TAX CRIMES HANDBOOK Office of Chief Counsel Criminal Tax Division 2009 PREFACE The goal in developing this handbook was to provide a resource for Criminal Tax Attorneys to use in the course of advising their client on criminal tax matters, and in evaluating recommendations for prosecution. This handbook is not intended to create or confer any rights, privileges, or benefits on any person. It is not intended to have the force of law, or of a statement of Internal Revenue Service policy. See, United States v. Caceres, 440 U.S. 741 (1979). _________/s/______________ EDWARD F. CRONIN Division Counsel/Associate Chief Counsel (Criminal Tax) Internal Revenue Service This Page is Blank – NO BORDER CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 1 TAX EVASION - I.R.C. § 7201 1-1.01 Statutory Language 2 1-1.02 Generally 2 1-1.03 Evasion of Assessment 4 [1] Elements of the Offense 4 [2] The Attempt 4 [3] Additional Tax Due and Owing 6 [4] Willfulness 9 [5] Venue 13 [6] Statute of Limitations 14 1-1.04 Evasion of Payment 15 [1] Elements of the Offense 15 [2] The Attempt 15 [3] Additional Tax Due and Owing 17 [4] Willfulness 17 [5] Venue 18 [6] Statute of Limitations 18 1-1.05 Collateral Estoppel 18 1-1.06 Lesser Included Offenses 19 1-1.07 Table of Cases 20 i CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 2 WILLFUL FAILURE TO COLLECT OR PAY OVER TAX I.R.C. § 7202 1-2.01 Statutory Language 30 1-2.02 Generally 30 1-2.03 Elements of the Offense 30 [1] Duty to Collect and/or to Truthfully Account for and Pay Over 31 [2] Failure to Collect or Truthfully Account for and Pay Over 31 [3] Willfulness 31 1-2.04 Motor Fuel Excise Tax Prosecutions 33 1-2.05 Venue 33 1-2.06 Statute of Limitations 33 1-2.07 Table of Cases 35 ii CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 3 FAILURE TO FILE, SUPPLY INFORMATION OR PAY TAX - I.R.C. § 7203 1-3.01 Statutory Language 38 1-3.02 Generally 39 1-3.03 Failure to Pay a Tax 39 1-3.04 Failure to File a Return 40 1-3.05 Failure to Keep Records 47 1-3.06 Failure to Supply Information 48 1-3.07 Venue 48 1-3.08 Statute of Limitations 49 1-3.09 Table of Cases 50 iii CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 4 FRAUDULENT WITHHOLDING EXEMPTION OR FAILURE TO SUPPLY INFORMATION - I.R.C. § 7205 1-4.01 Statutory Language 55 1-4.02 Generally 55 1-4.03 Section 7205(a) Offense 56 1-4.04 Section 7205(b) Offense 57 1-4.05 Venue 58 1-4.06 Statute of Limitations 58 1-4.07 Table of Cases 59 iv CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 5 FRAUD AND FALSE STATEMENTS - I.R.C. § 7206 1-5.01 Statutory Language 62 1-5.02 Generally 63 1-5.03 § 7206(1) - Declaration under the Penalties of Perjury 64 [1] Elements of the Offense 64 [2] “Makes” (Files) any Return, Statement or Document 65 [3] Return, Statement or Other Document 65 [4] Signed Under Penalties of Perjury 66 [5] Did Not Believe the Document to be True and Correct 67 [6] Materiality 67 [7] Willfulness 70 1-5.04 § 7206(2) - Aiding or Assisting the Preparation of a False or Fraudulent Document 71 [1] Elements of the Offense 71 [2] Aiding and Assisting 72 [3] Return, Affidavit, Claim, or Other Document 73 [4] Materiality 74 [5] Willfulness 74 1-5.05 § 7206(4) - Removal or Concealment with Intent to Defraud 75 [1] Elements of the Offense 75 [2] Removes, Deposits, or Conceals 75 [3] Tax Imposed or Levy Authorized 76 v [4] Willfulness 76 1-5.06 § 7206(5) - Compromises and Closing Agreements 77 [1] Scope of section 7206(5) 77 [2] Willfulness 77 1-5.07 Venue 77 1-5.08 Statute of Limitations 78 1-5.09 Duplicity Considerations for Lesser Included Offenses 78 1-5.10 Table of Cases 80 vi CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 6 FRAUDULENT RETURNS, STATEMENTS, OR OTHER DOCUMENTS I.R.C. § 7207 1-6.01 Statutory Language 88 1-6.02 Elements of the Offense 88 1-6.03 Summary 88 1-6.04 Venue 89 1-6.05 Statute of Limitations 89 1-6.06 Table of Cases 90 vii CHAPTER 1 TITLE 26 TAX CRIMES SECTION 7 ATTEMPTS TO INTERFERE WITH ADMINISTRATION OF INTERNAL REVENUE LAWS - I.R.C. § 7212 1-7.01 Statutory Language 92 1-7.02 Corrupt or Forcible Interference - I.R.C. § 7212(a) 92 [1] Generally 92 [2] Corrupt or Forcible Interference - Offense No. 1 93 [3] Corrupt Endeavors to Impede - “Omnibus Clause” Offense No. 2 93 1-7.03 Forcible Rescue of Seized Property - I.R.C. § 7212(b) 96 [1] Elements of the Offense 96 [2] Summary 97 1-7.04 Venue 97 1-7.05 Statute of Limitations 97 1-7.06 Table of Cases 99 viii CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 1 AIDING AND ABETTING - 18 U.S.C. § 2 2-1.01 Statutory Language 102 2-1.02 Elements of the Offense 102 2-1.03 Summary 102 2-1.04 Venue 105 2-1.05 Statute of Limitations 105 2-1.06 Table of Cases 106 ix CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 2 CONSPIRACY TO DEFRAUD THE GOVERNMENT WITH RESPECT TO CLAIMS - 18 U.S.C. § 286 2-2.01 Statutory Language 109 2-2.02 Elements of the Offense 109 2-2.03 Summary 109 2-2.04 Venue 110 2-2.05 Statute of Limitations 110 2-2.06 Table of Cases 111 x CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 3 FALSE, FICTITIOUS, OR FRAUDULENT CLAIMS 18 U.S.C. § 287 2-3.01 Statutory Language 113 2-3.02 Elements of the Offense 113 2-3.03 Summary 114 2-3.04 Venue 118 2-3.05 Statute of Limitations 119 2-3.06 Table of Cases 120 xi CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 4 CONSPIRACY TO COMMIT OFFENSE OR TO DEFRAUD THE UNITED STATES - 18 U.S.C. § 371 2-4.01 Statutory Language 123 2-4.02 Generally 123 2-4.03 Elements of the Offense 124 2-4.04 Summary 125 [1] The Agreement 125 [2] Parties to the Conspiracy 126 [3] Nexus Required: Parties and the Agreement 128 [4] Overt Act 128 [5] Intent 130 [6] Conspiracy to Commit an Offense Against the United States 131 [7] Conspiracy to Defraud the United States 132 [8] Conspiracy to Impede, Obstruct or Impair the I.R.S. -Klein Conspiracy 133 [9] Duration of the Conspiracy 136 2-4.05 Venue 137 2-4.06 Statute of Limitations 137 2-4.07 Use of § 371: Evidentiary Considerations 138 2-4.08 Table of Cases 141 xii CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 5 FICTIOUS OBLIGATIONS - 18 U.S.C. § 514 2-5.01 Statutory Language 151 2-5.02 Elements of the Offense 151 2-5.03 Summary 151 2-5.04 Venue 153 2-5.05 Statue of Limitations 153 2-5.06 Table of Cases 154 xiii CHAPTER 2 RELATED TITLE 18 OFFENSES SECTION 6 IDENTITY THEFT - 18 U.S.C. § 1028(a)(7) 2-6.01 Statutory Language 156 2-6.02 Elements of the Offense 156 2-6.03 Summary 156 [1] Means of Identification Documents 157 [2] Intent 157 [3] Interstate or Foreign Commerce 157 2-6.04 Venue 158 2-6.05 Statue of Limitations 158 2-6.06 Table of Cases 159 xiv CHAPTER 1 TITLE 26 TAX VIOLATIONS SECTION 1 TAX EVASION - I.R.C. § 7201 1-1.01 Statutory Language 2 1-1.02 Generally 2 1-1.03 Evasion of Assessment 4 [1] Elements of the Offense 4 [2] The Attempt 4 [3] Additional Tax Due and Owing 6 [4] Willfulness 9 [5] Venue 13 [6] Statute of Limitations 14 1-1.04 Evasion of Payment 15 [1] Elements of the Offense 15 [2] The Attempt 15 [3] Additional Tax Due and Owing 17 [4] Willfulness 17 [5] Venue 18 [6] Statute of Limitations 18 1-1.05 Collateral Estoppel 18 1-1.06 Lesser Included Offenses 19 1-1.07 Table of Cases 20 1-1.01 Statutory Language I.R.C. § 7201 - ATTEMPT TO EVADE OR DEFEAT TAX Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined* not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution. * As to offenses committed after December 31, 1984, the Criminal Fine Enforcement Act of 1984 (P.L. 92-596) enacted as 18 U.S.C. § 3571, increased the maximum permissible fines for felony offenses set forth in section 7201. The maximum permissible fine is $250,000 for individuals and $500,000 for corporations. 1-1.02 Generally [1] Two kinds of tax evasion. Section 7201 creates two offenses: (a) the willful attempt to evade or defeat the assessment of a tax, and (b) the willful attempt to evade or defeat the payment of a tax. Sansone v. United States, 380 U.S. 343, 354 (1965).