When the FBI Comes Calling…®
TAX EVASION (Continued)
26 U.S.C. § 7206 (2007).
The Crime
It is a felony violation of section 7206 for a person to do any of the following:
- Willfully make and subscribe any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter; 26 U.S.C. § 7206(1);
- Willfully aid or assist in, or procure, counsel, or advise the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; Id. § 7206(2);
- Simulate or falsely or fraudulently execute or sign any bond, permit, entry, or other document required by the provisions of the internal revenue laws, or by any regulation made in pursuance thereof, or procure the same to be falsely or fraudulently executed, or advise, aid in, or connive at such execution thereof; Id. § 7206(3);
- Remove, deposit, or conceal, or be concerned in removing, depositing, or concealing, any goods or commodities for or in respect whereof any tax is or shall be imposed, or any property upon which levy is authorized by 26 U.S.C. § 6331, with intent to evade or defeat the assessment or collection of any tax imposed by this title; Id. § 7206(4);
- In connection with any compromise under 26 U.S.C. § 7122, or offer of such compromise, or in connection with any closing agreement under 26 U.S.C. § 7121, or offer to enter into any such agreement, willfully-
- conceal from any officer or employee of the United States any property belonging to the estate of a taxpayer or other person liable in respect of the tax, Id. § 7206(5)(A); or
- receive, withhold, destroy, mutilate, or falsify any book, document, or record, or make any false statement, relating to the estate or financial condition of the taxpayer or other person liable in respect of the tax. Id. § 7206(5)(B).
The Punishment
The punishment for a violation of section 7206 is
- a fine of not more than $100,000 ($500,000 in the case of a corporation),
- imprisonment for not more than 3 years, or
- both.
The person convicted for a violation of section 7206 will also be required to pay the costs of prosecution.
Case Law Interpreting Section 7206
Section 7206(1) does not require the prosecution to prove intent to evade the payment of taxes, nor does it require the prosecution to prove the existence of any taxable income; all that is required is that Government prove that the defendant willfully made and subscribed a return, that it contained a written declaration that it was made under penalties of perjury, and that the defendant did not believe the return to be true and correct as to every material matter. United States v. Taylor, 574 F.2d 232, 234 (5th Cir. 1978); see also United States v. Tarwater, 308 F.3d 494, 504 (6th Cir. 2002) (same); United States v. Wilson, 887 F.2d 69, 72 (5th Cir. 1989) (same). Therefore, section 7206(1) is a fraud statute. Id. As such, "willfully" in this context does not require an "evil motive" as seen in section 7201; it simply means that the defendant voluntarily and intentionally violates a known legal duty. United States v. Pomponio, 429 U.S. 10, 12 (1976). This can lead to some odd decisions. In United States v. Reynolds, 919 F.2d 435 (7th Cir. 1990), the defendant filed his taxes on Form 1040EZ, on which he neglected to include income he "earned" by skimming the coffers of the place at which he worked. Reynolds at 437. Because the form does not have a line for income obtained illegally, he did not commit perjury as punished by section 7206(1). Id. Because the government did not charge the defendant under the more appropriate section 7201 or 7202, the court had to vacate the tax convictions in this case. Of course, the defendant was still guilty of embezzlement and other statutory violations.
Turning to other provisions of section 7206, which get very little attention, the offense involved in section 7206(2), aiding in the preparation and presentation of a false return, is committed at the time the return is filed, not the date on which it was due to be filed. United States v. Habig, 390 U.S. 222, 223 (1968). Section 7206(4) makes the removal or concealment of property upon which a levy is authorized a felony. United States v. Schwartz, 390 F.2d 1, 2 (3d Cir. 1968).
One final, overarching consideration: a person cannot fail to pay tax or violate any of the sections of 26 U.S.C. § 7201 et seq. as a symbolic protest against the government. United States v. Malinowski, 472 F.2d 850, 856 (3rd Cir. 1973). In Malinowski, the defendant disagreed with the United States going to war in Vietnam, and therefore filled out a fraudulent Employee Withholding Exemption Certificate (Form W-4) with fifteen exemptions, in violation of 26 U.S.C. § 7205. Id. at 852. The court characterized the defendant's First Amendment argument as "a suggestion that a member of society can be absolved of the responsibility for obeying a given law of the community, state, or nation if he can prove a sincere, abiding, and good faith objection to the direct or indirect object of that law." Id. at 857. The court rejected the defendant's "feeble effort to emasculate basic principles of civil disobedience." Id.