Supreme Court Leaves in Place Rule That Keeps a Return Open Indefinitely When the Preparer Commits Fraud

The Supreme Court on Monday, June 22, 2026 declined to hear Murrin v. Commissioner. That leaves in place a precedential Third Circuit ruling that the IRS has unlimited time to assess tax on a fraudulent return, even when the fraud was the preparer's and not the taxpayer's. For high earners who rely on paid preparers, the result means a return can stay open for decades because of conduct they never knew about.

What happened

According to the Journal of Accountancy, Stephanie Murrin's returns for 1993 through 1999 were completed by a tax return preparer. The IRS assessed taxes and penalties on those returns in 2019, roughly 20 years after she filed. Her attorneys told the Court she now owes about $328,000, including interest.

Murrin argued in the Tax Court that the normal three-year statute of limitations in Section 6501(a) barred the assessment. The Tax Court disagreed in T.C. Memo. 2024-10. On appeal, she argued the fraud exception in Section 6501(c)(1) did not apply because only her preparer, not she, intended to evade tax.

The Third Circuit rejected that reading in an August 2025 precedential opinion. The statute allows assessment at any time for a false or fraudulent return filed with intent to evade tax. The court held that nothing in it requires the intent to be the taxpayer's own. The panel said it sympathized with Murrin but was bound by the text. In its brief urging the justices not to take the case, the government noted that Congress allowed an unlimited period because fraud cases are harder to investigate than routine audits.

Who is affected

Formally, the ruling binds only the Third Circuit, which covers Pennsylvania, New Jersey and Delaware. But the Supreme Court's refusal to intervene leaves the IRS free to press the same position elsewhere. Any taxpayer who used a preparer who falsified entries is exposed, including one who reviewed and signed a return in good faith. Higher-income households are not immune. Their returns often involve larger deductions and more complex schedules, which gives a dishonest preparer more room to inflate items.

The Court's action was a denial of certiorari. It sets no national precedent, and it does not mean the justices agreed with the Third Circuit.

The after-tax math

The main financial risk is time. When an assessment arrives years later, interest has been compounding on the underlying tax since the original due dates. In Murrin's case, returns from the 1990s produced a bill of about $328,000 in 2019, including interest. Her attorneys argued that taxpayers in her position may no longer have the documents to prove what was accurate or to show what the preparer did.

Example: suppose a preparer inflates deductions and reduces a client's tax by $20,000 a year for five years. Under the normal rule, most of those years would close three years after filing. Under Murrin, all five stay open indefinitely. Fifteen years of interest could make the eventual bill several times the original $100,000 of understated tax. The actual amount depends on the IRS rates in effect over that period.

Moves to discuss with your advisor

• Checking a preparer's credentials, such as CPA licensing or enrolled agent status, and any disciplinary history is a low-cost step many households take before hiring someone new.
• Keeping signed copies of filed returns, workpapers and supporting records for longer than the usual three years reduces the risk of being unable to defend old returns.
• Refunds or deductions that look much larger than in prior years are a common warning sign worth questioning before signing.
• A taxpayer who learns a past preparer may have falsified returns may want to discuss options with a tax attorney before contacting the IRS.

What to watch

Watch for whether the IRS brings similar preparer-fraud cases in other circuits and whether any court reads Section 6501(c)(1) differently, which could set up another Supreme Court petition. Congress could also change the statute to require taxpayer intent or to cap the period for innocent taxpayers. No such bill had advanced as of the Court's order.

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