A new Tax Court memorandum decision, Aryanpure v. Commissioner (T.C. Memo. 2026-48), should make every business owner, especially one who handles cash, nervous. Think twice if you think your CPA firm can shield you against fraud penalties.

The Setup

Dr. Mohammad Fawad Aryanpure and his wife, Dr. Malika Aryanpure, were licensed physicians who jointly owned MedExpress, LLC, operating two medical clinics. They hired a respected accounting firm to prepare both business and personal returns. Sounds responsible, right?

The IRS assessed over $500,000 in deficiencies and civil fraud penalties against them across four tax years (2011–2014).

The Scheme: Hundreds of “Quiet” Deposits

The Court found that Dr. Fawad personally handled the clinic’s cash and checks—and routinely diverted business receipts into the couple’s personal bank accounts instead of the business account. This happened on more than 300 occasions during the years at issue, sometimes literally minutes apart from depositing other funds into the business account on the same day.

In one telling episode, Dr. Fawad started writing a cash deposit into the business account—then crossed it out and redirected it to his personal account instead. His explanation? “No particular reason.”

The 75% Penalty—And Why It Stuck

Section 6663 allows the IRS to impose a civil fraud penalty equal to 75% of the underpayment attributable to fraud. The Court found Dr. Fawad checked nearly every box on the “badges of fraud” list:

• Substantial, repeated understatements of income (hundreds of thousands of dollars per year, for four straight years)
• Inadequate books and records—QuickBooks was incomplete because staff only saw business bank statements, never the diverted personal deposits
• Implausible, shifting explanations—Dr. Fawad’s testimony repeatedly contradicted itself and conflicted with credible staff witnesses
• Concealment of income through the personal-account diversions
• Misleading his own accountants—including handing them a handwritten cash total of $3,600 when batch sheets showed at least $171,162 in actual cash receipts
• Filing false returns for four consecutive years

“My Accountant Used the Wrong Forms” Was Not a Defense

Dr. Fawad’s expert argued the accounting firm should have used the practice’s electronic medical records system instead of relying on Forms 1099 and QuickBooks. The Court wasn’t moved. Reliance on a preparer is no defense to fraud if you didn’t give that preparer accurate information in the first place. Dr. Fawad knew exactly what his staff were—and weren’t—giving the accountants, and he fed them numbers he knew were wrong. The reasonable cause defense under Section 6664 failed completely.

The IRS Has Unlimited Time to Audit When Fraud Occurs

Normally, the IRS has just three years to assess additional tax. But fraud throws that out the window—the IRS can assess at any time. And under joint-return rules, one spouse’s fraud can keep the assessment period open against both spouses.

The One Bright Spot: Dr. Fawad’s Wife Walked

Despite signing the same false joint returns, Dr. Malika (Dr. Fawad’s wife) was found not liable for the fraud penalty. The Court found no evidence she concealed income, mishandled records, or misled the accountants—that was all Dr. Fawad. Section 6663(c) protects an innocent spouse from fraud penalties even on a jointly filed fraudulent return.

The Takeaway

If you deposit business receipts in your personal account and make only selective disclosures to your accountant, this isn’t a gray area—it’s the textbook definition of fraud. And a 75% penalty, on top of back taxes and interest with unlimited time for the IRS to go back and audit, can turn a “tax problem” into a nightmare.