On June 22, 2026, the Supreme Court denied review in Murrin v. Commissioner, No. 25-988, without comment. That left a real conflict on the tax preparer fraud statute of limitations: whether the IRS can reach back decades when a preparer, not the taxpayer, falsified the return. The Tax Court and Third Circuit say yes; the Federal Circuit said no in 2015, on different facts.
For an Albuquerque or Las Cruces family whose preparer was later indicted, the answer depends on where the fight happens, because the Tenth Circuit, which hears New Mexico appeals, has not ruled.
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North Star Tax and Legal Briefing: Tax Preparer Fraud Statute of Limitations in New Mexico After the Murrin Cert Denial
A preparer falsifies returns, the client never knows, and years later the IRS sends a notice for every tainted year. This episode explains when the limitations period stays open after the Murrin cert denial, what the Tenth Circuit has not decided, and what a New Mexico taxpayer should do within the 90-day window.
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A New Mexico couple files their returns on time, every year, through a storefront preparer. Years later, that preparer is convicted of padding his clients’ returns with fake deductions. The couple never knew. Then, long after the normal three-year window has closed, the I R S mails a notice covering every one of those years at once. Can the government really reach back that far when the fraud belonged to the preparer, not the taxpayer? In the Tax Court, the answer is yes. In one federal appeals court, the answer was no. And this June, the Supreme Court declined to settle it. For New Mexico taxpayers, where the fight happens may decide how it ends.
Start with the normal rule. The I R S generally has three years after a return is filed to assess more tax. There is a six-year window when a return leaves out more than twenty-five percent of the income it should have reported. But a preparer who invents deductions usually omits no income at all, so that longer window never opens. What’s left is the fraud exception. It removes the deadline entirely for a false or fraudulent return filed with intent to evade tax. Here is the key distinction to hold onto. The statute never says whose intent. It does not say the taxpayer’s, and it does not say the preparer’s. It simply says a return filed with intent to evade can be assessed at any time. Everything in this episode turns on how the courts fill in that silence.
The Tax Court answered first, in two thousand seven, in the Allen case. A truck driver’s preparer had been convicted on thirty counts of aiding false returns, and the court held that the preparer’s intent alone was enough to keep the client’s years open indefinitely. It applied the same rule in the Murrin case, upholding a two thousand nineteen notice for tax years nineteen ninety-three through nineteen ninety-nine. The taxpayer conceded about sixty-five thousand dollars in tax, and the court put the interest at close to two hundred fifty thousand dollars. The Third Circuit affirmed, calling the statute agnostic about who intended to evade. On June twenty-second of this year, the Supreme Court denied review without comment, so that decision stands. Now the other side. The Federal Circuit read the statute more narrowly in two thousand fifteen. But that ruling is thinner than it looks. The fraud there came from an outside attorney who designed a tax shelter, not a return preparer, and the court expressly reserved the closer case of someone more directly involved in preparing the return. And the Tenth Circuit, which hears New Mexico appeals, has never ruled on the question at all.
Take a hypothetical Albuquerque couple whose preparer added about six thousand dollars of tax per year in fake deductions across four years, on correct tax near thirty thousand dollars a year. The three-year windows closed long ago. Then a notice arrives for all four years. The tax alone is twenty-four thousand dollars. The twenty percent accuracy penalty adds another forty-eight hundred. Interest runs from the original due dates, and at a hypothetical five percent average rate it comes to roughly twenty thousand three hundred dollars more. That is the compounding problem: the older the year, the larger the interest. One piece of good news. The seventy-five percent fraud penalty turns on the taxpayer’s own fraud, which the government must prove. A client who knew nothing generally faces only the twenty percent penalty, and reasonable cause and good faith can defeat it.
Forum choice matters here. A Tax Court petition costs nothing up front, but it must be filed within ninety days, and the Tax Court will apply its own rule. A refund suit requires paying the full assessment first, a check near forty-nine thousand dollars in our example. And petitioning the Tax Court generally bars a later refund suit for the same year. So, three things this week. If you have received a notice for an old year, calendar the ninety-day deadline today. Gather every return and every message from the preparer, because the penalty defense lives in what you knew and when. And before anyone files your next return, confirm the preparer signs it and lists an identifying number, read it before you sign, and keep a copy. That’s what we do at North Star Law Firm. The initial consultation is free, and the full written analysis with citations is at N M dash legal dot net.
What does the tax preparer fraud statute of limitations in § 6501(c)(1) say?
Under 26 U.S.C. § 6501, the IRS generally has three years to assess. Subsection (c)(1) removes the deadline: “In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed . . . at any time.” It never says whose intent. The willful-evasion rule in (c)(2) excludes income tax. The six-year period in (e)(1)(A) needs omitted gross income above 25 percent of what was reported, and a preparer who invents deductions usually omits none. That leaves (c)(1) as the only open door.
The Tax Court first applied (c)(1) to preparer fraud in Allen v. Commissioner, 128 T.C. 37 (2007), where a Memphis truck driver’s preparer was convicted on 30 counts of aiding false returns. It followed Allen in Murrin v. Commissioner, T.C. Memo. 2024-10, upholding a 2019 notice for 1993 through 1999. The Third Circuit affirmed in Murrin v. Commissioner, 158 F.4th 527 (3d Cir. 2025) (amended Oct. 17, 2025), drawing on the passive-voice reasoning of Bartenwerfer v. Buckley, 598 U.S. 69 (2023). It called the statute “agnostic” about who intended to evade. Ms. Murrin conceded $65,318 in tax, with interest the court estimated near $250,000.
What did the Supreme Court’s denial leave standing?
The petition was filed February 17, 2026. The Solicitor General’s brief in opposition argued there was no square conflict, and the June 22, 2026 order list denied review without reasons.
The other side of the split is BASR Partnership v. United States, 795 F.3d 1338 (Fed. Cir. 2015), and it is thinner than it looks. The fraud came from an outside attorney who designed a shelter. Judge O’Malley’s concurrence leaned heavily on the TEFRA partnership rule in former § 6229, and majority footnote 3 reserved whether someone “more closely connected to the tax preparation” counts. The Second Circuit in City Wide Transit, Inc. v. Commissioner, 709 F.3d 102 (2d Cir. 2013) found an embezzling accountant’s fraud sufficient on a taxpayer concession, and Finnegan v. Commissioner, 926 F.3d 1261 (11th Cir. 2019), involving Murrin’s same preparer, held the challenge waived.
Which forum does a New Mexico taxpayer have, and what does each one cost?
A Tax Court petition filed within 90 days under § 6213(a) requires no payment, but the court will apply Allen. Under Golsen v. Commissioner, 54 T.C. 742 (1970), it follows a circuit decision “squarely in point” only where appeal lies to that circuit, as it explained in Valley Park Ranch, LLC v. Commissioner, 162 T.C. No. 6 (2024). A New Mexico resident’s appeal goes to the Tenth Circuit under § 7482(b)(1)(A), and a search found no Tenth Circuit decision on third-party intent. The nearest case, Omega Forex Group, LC v. United States, No. 17-4066 (10th Cir. Oct. 22, 2018), turned on the taxpayer’s own fraud.
The refund route starts with full payment of the assessment, as Flora v. United States, 362 U.S. 145 (1960) requires, then a claim within the § 6511(a) window under § 7422(a), then a six-month wait unless the claim is disallowed sooner under § 6532(a)(1). Suit can go to the Court of Federal Claims (28 U.S.C. § 1491; § 1346(a)(1)), with appeal to the Federal Circuit and BASR, or to the District of New Mexico, where appeal lies to the Tenth Circuit. Under § 6512(a), a Tax Court petition generally bars a later refund suit for the year.
Notice of Deficiency for an Old Year in New Mexico? Contact Us Now
If the preparer committed the fraud, what penalties and interest remain?
The 20 percent penalty in § 6662 reaches a substantial understatement, one above the greater of 10 percent of the correct tax or $5,000. The 75 percent fraud penalty in § 6663 is different; the Third Circuit read it as reaching only the taxpayer’s own fraud, which the IRS must prove under § 7454(a).
The defense is reasonable cause and good faith under § 6664(c)(1). United States v. Boyle, 469 U.S. 241 (1985) treats reliance on advice about “a matter of tax law” as reasonable. Neonatology Associates, P.A. v. Commissioner, 115 T.C. 43 (2000) sets a three-part test for that reliance. Allen, though, expects taxpayers to catch items that are “obviously false or incorrect.” Interest under § 6601(a) runs from the original due date. The individual rate for the current quarter is 7 percent (IR-2026-98). The amended Third Circuit opinion left interest challenges open, though abatement under § 6404(e) is narrow and counts IRS delay only after written contact.
How would this play out for an Albuquerque couple whose preparer was convicted?
A hypothetical Northeast Heights couple filed 2012 through 2015 joint returns on time through a storefront preparer. He added fake deductions worth $6,000 of tax per year, on correct tax near $30,000, and was convicted in 2024. The three-year windows closed between April 2016 and April 2019. With no omitted income, the six-year rule never applied. In 2026 the IRS mails a notice for all four years, relying on the tax preparer fraud statute of limitations.
The tax totals $24,000. Each year’s $6,000 exceeds $5,000, so the § 6662 penalty adds $4,800. At a hypothetical 5 percent average rate compounded daily, interest through 2026 is about $20,300, excluding interest on penalties. The refund route means a check near $49,000 first. The Tax Court costs nothing up front but applies Allen, leaving the penalty defense and a possible Tenth Circuit appeal.
| Path | Pay first? | Appeal goes to | Preparer-fraud rule |
|---|---|---|---|
| Tax Court petition | No | Tenth Circuit | Allen applies; circuit undecided |
| Court of Federal Claims refund suit | Yes, in full | Federal Circuit | BASR, subject to footnote 3 |
| D.N.M. refund suit | Yes, in full | Tenth Circuit | Open question |
| Concede, then seek relief | No | None | Relief only, no limitations defense |
What relief remains after an old-year assessment, and how does New Mexico’s statute differ?
Assessed tax is collectible for ten years under § 6502(a), so a 2027 assessment runs into 2037. An offer based on doubt as to liability is unavailable after a final court decision under Treas. Reg. § 301.7122-1(b), while effective tax administration offers remain. Where one spouse dealt with the preparer, § 6015 relief is decided “without regard to community property laws,” which matters in New Mexico.
The state statute reads differently. NMSA 1978, § 7-1-18 starts with three years from the end of the year tax was due. Its fraud period is ten years, not unlimited, and covers “a false or fraudulent return made by a taxpayer with intent to evade tax.” A federal change also triggers a report due 180 days after final determination under § 7-1-13(E), with its own assessment window.
What should New Mexico taxpayers check before a preparer files?
A paid return must carry the preparer’s identifying number under § 6109(a)(4) and a signature, with a § 6695(b) penalty for failing to sign. The IRS warns about unsigned “ghost” returns in IR-2024-96, and its preparer selection page links a credential directory. Read the return before signing; keep a copy. The preparer faces the greater of $5,000 or 75 percent of his income from the return under § 6694(b) and felony exposure under § 7206(2), but neither pays the client’s tax. See the firm’s guide to IRS preparer investigations in New Mexico.
Frequently Asked Questions
Can the IRS assess tax for a year my preparer falsified without my knowledge?
In the Tax Court, yes. Allen and Murrin hold that a preparer’s intent to evade tax keeps the period open indefinitely under section 6501(c)(1), even when the taxpayer knew nothing. The Federal Circuit read the statute more narrowly in BASR, and the Tenth Circuit has not decided the question.
Did the Supreme Court decide Murrin?
No. The Court denied certiorari on June 22, 2026, in No. 25-988. The Third Circuit’s decision stands and the conflict with BASR remains. The government had argued the conflict was not square, because BASR involved an attorney who created a tax shelter rather than a return preparer.
Will I owe the 75 percent fraud penalty if my preparer committed the fraud?
The civil fraud penalty under section 6663 turns on the taxpayer’s own fraud, and the IRS bears the burden of proving it. A taxpayer who knew nothing of the scheme more often faces the 20 percent accuracy penalty under section 6662, which reasonable cause and good faith can defeat.
Should a New Mexico taxpayer pay and sue in the Court of Federal Claims to use BASR?
Sometimes. That route requires full payment and a refund claim before suit, usually with a six-month wait. BASR involved an outside attorney rather than a preparer, and its footnote 3 reserved the closer case. Petitioning the Tax Court first generally bars a later refund suit for that year.
Does New Mexico follow the same unlimited rule for its own taxes?
No. NMSA 1978, section 7-1-18 allows ten years, not unlimited time, for a false or fraudulent return made by a taxpayer with intent to evade. A federal adjustment carries its own state reporting duty and assessment window. North Star Law Firm works with New Mexico-licensed counsel on state-law questions.
How North Star Law Firm Can Help
North Star Law Firm represents New Mexico taxpayers facing a notice of deficiency for years tainted by a preparer’s fraud, through Tax Court litigation and penalty abatement work. Where one spouse dealt with the preparer, innocent spouse relief is part of the firm’s tax defense practice.
Phillip Zagotti, JD/CPA, represents taxpayers before the IRS and the U.S. Tax Court and is admitted to the U.S. District Court for the District of New Mexico. On forum choice, see where a New Mexico taxpayer fights the IRS. The firm works alongside New Mexico-licensed counsel on state-law questions. To review an old-year notice before the 90 days run, contact North Star Law Firm.