Why You Need an Honest
A tax preparer's intentional
false itemized deductions on Schedule A means that the
limitations never ends.
The normal rule is
IRS only has three years after a tax return
is filed to assess additional tax. Once the three
passed, the IRS can't come back and audit the return.
exceptions to this rule, however. For example, a
understatement of gross income (more than 25% of the amount
income stated in the filed return) extends the statute of
to six years.
Under some circumstances, there is no statute of
a false or fraudulent return is filed with the intent to
then there is no time limitation on audit or
What if you give your tax preparer accurate information, but
false deductions and puts them on your Schedule A, and then
and file the return without realizing what has
happened? The US
Tax Court recently answered that question, holding that even
taxpayer did not intend to evade any tax, if his tax preparer used
false information with the intent of evading tax, the
limitations never ends. Vincent
Allen, 128 T.C. No. 4 (2007)
In that case, Gregory Goosby prepared Mr. Allen's tax
Mr. Allen gave Mr. Goosby his W-2's, 401(k) statements,
interest statement and property tax statement for the years
2000. Mr. Goosby fabricated charitable contributions,
entertainment expenses and pager and computer expenses and
as itemized deductions on Mr. Allen's Schedule A's for those
years. Mr. Allen signed and filed the returns by the
and received copies of them from Goosby.
In March, 2005, almost five years after filing his 1999
almost four years after filing the 2000 return, the IRS
deficiency notices to Mr. Allen, disallowing a number of the
deductions for those years. Mr. Allen petitioned the
Court, and the IRS stipulated that Mr. Allen did not have
any intent to
evade tax when he signed and filed his 1999 and 2000
Allen agreed that the returns contained false deductions,
and that Mr.
Goosby had included the deductions with intent to evade tax.
The Tax Court reasoned that every taxpayer is obligated to
returns for items that are obviously false or incorrect and
hide behind an agent's fraudulent preparation of his
held that because Mr. Allen received copies of the returns,
and did not
file amended returns for those years correcting the errors,
be required to pay the tax due and should not have the
benefit of any
statute of limitations.
Apparently, it had been Mr. Goosby's practice to prepare
returns. In 2006 he was indicted, tried and convicted
violations of willfully aiding and assisting other clients
preparation of false and fraudulent income tax
allowing the IRS an indefinite amount of time to assess
cases like these, the Tax Court gives the IRS ample
examine all of the other returns prepared by Mr. Goosby
This case illustrates how important it is to have an honest
preparer that you can trust to protect you from a lifetime
over your shoulder.
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