schedule C filers: keep income records, expense receipts, and mileage logs
• For rental property (Schedule E): keep all income, expense, and improvement records until at least three years after the property is sold
• For any credit claimed, keep substantiation. The residential energy credit, for example, requires product certifications and contractor invoices, not just a recollection of what you spent

Know when self-preparation has limits

We want to be direct with our readers: if your return consists of a W-2, some 1099-INT bank interest, and a Form 1098 mortgage statement, you do not need a CPA unless you need tax advisory services or just do not want to deal with your 1040. Consumer software handles those returns well and the exposure is minimal.

But if you are venturing into Schedule C territory with a self-employed business, or Schedule E with rental income, the underlying tax law at both the federal and state level is genuinely complex. Software will accept entries it should not. We have seen taxpayers deduct the full purchase price of a business suit (not deductible unless it is a required uniform that cannot be worn outside of work), deduct not just mortgage interest but entire mortgage payments as a business expense, and claim residential energy credits they cannot substantiate. The software accepts all of it. The IRS, eventually, may not.

More important in light of Murrin: if you paid a preparer to prepare those returns and they cut corners or committed fraud, you may be exposed far longer than you realize. The third-party intent exception eliminates the statute of limitations. It does not matter that you did not know.

If you suspect a prior preparer had problems

If you have reason to believe a preparer you used in prior years was fraudulent or has been disciplined, consult a CPA or tax attorney. In some circumstances, proactive disclosure or amended returns may provide better outcomes than waiting for the IRS to act. The unlimited lookback cuts both ways: the IRS can come back, but there are also avenues available to taxpayers who get ahead of the issue.

The Bottom Line

The Murrin ruling is a striking reminder that the tax system does not always distribute its consequences in proportion to fault. An innocent taxpayer can lose statute of limitations protection because of what someone else did on their behalf.

The best defense available to any taxpayer is the same regardless of that reality: file accurate returns, understand what you are deducting and why, keep thorough records, and do not assume that the passage of time means the matter is closed. In fraud cases, it may not be.

We recommend scanning and maintaining all tax files digitally. That is what we do in our practice, and in a world where the IRS’s lookback window can be unlimited, it is the most practical form of protection any taxpayer has.

And to all our fellow CPAs, help us all sleep a little better at night and please do not commit fraud on a client’s behalf or on anyone’s behalf. To date, the US tax code is estimated to now be between 60,000 to 75,000 pages including IRC, Treasury Regs, and IRS guidance, not to mention the Memos and Tax Court decisions. There are enough treasures in those pages to strategically pay the least amount of taxes as is legal.

For the self-preparer, AI is a great tool to run a quick check on how to not commit tax fraud. If you have to ask or question the reasonableness of a deduction and worry you may inadvertently commit tax fraud, it may be time to find a CPA or a skilled tax preparer.

Sources

Geiszler, Matthew, Ph.D., and John McKinley, CPA, CGMA, J.D., LL.M. “‘Intent to evade tax’ for purposes of Sec. 6501(c) not limited to taxpayer’s intent.” Tax Matters, Journal of Accountancy, January 2026. https://editions.journalofaccountancy.com/article/Tax+Matters/5080448/857962/article.html

Murrin, T.C. Memo. 2024-10; Murrin, No. 24-2037 (3d Cir. 10/17/25).

Jones, Karen L. “Documentation and Recordkeeping for Tax Practitioners.” The Tax Adviser (AICPA), February 2023. https://www.thetaxadviser.com/issues/2023/feb/documentation-and-recordkeeping-for-tax-practitioners/

Internal Revenue Service. “Topic No. 305, Recordkeeping.” https://www.irs.gov/taxtopics/tc305

Internal Revenue Service. “How Long Should I Keep Records?” https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records