Tax Evasion [26 U.S.C. § 7201]: A person commits “tax evasion” by knowingly and willfully under-reporting his income on his tax return with the intent of evading payment of taxes to the government. Tax evasion requires an affirmative act; merely failing to file a tax return does not amount to tax evasion, even if the failure to file was willful. In the context of Section 7201, a person acts “willfully” where he voluntarily and intentionally violates a known legal duty. Thus, in the context of tax evasion, individuals who did not fulfill their tax obligations because they believed they did not owe any money to the government would not be committing tax evasion, regardless of whether their belief was reasonable.
False Statements on Income Tax Returns [26 U.S.C. § 7206(1)]: A person may be guilty of making “false statements on income tax returns” if that person knowingly and willfully signs and submits a tax return that contains material false statements with the intent to violate a known legal duty. A false statement is considered “material” if it is capable of influencing an IRS audit, investigation, or verification of income. The term “false statement” includes material omissions from an income tax return. Since Section 7206(1) requires evidence that a person acted knowingly and willfully, if a person includes false statements or omissions on a tax return as a result of that person’s mistaken beliefs or misunderstandings, that person would not be criminally liable for making false statements on an income tax return. Similarly, if the false statements are the result of the person’s reliance on a tax preparer, that person may have a defense to the crime of making false statements on a tax return.
Aiding or Assisting in Preparation of False Documents Under Internal Revenue Laws [26 U.S.C. § 7206(2)]: A person may be guilty of “aiding or assisting in preparation of false documents under the Internal Revenue Laws” if that person knowingly and willfully assisted in the preparation of a tax return that contained material false statements with the intent to violate a known legal duty. Importantly, the knowledge or consent of the person whose taxes are prepared is irrelevant to the commission of this crime.
Conspiracy [18 U.S.C. § 371]: A person may be guilty of conspiracy if he or she willfully agrees with at least one other person to commit a crime and at least one overt act is taken in furtherance of the conspiracy by that person or one of that
person’s co-conspirators. A “conspiracy” is created when two or more individuals agree to work together in pursuit of an unlawful goal. To be involved in a federal tax fraud conspiracy, a person must be aware of the unlawful nature of the scheme; merely acting in a way that incidentally advances some element of the crime does not render someone a conspirator. Nonetheless, the person need not be aware of all of the details of the tax fraud scheme, the identities of all other co-conspirators, or all of the plans or actions of the co-conspirators to join the conspiracy. No formal agreement need exist or be acknowledged by the co-conspirators.18 U.S.C. § 371 (Conspiracy): Title 26 does not have its own conspiracy rule, so the government uses this general statute to prosecute people who work together to commit tax fraud or a “Klein conspiracy” to obstruct the IRS. Contact Fort Worth, Texas Attorney Dale O’Neal if you have questions at 817-877-5995
Federal tax crime prosecutions involve a combination of statutes across Title 26 (Internal Revenue Code), Title 18 (Crimes and Criminal Procedure), and Title 31 (Money and Finance/Currency), defining different aspects of financial misconduct.
Overview of Titles in Tax Crimes
- Title 26 (Internal Revenue Code)
○ Covers core federal criminal tax violations.
○ Enforced exclusively by IRS Criminal Investigation (IRS:CI).
○ Key statutes:
■ 26 U.S.C. § 7201: Tax evasion (felony, up to 5 years prison).
■ 26 U.S.C. § 7202: Willful failure to collect/pay over tax.
■ 26 U.S.C. § 7203: Willful failure to file a return.
■ 26 U.S.C. § 7206: Filing false/fraudulent returns.
- Title 18 (Crimes and Criminal Procedure)
○ Covers general federal crimes, fraud, and money laundering.
○ Used alongside or in place of Title 26 for complex schemes.
○ Key statutes:
■ 18 U.S.C. § 371: General conspiracy (Title 26 lacks a specific conspiracy clause).
■ 18 U.S.C. §§ 286/287: False claims against the government (fraudulent refunds).
■ 18 U.S.C. §§ 1956/1957: Money laundering controls.
- Title 31 (Money and Finance / Bank Secrecy Act)
○ Governs currency reporting and foreign bank account rules (FBAR). ○ Key statutes:
■ 31 U.S.C. § 5313: Currency transaction reporting (CTR) requirements. ■ 31 U.S.C. § 5324: Structuring transactions to evade reporting limits. ■ Different statutes of limitations apply compared to Title 26.
CONTACT DALE O’NEAL FORT WORTH TAX LAWYER 817-877-5995