The crime of tax evasion can be established where a taxpayer willfully fails to pay the IRS a tax that is owed. While charges of tax evasion are more common in the context of a fraudulent tax return that is filed in an effort to evade the assessment of tax in the first place, the fraudulent failure to pay a tax is also a standalone federal crime.
In order to establish the crime of tax evasion under section 7201 of the Internal Revenue Code for the attempted evasion of the payment of tax, the government must prove the following elements beyond a reasonable doubt:
Attempt to Evade Payment
Attempts to evade the payment of tax typically involve a form of concealing money or assets–for example, removing assets from the reach of the IRS. The affirmative act necessary to establish the crime of evading the payment of tax often involves schemes that deal heavily in cash, the placement of assets under the name of others, transferring assets outside the United States, or omitting assets from a form 433-A, Collection Information Statement. Some common examples include:
- concealing assets in bank accounts of family members;
- placing assets in the name of other people;
- cash expenditures;
- false statements to an IRS agent;
- conducting business purely in cash; and
- fraud during a bankruptcy
Additional Tax Due and Owing
The government is generally required to prove that a tax was actually due and owing–that is, that there is a tax deficiency.
There are a number of items of taxable income that may satisfy this requirement, even though they are not expressly specified in the tax code, including:
- gambling income
- embezzlement proceeds
- extortion proceeds
- income from a fraud
- loans received with no intent to repay them
The outstanding tax can, however, come from virtually any source, and need not be related to nefarious or illegal conduct.
Notably, while most circuit courts require that the government show that there was a substantial tax deficiency, not all courts require the showing, and the government maintains that it is not required to prove the precise amount of tax due and owing in order to successfully prosecute a taxpayer for tax evasion.
Willfulness is defined as the “voluntary, intentional violation of a known legal duty.” Thus, a good faith belief that one is not violating the tax laws is, as a general matter, a defense against a charge of tax evasion. The government may argue that the willful evasion of the payment of tax can be inferred from a number of acts, including conduct that attempts to place assets beyond the government’s reach.