S. 4964

Protecting Innocent Taxpayers from Endless Assessments Act

Official summary

Written by the Congressional Research Service.

Protecting Innocent Taxpayers from Endless Assessments Act

This bill limits the amount of time the Internal Revenue Service (IRS) has to assess taxes related to fraudulent or false federal tax returns where there is no intent by the taxpayer to evade taxes.

As background, the IRS generally has three years from the date that a tax return is filed (statute of limitations) to assess taxes owed by the taxpayer for the tax year. However, if a false or fraudulent tax return is filed with the intent to evade tax (fraud exception), then the IRS may assess taxes at any time. In Murrin v. Commissioner the U.S. Tax Court held (and the U.S. Court of Appeals for the Third Circuit affirmed) that the fraud exception applies when a tax return preparer places false or fraudulent entries on a tax return without the taxpayer’s knowledge. In contrast, the U.S. Court of Federal Claims held in BASR Partnership v. Commissioner that the fraud exception only applies if the taxpayer intends to evade taxes.

The bill limits the fraud exception to cases in which the taxpayer intends to evade taxes.

Text of the bill

Collapse all
Sec. 1. Short title

This Act may be cited as the Protecting Innocent Taxpayers from Endless Assessments Act.

Sec. 2. Limitation period not extended for victims of preparer fraud

(a) In general. Section 6501(c)(1) of the Internal Revenue Code of 1986 is amended by inserting by the taxpayer after intent.

(b) Effective date. The amendment made by this section shall apply to assessments made or proceedings begun after the date of enactment of this Act.