Tax Fraud – Statutes and Elements
The most common tax fraud violations are: § 7201: Tax Evasion, § 7203: Failure to file/Failure to pay, § 7206(1): Willfully making and subscribing a return, etc. under penalties of perjury and § 7206(2): Aiding and assisting in the filing of a false tax return and § 7207: Delivering a Fraudulent return.
In § 7201, the elements are 1) the existence of a tax deficiency, 2) an affirmative act of evasion or attempted evasion of tax and 3) willfulness. The agent needs only to establish that a taxpayer has an item of income not contained in his income tax return [or attendant returns]. That said, a mere tax deficiency will NOT suffice to sustain an evasion conviction; the Government must show an affirmative act of evasion and willfulness.
In § 7203, a violation of which is a misdemeanor for an individual (although it may be a higher charge for a corporation), the elements are 1) willfulness, 2) failure to make a return, to pay a tax or to keep records or supply information while 3) having a legal duty to do so 4) at the time required by law. This statute is used primarily to prosecute tax protesters who fail to file a return or who file incomplete returns. Failure to file can be proven by testimony of a representative an individual from the IRS, stating that a search was made of the IRS’s records and no return was found.
In § 7206(1), the individual must have 1) willfully, 2) signed a return, statement or other document, 3) under penalties of perjury which, 4) was materially false and 5) which the accused did not believe to be true and correct. In § 7206(2), the individual must have 1) willfully, 2) aided or assisted in, or procured, counseled or advised, the preparation or presentation of any document in connection with any matter arising under the internal revenue laws which 3) document is materially false. Unlike the tax evasion statute, there is no requirement that the Government to prove a tax deficiency; it is only necessary to show that the return is materially false.