Judge Richard Wesley
City Wide Transit, and Fouche’s other bus companies, collectively owed $700,000 in payroll taxes by the end of 1998. Fouche retained Begwho falsely held himself out as a public accountantto negotiate tax reductions. Beg engaged in a scheme whereby he embezzled hundreds of thousands of dollars from City Wide, which received certain tax refunds. In response to a June 2002 complaint, Beg pleaded guilty, in October, to preparing false tax returns for City Wide. After an investigation the Internal Revenue Service sought recovery of $371,625 in taxes from City Wide. Barring collection of outstanding employment taxes for seven taxable quarters dating from 1997 to 2000, the Tax Court held the Commissioner time barred from collecting those taxes under Internal Revenue Code §6501(a) and that §6501(c)(1) and (2)’s tolling provisions did not apply. Finding that Tax Court erred, Second Circuit reversed, and held that an accountant who files fraudulent tax returns on behalf of a company so as to embezzle money otherwise owed to the Commissioner intentionally evades taxes, thereby triggering §6501(c)(1)’s tolling provisions. Thus, the Commissioner could assess City Wide’s taxes for the subject seven quarters at any time.
