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Tax Evasion
Failing to file or pay taxes can lead to civil consequences and, when the required criminal elements are proven, prosecution. An honest mistake is not automatically tax evasion.
Tax Evasion Versus Failure to File
Federal tax evasion under 26 U.S.C. § 7201 generally requires a tax deficiency, willfulness, and an affirmative act attempting to evade assessment or payment. An affirmative act may include deliberately concealing income or assets or submitting false information. Mere nonfiling, without the required affirmative evasion, is not by itself felony evasion.
Section 7203 separately criminalizes certain willful failures to file, pay, keep records, or supply information. Ordinary willful failure to file is a misdemeanor carrying up to one year of imprisonment. Accidental oversight, negligence, or an inability to pay does not automatically establish the required willfulness. Civil tax, interest, or penalties may still apply.
What Must the Government Prove?
The prosecution must prove each charged element beyond a reasonable doubt. In this setting, willfulness means voluntarily and intentionally violating a known legal duty. Good-faith misunderstanding, the accuracy of the alleged tax deficiency, and whether an affirmative evasive act occurred can be significant, depending on the charge. Repeated nonfiling may be evidence, but does not substitute for every required element.
Potential Penalties
Section 7201 authorizes up to five years of imprisonment. Fine exposure must also account for 18 U.S.C. § 3571: an individual convicted of a felony may generally face up to $250,000, and an organization up to $500,000; an alternative based on twice the gross gain or loss may be higher. For an ordinary section 7203 Class A misdemeanor, generally applicable fine ceilings can reach $100,000 for an individual or $200,000 for an organization, subject to applicable alternative provisions. The sentence is case-specific, and costs of prosecution and other financial consequences may also apply.
Sources: U.S. Department of Justice Criminal Tax Manual; 18 U.S.C. § 3571.
Facing a Tax Investigation?
Preserve records and obtain legal advice before responding to investigative requests. Contact Valiente Law to discuss an allegation and potential defenses.
Posted in: White Collar Crimes