Tax Violations

• Author: John D. Richardson
• Pages: 1433-1482

TAX VIOLATIONS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1435

II. CRIMINAL INVESTIGATIONS UNDER I.R.C. §§ 7201, 7202, 7203, 7206,

AND 7212(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1435

A. Legal Landscape of IRS Investigations . . . . . . . . . . . . . . . . . . 1435

1. Responsibility for Investigation and Prosecution . . . . . . . 1435

2. Constitutional Considerations . . . . . . . . . . . . . . . . . . . . . 1437

a. Notice and Due Process Requirements . . . . . . . . . . . 1437

b. Substantive Rights and the Internal Revenue Manual . 1437

c. Disclosure of Documents . . . . . . . . . . . . . . . . . . . . . 1439

3. Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1441

4. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . 1441

B. I.R.C. § 7201—Tax Evasion . . . . . . . . . . . . . . . . . . . . . . . . . 1443

1. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1443

a. Existence of a Tax Deficiency . . . . . . . . . . . . . . . . . 1443

b. Affirmative Act Constituting Evasion . . . . . . . . . . . . 1447

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1448

2. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1450

a. Lack of Deficiency . . . . . . . . . . . . . . . . . . . . . . . . . 1450

b. Lack of Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . 1451

c. Reliance on Expert Advice . . . . . . . . . . . . . . . . . . . . 1453

d. Selective Prosecution and Other Constitutional

Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1453

3. Relation to Other Tax Crimes . . . . . . . . . . . . . . . . . . . . . 1454

C. I.R.C. § 7202—Failure to Collect Tax . . . . . . . . . . . . . . . . . . 1454

1. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1455

a. Duty to Collect or to Account for and Pay Over Tax . . . 1455

b. Failure to Collect, Truthfully Account For, or Pay Over

Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1458

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1458

2. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1458

D. I.R.C. § 7203—Failure to File Taxes . . . . . . . . . . . . . . . . . . . 1459

1. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1459

a. Requirement to File a Return . . . . . . . . . . . . . . . . . . 1459

b. Failure to File a Return . . . . . . . . . . . . . . . . . . . . . . 1460

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1460

2. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1461

E. I.R.C. § 7206— Tax Fraud & False Statements and Aiding or

Assisting Tax Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1462

1. I.R.C. § 7206(1)—Tax Perjury . . . . . . . . . . . . . . . . . . . . 1463

1433

a. Making and Subscribing a False Return or Document 1463

b. Signed under Penalty of Perjury . . . . . . . . . . . . . . . . 1464

c. Material Falsity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1465

d. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1467

e. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1467

2. I.R.C. § 7206(2)—Aiding and Assisting Tax Fraud. . . . . . 1468

a. Aiding or Assisting . . . . . . . . . . . . . . . . . . . . . . . . . 1469

b. Material Falsity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1470

c. Willfulness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1470

d. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1470

F. I.R.C. § 7212(a)—Interference with the Internal Revenue Laws 1470

1. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1471

a. Corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1471

b. Endeavor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1471

c. Nexus Between the Defendant’s Conduct and an

Administrative Proceeding . . . . . . . . . . . . . . . . . . . . 1472

d. The Stage of Proceeding . . . . . . . . . . . . . . . . . . . . . 1473

2. Defenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1473

G. Sanctions Under the U.S. Sentencing Guidelines . . . . . . . . . . . 1473

1. Violations of I.R.C. § 7201 . . . . . . . . . . . . . . . . . . . . . . . 1473

2. Violations of I.R.C. § 7202 . . . . . . . . . . . . . . . . . . . . . . . 1474

3. Violations of I.R.C. § 7203 . . . . . . . . . . . . . . . . . . . . . . . 1475

4. Violations of I.R.C. § 7206 . . . . . . . . . . . . . . . . . . . . . . . 1475

5. Violations of I.R.C. § 7212(a) . . . . . . . . . . . . . . . . . . . . . 1476

III. CRIMINAL CONSPIRACY INVESTIGATIONS UNDER 18 U.S.C. § 371. . . 1477

A. Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1477

B. Defenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1479

C. Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1480

IV. OTHER RELATED CRIMINAL STATUTES . . . . . . . . . . . . . . . . . . . . . . 1480

A. Related Title 18 Violations . . . . . . . . . . . . . . . . . . . . . . . . . . 1480

1. 18 U.S.C. § 286: Conspiracy to Defraud the Government with

Respect to Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1480

2. 18 U.S.C. § 287: False, Fictitious, or Fraudulent Claims . . 1480

B. Related Title 31 Violations: Bank Secrecy Act and Anti-Money

Laundering Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481

1. 31 U.S.C. § 5314: Report of Foreign Bank and Financial

Accounts (FBARs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1481

2. 31 U.S.C. § 5331(a) & I.R.C. § 6050I: Cash Transaction

Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1482

1434 AMERICAN CRIMINAL LAW REVIEW [Vol. 59:1433

I. INTRODUCTION

This article outlines the elements, defenses, and sentencing consequences of

select criminal tax violations

1

of Title 26 of the United States Code, the Internal

Revenue Code (“I.R.C.”), which are prosecuted under an array of criminal tax

statutes.

2

Section II of this article examines the policies and procedures of Internal

Revenue Service (“IRS”) criminal investigations. In doing so, it addresses the basic

elements of, defenses to, and sanctions for five principal tax crimes: tax evasion

under I.R.C. § 7201, willful failure to collect tax under § 7202, willful failure to

file taxes under § 7203, tax perjury and aiding and assisting tax fraud under § 7206,

and interference with the administration of internal revenue laws under § 7212(a).

Sections III and IV of this article examine criminal statutes that may implicate

tax crimes but that are not within the I.R.C. Section III details criminal investiga-

tions of conspiracy to violate the tax laws under the “defraud clause” of the general

federal conspiracy statute, 18 U.S.C. § 371. Section IV examines various criminal

statutes within Titles 18 and 31 of the United States Code that relate to tax.

II. CRIMINAL INVESTIGATIONS UNDER I.R.C. §§ 7201, 7202, 7203, 7206,

AND 7212(A)

Part A of this section examines the legal landscape of criminal tax investiga-

tions, including: the division of responsibility for investigation and prosecution,

constitutional considerations, venue, and the statute of limitations for I.R.C. viola-

tions. Parts B through F of this section address the elements of, and defenses to,

each of the following offenses: tax evasion and attempted tax evasion, failure to

collect tax, failure to file taxes, tax perjury and aiding and assisting tax fraud, and

interference with the administration of internal revenue laws. Part G explains

potential punishments set forth by the United States Sentencing Guidelines

(“Guidelines”) as well as possible sentencing enhancements.

A. Legal Landscape of IRS Investigations

1. Responsibility for Investigation and Prosecution

The IRS uses two investigative bodies in carrying out its responsibility to

enforce the tax laws. The IRS Criminal Investigation Division (“CI”) is the IRS’s

criminal law enforcement agency that investigates potential criminal violations of

the I.R.C. and related provisions of Title 18 of the United States Code.

3

By

1. This article focuses on the most serious and common tax crimes. The remaining I.R.C. criminal provisions

are omitted here because they are either relatively minor (such as fraud on submitted copies of Form W-4) or rare

(such as forcible rescue of seized property).

2. I.R.C. §§ 7201–7232, 7261–7262, 7268–7273, 7275 (setting forth criminal provisions of the Tax Code).

3. Criminal Investigation (CI) At-a-Glance, INTERNAL REVENUE SERV., https://www.irs.gov/about-irs/

criminal-investigation-ci-at-a-glance (last updated Jan. 19, 2021); see also United States v. Peters, 153 F.3d 445,

2022] TAX VIOLATIONS 1435