# Office of Chief Counsel

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## Text

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
SECTION 1

TITLE 26 TAX VIOLATIONS
TAX EVASION - I.R.C. § 7201

1-1.01

Statutory Language

2

1-1.02

Generally

2

1-1.03

Evasion of Assessment

4

1-1.04

[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

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

SECTION 2

TITLE 26 TAX VIOLATIONS

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

SECTION 3

TITLE 26 TAX VIOLATIONS

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

SECTION 4

TITLE 26 TAX VIOLATIONS

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

SECTION 5

TITLE 26 TAX VIOLATIONS

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

1-5.04

1-5.05

[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

§ 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

§ 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

1-5.06

76

§ 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

SECTION 6

TITLE 26 TAX VIOLATIONS

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

SECTION 7

TITLE 26 TAX CRIMES

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

1-7.03

[1] Generally

92

[2] Corrupt or Forcible Interference - Offense No. 1

93

[3] Corrupt Endeavors to Impede - “Omnibus Clause”
Offense No. 2

93

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

SECTION 1

RELATED TITLE 18 OFFENSES

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

SECTION 2

RELATED TITLE 18 OFFENSES

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

SECTION 3

RELATED TITLE 18 OFFENSES

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

SECTION 5

RELATED TITLE 18 OFFENSES

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
SECTION 1

TITLE 26 TAX VIOLATIONS
TAX EVASION - I.R.C. § 7201

1-1.01

Statutory Language

2

1-1.02

Generally

2

1-1.03

Evasion of Assessment

4

1-1.04

[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

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). See also, United States v.
Shoppert, 362 F.3d 451, 454 (8th Cir.), cert. denied, 543 U.S. 911 (2004); United States v. Mal,
942 F. 2d 682, 687-88 (9th Cir. 1991) (if a defendant transfers assets to prevent the I.R.S. from
determining his true tax liability, he has attempted to evade assessment; if he does so after a tax
liability has become due and owing, he has attempted to evade payment).
[a] Evasion of assessment. The most common attempt to evade or defeat a tax is the
affirmative act of filing a false return that omits income and/or claims deductions to which the
taxpayer is not entitled. The tax reported on the return is falsely understated and creates a
deficiency. Consequently, such willful under reporting constitutes an attempt to evade or
defeat tax by evading the correct assessment of the tax.
[b] Evasion of payment. This offense generally occurs after the existence of a tax due
and owing has been established (either by the taxpayer reporting the amount of tax or by the
I.R.S. assessing the amount of tax deemed to be due and owing) and almost always involves
an affirmative act of concealment of money or assets from which the tax could be paid. As
discussed in Section 1-1.04 below, it is not essential that the I.R.S. have made a formal
assessment of taxes owed and a demand for payment in order for tax evasion charges to be
brought. Tax deficiency can arise by operation of law when there is a failure to file and the
government later determines the tax liability. United States v. Daniel, 956 F.2d 540, 542 (6th
Cir. 1992).
Note: These two offenses share the same basic elements necessary to prove a violation of
I.R.C. § 7201. For purposes of clarity and practicality when using this Handbook as a
resource, these offenses are discussed separately.

2

[2] Persons Liable for Title 26 Violations.
[a] Statutory definition of "person."
1. The term "person," as defined by I.R.C. § 7343, includes an officer or
employee of a corporation, or a member or employee of a partnership, who is under a
duty to perform the act in respect of which the violation occurs. See also, United States v.
Miller, 545 F.2d 1204, 1216 (9th Cir. 1976); Lumetta v. United States, 362 F.2d 644, 647
(8th Cir. 1966); Locke v. United States, 166 F.2d 449, 450-51 (5th Cir. 1948); Currier v.
United States, 166 F.2d 346, 348 (1st Cir. 1948); United States v. Berger, 325 F. Supp.
1297, 1303-05 (S.D. N.Y. 1971), aff'd, 456 F.2d 1349 (2d Cir. 1972), cert. denied, 409
U.S. 892 (1972).
2. Guardians and Executors. A Section 7203 case interpreted the term “person”
to include a guardian or executor of estate. United States v. Jenning, 31 A.F.T.R.2d 73782 (9th Cir. 1973).
[b] Individuals. United States v. Sloan, 939 F.2d 499, 500-01 (7th Cir. 1991); United
States v. Condo, 741 F.2d 238, 239 (9th Cir. 1984); United States v. Rice, 659 F.2d 524, 528
(5th Cir. 1981).
[c] Return preparers. United States v. Donovan, 250 F. Supp. 463, 465-66 (W.D. Tex.
1966); United States v. Mesheski, 169 F. Supp. 372 (E.D. Wis. 1959), rev'd, 286 F.2d 345 (7th
Cir. 1961).
[d] Corporations. United States v. Knox Coal Co., 347 F.2d 33 (3d Cir.), cert. denied,
382 U.S. 904 (1965); United States v. American Stevedores, Inc., 310 F.2d 47, 48 (2d Cir.
1962), cert. denied, 371 U.S. 969 (1963); United States v. Lustig, 163 F.2d 85 (2d Cir. 1947),
cert. denied, 332 U.S. 775 (1947); Pankratz Lumber Co. v. United States, 50 F.2d 174 (9th
Cir. 1931).
[3] Scope - Evasion of another's tax. A person may be prosecuted under this statute for
willful evasion of another's tax. The offense of tax evasion is very broadly defined to include a
person's attempt "in any manner to evade or defeat any tax imposed by [Title 26] or payment
thereof." Thus, the statute permits prosecution of one party for the evasion of another party's
tax liability. See, United States v. Wilson, 118 F.3d 228, 236 (4th Cir. 1997); see also, United
States v. Trov, 293 U.S. 58 (1934); United States v. Frazier, 365 F.2d 316, 318 (6th Cir.
1966), cert. denied, 386 U.S. 971 (1967); Tinkoff v. United States, 86 F.2d 868, 876 (7th Cir.
1937).

3

1-1.03 Evasion of Assessment
[1] Elements of the Offense:
[a] An attempt to evade or defeat a tax or the payment of a tax;
[b] An additional tax due and owing; and,
[c] Willfulness.
Sansone v. United States, 380 U.S. 343, 351 (1965); Spies v. United States, 317 U.S. 492
(1943); United States v. Lavoie, 433 F.3d 95, 97-99 (1st Cir. 2005); United States v.
Farnsworth, 456 F.3d 394, 401-03 (3d Cir. 2006); United States v. Nolen, 472 F.3d 362, 37677 (5th Cir. 2006); United States v. Cor-Bon Custom Bullet Co., 287 F.3d 576, 579 (6th Cir.),
cert. denied, 537 U.S. 880 (2002); United States v. Daniels, 387 F.3d 636, 639 (7th Cir.), cert.
denied, 544 U.S. 911 (2004); United States v. Shoppert, 362 F.3d 451, 454 (8th Cir.), cert.
denied, 543 U.S. 911 (2004); United States v. Kayser, 488 F.3d 1070, 1073 (9th Cir. 2007);
United States v. Anderson, 319 F.3d 1218, 1219-20 (10th Cir. 2003); United States v.
Mounkes, 204 F.3d 1024, 1028 (10th Cir.), cert. denied, 530 U.S. 1230 (2000); United States
v. Daniel, 956 F.2d 540, 542 (6th Cir. 1992); United States v. Masat, 896 F.2d 88, 97-99 (5th
Cir. 1990).
Each element must be proved beyond a reasonable doubt. United States v. Marashi, 913
F.2d 724, 735-36 (9th Cir. 1990); United States v. Williams, 875 F.2d 846, 849 (11th Cir.
1989).
[2] The Attempt
[a] Attempt to evade assessment. The taxpayer must undertake some action, that is,
engage in an affirmative act for the purpose of attempting to evade or defeat the assessment of a
tax. This element requires more than passive neglect of a statutory duty. A mere act of willful
omission does not satisfy the affirmative act requirement of I.R.C. § 7201. United States v.
Masat, 896 F.2d 88, 97-99 (5th Cir. 1990).
[b] Examples of affirmative acts include:
1. Filing of a false return. United States v. Habig, 390 U.S. 222, 223 (1968);
Sansone v. United States, 380 U.S. 343, 351-52 (1965); United States v. Coppola, 425
F.2d 660 (2d Cir. 1969); United States v. Gricco, 277 F.3d 339, 351-52 (3d Cir. 2002);
United States v. Boulware, 384 F.3d 794 (2004), 470 F.3d 931, 934 (9th Cir. 2006),
reversed on other grounds, 128 S. Ct. 1168, 1182 (2008).
2. Filing of a false amended return. United States v. Samara, 643 F.2d 701, 704
(10th Cir. 1981); Norwitt v. United States, 195 F.2d 127, 133-34 (9th Cir. 1952), cert.
denied, 344 U.S. 817 (1952).
4

3. Failure to file return coupled with an affirmative act of evasion is commonly
referred to as a "Spies evasion." Passive failure to file tax returns is not tax evasion. If the
taxpayer failed to file a return, an evasion case can be maintained only if the taxpayer
engaged in an affirmative act to conceal or mislead. Spies v. United States, 317 U.S. 492,
498-99 (1943). By way of illustration, and not by way of limitation, the Supreme Court in
Spies set out examples of conduct which can constitute affirmative acts of evasion:
(A) Keeping a double set of books.
(B) Making false or altered entries.
(C) Making false invoices.
(D) Destruction of records.
(E) Concealing sources of income.
(F) Handling transactions to avoid usual records.
(G) Any other conduct likely to conceal or mislead.
See also, United States v. Brooks, 174 F.3d 950, 954-56 (8th Cir. 1999); United States v.
Meek, 998 F.2d 776, 779 (10th Cir. 1993).
4. Filing False W-4's plus Failure to file a Return Equals Evasion. Filing false
and fraudulent Forms W-4 claiming to be exempt from federal taxation in combination
with failure to file tax returns for each year can constitute an affirmative act of evasion.
See, United States v. Brooks, 174 F.3d 950, 954-56 (8th Cir. 1999); United States v.
King, 126 F.3d 987, 991-94 (7th Cir. 1997) (filing false forms W-4 is an affirmative act
despite the fact that those forms had expired); United States v. Willams, 928 F.2d 145,
147-49 (5th Cir.), cert. denied, 502 U.S. 811 (1991); United States v. Connor, 898 F.2d
942, 944-45 (3d Cir.), cert. denied, 497 U.S. 1029 (1990); United States v. Copeland, 786
F.2d 768, 770-71 (7th Cir. 1985); United States v. Willis, 277 F.3d 1026, 1031 (8th Cir.
2002).
5. False statements to Treasury agents relating to the fraud. United States v.
Beacon Brass Company, Inc., 344 U.S. 43, 45-46 (1952); United States v. Wilson, 118
F.3d 228, 236 (4th Cir. 1997); United States v. Winfield, 960 F.2d 970, 973-74 (11th Cir.
1992). But see, United States v. Romano, 938 F.2d 1569, 1573 (2d Cir. 1991)(equivocal
statements to officials do not constitute an affirmative act).
6. Corporate officer's diversion of corporate funds to pay personal expenses.
United States v. Boone, 951 F.2d 1526, 1540-41 (9th Cir. 1991); Katz v. United States,
321 F.2d 7, 10 (1st Cir.), cert. denied, 375 U.S. 903 (1963); United States v. American
Stevedores, Inc., 310 F.2d 47, 48 (2d Cir. 1962), cert. denied, 371 U.S. 969 (1963);
United States v. Brill, 270 F.2d 525, 526 (3d Cir. 1959).
5

7. Sluicing off corporate income to principal shareholders in the guise of
commissions or salaries out of proportion to the value of service rendered to the
corporate taxpayer. United States v. Ragen, 314 U.S. 513, 525-26 (1942); United States
v. Keenan, 267 F.2d 118, 123 (7th Cir.), cert. denied, 361 U.S. 863 (1959).
8. Consistent pattern of overstating deductions. Zacher v. United States, 227
F.2d 219, 224 (8th Cir. 1955), cert. denied, 350 U.S. 993 (1956); United States v.
Trevino, 394 F.3d 771, 777-78 (9th Cir. 2005), cert. denied, 547 U.S. 1022 (2006).
9. Concealment of bank accounts. United States v. Wilson, 118 F.3d 228, 236
(4th Cir. 1997); Paschen v. United States, 70 F.2d 491 (7th Cir. 1934). Using a false SSN
on bank accounts. United States v. Carlson, 235 F.3d 466, 469 (9th Cir. 2000), cert.
denied, 121 S.Ct. 1627 (2001).
10. Holding property in nominee names. United States v. Shoppert, 362 F.3d
451, 460 (8th Cir.), cert. denied, 543 U.S. 911 (2004); United States v. Wilson, 118 F.3d
228, 236 (4th Cir. 1997); United States v. Peterson, 338 F.2d 595, 597 (7th Cir. 1964),
cert. denied, 380 U.S. 911 (1965).
11. Representing political gratuities as gifts. Murray v. United States, 117 F.2d
40, 43-45 (8th Cir. 1941).
12. Doing business in diverse names and keeping large sums of cash in safe
deposit boxes in numerous banks. United States v. Zimmerman, 108 F.2d 370, 379 (7th
Cir. 1939).
13. Failure to file declaration of estimated tax, concealing or attempting to
conceal true income, failure to pay income tax due, and filing frivolous returns --a
purported income tax return (tax of $10.75) and an amended return (tax of $312.67).
United States v. Afflerbach, 547 F.2d 522 (10th Cir. 1976).
14. Structuring cash transactions to evade the filing of Bank Secrecy Act reports.
United States v. Mounkes, 204 F.3d 1024, 1030 (10th Cir.), cert. denied, 530 U.S. 1230
(2000).
[c] Affirmative acts pre-dating the date of deficiency. If the indictment mentions only the
date of deficiency as the date of the crime and fails to mention the predeficiency period, then
the government is precluded from relying on evidence of acts occurring in the predeficiency
period as evidence of affirmative acts of evasion. United States v. Voight, 89 F.3d 1050,
1089-90 (3d Cir.), cert. denied, 519 U.S. 1047 (1996).
[d] Affirmative acts serving purposes other than tax evasion. If tax evasion motive plays
any part in defendant’s conduct, the offense of tax evasion may be made out even though the
conduct may also serve purposes other than tax evasion. United States v. Voight, 89 F.3d
1050, 1090 (3d Cir.), cert. denied, 519 U.S. 1047 (1996).

[3] Additional Tax Due and Owing
6

[a] Generally. The government must demonstrate the existence of a tax due and owing, i.e., a
tax deficiency, to prove tax evasion. The government must prove the criminal tax adjustments
include evidence of criminal intent. Defense counsel will attack this element of the case if at all
possible. Therefore, it is important to verify that the income from which the tax deficiency
resulted was in fact taxable income. See, I.R.C. §§ 61, 62 and 63.
[b] Examples of taxable income not expressly specified in the Code, include:
1. Gambling. Garner v. United States, 501 F.2d 228 (9th Cir. 1974), aff'd on
other grounds, 424 U.S. 648 (1976); McClanahan v. United States, 292 F.2d 630, 631-32
(5th Cir.), cert. denied, 368 U.S. 913 (1961).
2. Campaign contributions used for personal purposes. United States v. Scott,
660 F.2d 1145, 1152 (7th Cir. 1981), cert. denied, 455 U.S. 907 (1982).
3. Embezzlement. James v. United States, 366 U.S. 213, 221-22 (1961); United
States v. Eaken, 17 F.3d 203 (7th Cir. 1994); United States v. Kleifgen, 557 F.2d 1293,
1298-99 (9th Cir. 1977).
4. Extortion Proceeds. Rutkin v. United States, 343 U.S. 130, 136-39 (1952);
United States v. Cody, 722 F.2d 1052 (2d Cir. 1983), cert. denied, 467 U.S. 1226 (1984).
5. Fraud Income. United States v. Dixon, 698 F.2d 445, 446 (11th Cir. 1983)
(gross income includes proceeds from investment fraud scheme); Moore v. United States,
412 F.2d 974, 978 (5th Cir. 1969)(income includes gains from illegal activities).
6. Loans received with no intent to repay. United States v. Curtis, 782 F.2d 593,
596 (6th Cir. 1986); United States v. Swallow, 511 F.2d 514, 519 (10th Cir.), cert.
denied, 423 U.S. 845 (1975); United States v. Rosenthal, 470 F.2d 837, 842 (2d Cir.
1972), cert. denied, 412 U.S. 909 (1973); United States v. Rochelle, 384 F.2d 748, 75152 (5th Cir. 1967), cert. denied, 390 U.S. 946 (1968).
7. Kickbacks. United States v. Sallee, 984 F.2d 643 (5th Cir. 1993); United States v.
Cody, 722 F.2d 1052 (2d Cir. 1983); United States v. Fogg, 652 F.2d 551, 555 (5th Cir. 1981),
cert. denied, 456 U.S. 905 (1982); United States v. Swallow, 511 F.2d 514, 519 (10th Cir.),
cert. denied, 423 U.S. 845 (1975); United States v. Wyss, 239 F.2d 658, 660 (7th Cir. 1957).
[c] Tax deficiency does not include interest and penalties if the violation is evasion of
assessment. United States v. Mal, 942 F. 2d 682, 687 (9th Cir. 1991).
[d] Evading another's tax liability. A tax deficiency may be predicated on taxable income
that was taxable either to the person charged or another person or entity. United States v. Trov,
293 U.S. 58 (1934); United States v. Aracri, 968 F.2d 1512, 1523 (2d Cir. 1992); United States
v. Frazier, 365 F.2d 316, 318 (6th Cir. 1966), cert. denied, 386 U.S. 971 (1967); Tinkoff v.
United States, 86 F.2d 868, 876 (7th Cir. 1937).

7

[e] Assessment and demand not required. If the prosecution theory is evasion of
assessment, there need not be a prior formal tax assessment or demand for payment. Tax
deficiency can arise by operation of law when there is a failure to file and the government
later determines the tax liability. United States v. Daniel, 956 F.2d 540, 542 (6th Cir. 1992);
United States v. Dack, 747 F.2d 1172, 1174 (7th Cir. 1984).
[f] Amount of tax to be proven. The government need not prove a precise amount of tax
due and owing or prove its case to a mathematical certainty. United States v. Johnson, 319
U.S. 503, 517-18 (1943); United States v. Mounkes, 204 F.3d 1024, 1028 (10th Cir.), cert.
denied, 530 U.S. 1230 (2000); United States v. Bender, 606 F.2d 897, 898 (9th Cir. 1979);
United States v. Keller, 523 F.2d 1009, 1012 (9th Cir. 1975).
1. Most circuits require the government to show that a substantial tax deficiency
existed with respect to the years involved in the charge. United States v. Burkhart, 501 F.2d
993, 995 (6th Cir. 1974), cert. denied, 420 U.S. 946 (1975); United States v. Marcus, 401
F.2d 563, 565 (2d Cir. 1968), cert. denied, 393 U.S. 1023 (1969); Swallow v. United States,
307 F.2d 81, 83 (10th Cir. 1962), cert. denied, 371 U.S. 950 (1963); United States v. Alker,
260 F.2d 135, 140 (3d Cir. 1958), cert. denied, 59 U.S. 906 (1959).
2. In the Seventh and Ninth Circuits there is no statutory requirement of
substantiality, so showing some tax deficiency suffices. United States v. Daniels, 387 F.3d
636, 641 (7th Cir.), cert. denied, 544 U.S. 911 (2004); United States v. Marashi, 913 F.2d
724, 735-736 (9th Cir. 1990); United States v. Bender, 606 F.2d 897, 898 (9th Cir. 1979).
[g] Technical defenses.
1. Loss carryback or "Lucky Loser Argument" is no defense. Net operating
losses which occur after tax returns are required to be filed cannot be carried back to
eliminate a tax liability. Such carryback losses cannot be used to reduce or eliminate
misstatements of tax liability when fraudulently made. Willingham v. United States, 289 F.2d
283, 287-88 (5th Cir. 1961), cert. denied, 368 U.S. 826 (1961).
2. Insufficient Earnings and Profits (E&P). Many tax schemes involve shareholders of
closely held C corporations (corporations that pay tax) diverting corporate receipts to themselves or
their family members, having the corporation pay their personal expenses, and other schemes where
the corporate funds are distributed to the shareholders without the shareholders reporting any gross
income and the corporation’s taxable income being understated. In United States v. Boulware, 128
S.Ct. 1168, 1182 (2008), the Supreme Court held that in determining the taxable amount of any such
corporate distributions to the shareholder the distribution rules of I.R.C. §§ 301 and 316 apply.
In general, the distribution rules of sections 301 and 316 provide that corporate distributions to
shareholders are paid first out of current E&P, second out of accumulated E&P, and third out of
capital (if the distribution exceeds current and accumulated E&P and the shareholder’s basis in the
stock of the corporation, then such excess is taxed as a capital gain). The defense is that the
corporation lacked current or accumulated E&P; therefore, any distributions by the corporation to
the shareholder are a non-taxable return of capital.

8

To overcome this defense, the government must prove the corporation had current or accumulated
E&P. To compute E&P, start with the taxable income of the corporation as corrected. A number
of technical adjustments are made to the taxable income, most of which would not be at issue in a
criminal tax case, so the amounts of these adjustments from the corporation’s records could be
used. Reduce the adjusted taxable income, by the tax due on the corrected taxable income to arrive
at E&P. Any distributions paid out of E&P are taxable (constructive) dividends to the shareholder.
In deciding Boulware, the Supreme Court adopted the holding of the Second Circuit Court of
Appeals in United States v. D’Agostino, 145 F.3d 69 (2d Cir. 1998), and rejected the following
circuit court decisions: United States v. Williams, 875 F.2d 846 (11th Cir. 1989); United States v.
Thetford, 676 F.2d 170 (5th Cir. 1982), cert. denied, 459 U.S. 1148 (1983); United States v. Miller,
545 F.2d 1204 (9th Cir. 1976), cert. denied, 430 U.S. 930 (1977); and Davis v. United States, 226
F.2d 331 (6th Cir. 1955), cert. denied, 350 U.S. 965 (1956).
3. Reclassify business expenses. In United States v. Kayser, 488 F.3d 1070,
1073 (9th Cir. 2007), a divided panel of the 9th Circuit overturned defendant’s conviction by
allowing him to reclassify previously claimed corporate business expenses as personal
business expenses which offset unreported income and resulted in no tax due and owing.
The court did not overrule United States v. Miller, 545 F. 2d 1204 (9th Cir. 1976), cert.
denied, 430 U. S. 930 (1977), which had held otherwise, but interpreted Miller’s holding as
being consistent with the court’s decision.
4. Different method of reporting or accounting. As a general rule, the
Government must use the taxpayer's method of accounting in computing the income. Fowler
v. United States, 352 F.2d 100, 103 (8th Cir. 1965), cert. denied, 383 U.S. 907 (1966); United
States v. Vardine, 305 F.2d 60, 64 (2d Cir. 1962); United States v. Hestnes, 492 F. Supp.
999, 1000-01 (W.D. Wis. 1980). If the taxpayer used a particular method of reporting
income, then the taxpayer is bound by that choice at trial. The taxpayer cannot report his
income on the cash method and then at trial, allege that on an accrual basis unreported
income would be a less than the Government proved on a cash basis. Clark v. United States,
211 F.2d 100, 105 (8th Cir. 1954), cert. denied, 348 U.S. 911 (1955). See also, United States
v. Helmsly, 941 F.2d 71, 86-87 (2d Cir. 1991)(defendant not free to re-calculate taxes
resorting to one of four depreciation methods to defend the charge by showing that another
depreciation method would have resulted in no tax liability); United States v. Hecht, 705 F.
2d 976, 977-78 (8th Cir. 1983).
5. A legitimate claim to a foreign tax credit is a defense. United States v. Cruz,
698 F.2d 1148, 1152 (11th Cir. 1983); United States v. Campbell, 351 F.2d 336, 338-39 (2d
Cir. 1965), cert. denied, 383 U.S. 907 (1966). Liability for the foreign tax credit must be fully
established as an amount owed to the foreign government.
[4] Willfulness
[a] Willfulness is defined as the "voluntary, intentional violation of a known legal duty."
Cheek v. United States, 498 U.S. 192, 200-01 (1991); United States v. Pomponio, 429 U.S. 10,
12 (1976); United States v. Bishop, 412 U.S. 346, 360 (1973); United States v. Pensyl, 387 F.3d
456, 458-59 (6th Cir. 2004); United States v. George, 420 F.3d 991, 999 (9th Cir. 2005).
9

[b] Subjective Test. A defendant's good faith belief that he is not violating the tax laws, no
matter how objectively unreasonable that belief may be, is a defense in a tax prosecution. Cheek
v. United States, 498 U.S. 192, 199-201 (1991). See also, United States v. Grunewald, 987 F.2d
531, 535-36 (8th Cir. 1993); United States v. Pensyl, 387 F.3d 456, 459 (6th Cir. 2004).
1. Erroneous beliefs. A defendant's erroneous belief that tax laws are
unconstitutional is no defense to tax evasion. Cheek v. United States, 498 U.S. 192,
205-06 (1991).
2. Law is vague or unsettled.
(A) Where the law is vague or unsettled as to whether a transaction has
generated taxable income, courts have found the defendant lacked willfulness. For
instance:
(i) Payments given by wealthy widower to mistresses where civil
tax cases had held such payments were gifts. United States v. Harris, 942
F.2d 1125, 1131 (7th Cir. 1991).
(ii) Prior Tax Court case accepting income reporting method
made it inappropriate to impose criminal liability for using that method.
United States v. Heller, 830 F. 2d 150, 154-55 (11th Cir. 1987).
(iii) Novel issue of tax treatment of money received from sale of
rare blood. United States v. Garber, 607 F.2d 92, 100 (5th Cir. 1979).
(iv) Business income on Indian reservation in light of conflict
among government branches on the issue. United States v. Critzer, 498
F.2d 1160, 1162 (4th Cir. 1974).
(B) The fact that an appellate court has not decided an issue does not
mean that the law is vague or unsettled if established principles of tax law clearly
delineate the scheme's illegality. See, e.g., United States v. Tranakos, 911 F.2d
1422, 1430-31 (10th Cir. 1990)(addressing use of sham transactions to avoid
taxation); United States v. Krall, 835 F.2d 711, 714 (8th Cir. 1987)(regarding use
of sham trusts to avoid taxation); United States v. Crooks, 804 F.2d 1441 (9th Cir.
1986) (concerning principle favoring tax treatment of substance over form);
United States v. George, 420 F. 3d 991, 995-96 (9th Cir. 2005)(concerning
allocation of receiver fees by a cash basis taxpayer).
(C) The fact that the law is vague or unsettled does not negate willfulness if the
defendant is not also subjectively uncertain of the law or if bad faith can be inferred
from the defendant’s conduct. Factual evidence of the defendant’s state of mind is
required to negate willfulness. United States v. Harris, 942 F.2d 1125, 1128-29 (7th Cir.
1991); United States v. Curtis, 782 F.2d 593, 598-600 (6th Cir. 1986)(rejecting defense
because it allows a finding that there was no willfulness even if defendant was unaware
of the legal uncertainty and because it distorts the roles of experts, judges, and juries
with respect to questions of law); United States v. MacKenzie, 777 F.2d 811, 816-17 (2d
10

Cir. 1985); United States v. Mallas, 762 F .2d 361, 363 (4th Cir. 1985); United States v.
Ingredient Technology, 698 F.2d 88, 96-97 (2d Cir.), cert. denied, 462 U.S. 1131
(1983).
3. Where the defendant concealed assets or covered up sources of income,
willfulness is present and good faith may not be used as a defense. United States v.
Brooks, 174 F.3d 950, 954-55 (8th Cir. 1999).
4. A willful blindness or deliberate indifference jury instruction permits a jury
to infer knowledge if it finds the defendant closed his eyes to what was obvious to him.
United States v. Willis, 277 F.3d 1026, 1031-32 (8th Cir. 2002); United States v. Dean,
487 F.3d 840, 851 (11th Cir. 2007).
[c] Absent an admission, confession or accomplice testimony, willfulness is rarely subject
to direct proof and generally must be inferred from the circumstances of the case. United
States v. Wilson, 118 F.3d 228, 236 (4th Cir. 1997); United States v. Ashfield, 735 F.2d 101,
105 (3d Cir.), cert. denied, 469 U.S. 858 (1984); United States v. Spinelli, 443 F.2d 2, 3 (9th
Cir. 1971); United States v. Magnus, 365 F.2d 1007, 1011-12 (2d Cir. 1966); Paschen v.
United States, 70 F.2d 491 (7th Cir. 1934).
[d] Willfulness may be inferred from "any conduct, the likely effect of which would be
to mislead or to conceal." Spies v. United States, 317 U.S. 492, 499 (1943). The following
are examples of conduct from which willfulness has been inferred:
1. Signing return knowing that the contents of that return understated income.
United States v. Olbres, 61 F.3d 967, 970-71 (1st Cir.), cert. denied, 516 U.S. 991 (1995).
2. Substantial understatement of income in successive years. United States v.
Lavoie, 433 F.3d 95, 98-99 (1st Cir. 2005); United States v. Kim, 884 F.2d 189, 192-93 (5th
Cir. 1989); United States v. Krzyske, 836 F.2d 1013, 1019-20 (6th Cir. 1988); United States
v. Skalicky, 615 F.2d 1117, 1120 (5th Cir.), cert. denied, 449 U.S. 832 (1980); United States
v. Larson, 612 F.2d 1301, 1305 (8th Cir.), cert. denied, 446 U.S. 936 (1980); United States v.
Gardner, 611 F.2d 770, 776 (9th Cir. 1980).
3. Prior and subsequent similar acts reasonably close to the prosecution years.
United States v. Johnson, 386 F.2d 630, 631 (3d Cir. 1967); United States v. Magnus, 365
F.2d 1007, 1011-12 (2d Cir. 1966); United States v. Alker, 260 F.2d 135, 156-57 (3d Cir.
1958), cert. denied, 359 U.S. 906 (1959).
4. Failure to supply an accountant with accurate and complete information. United
States v. Lavoie, 433 F.3d 95, 99 (1st Cir. 2005); United States v. Bishop, 291 F.3d 1100, 110608 (9th Cir. 2002), United States v. Olbres, 61 F.3d 967, 970-71 (1st Cir.), cert. denied, 516
U.S. 991 (1995); United States v. Brimberry, 961 F.2d 1286, 1290-91 (7th Cir. 1992); United
States v. Chesson, 933 F.2d 298, 304-05 (5th Cir. 1991); United States v. Michaud, 860 F.2d
495, 500 (1st Cir. 1988); United States v. Meyer, 808 F.2d 1304, 1306 (8th Cir. 1987); United
States v. Ashfield, 735 F.2d 101, 106-07 (3d Cir.), cert. denied, 469 U.S. 858 (1984); United
States v. Samara, 643 F.2d 701,703-04 (10th Cir.), cert. denied, 454 U.S. 829 (1981).

11

5. Making false exculpatory statements to agents or causing them to be made.
United States v. Chesson, 933 F.2d 298, 304-05 (5th Cir. 1991); United States v.
Frederickson, 846 F.2d 517, 520-21 (8th Cir. 1988); United States v. Walsh, 627 F.2d 88,
92 (7th Cir. 1980).
6. Destroying, throwing away, or "losing" books and records. United States v.
Chesson, 933 F. 2d 298, 304-05 (5th Cir. 1991); United States v. Walker, 896 F.2d 295
(8th Cir. 1990); United States v. Conforte, 624 F.2d 869, 875-76 (9th Cir.), cert. denied,
449 U.S. 1012 (1980); United States v. Garavaglia, 566 F.2d 1056, 1059-60 (6th Cir.
1977).
7. Making or using false documents, entries in books and records, or invoices.
United States v. Chesson, 933 F.2d 298, 304 (5th Cir. 1991); United States v. Walker,
896 F.2d 295, 297-300 (8th Cir. 1990). This includes backdating documents such as
receipts and contracts to gain a tax advantage. United States v. O'Keefe, 825 F.2d 314,
318 (11th Cir. 1987); United States v. Drape, 668 F.2d 22, 25-26 (1st Cir. 1982).
8. Keeping a double set of books. Spies v. United States, 317 U.S. 492, 499
(1943); United States v. Daniels, 617 F.2d 146, 148 (5th Cir. 1980).
9. Placing property or business in the name of another. United States v. Brooks,
174 F.3d 950, 954-55 (8th Cir. 1999); United States v. Daniel, 956 F.2d 540, 543 (6th
Cir. 1992); United States v. Peterson, 338 F.2d 595, 597 (7th Cir. 1964), cert. denied, 380
U.S. 911 (1965); United States v. Woodner, 317 F.2d 649, 650 (2d Cir.), cert. denied, 375
U. S. 903 (1963).
10. Extensively using currency and cashier's checks. United States v. Daniel, 956
F.2d 540, 543 (6th Cir. 1992); United States v. Holovachka, 314 F.2d 345, 357-58 (7th
Cir.), cert. denied, 374 U.S. 809 (1963); Schuermann v. United States, 174 F.2d 397, 398
(8th Cir.), cert. denied, 338 U.S. 831 (1949).
11. Spending large amounts of cash which could not be reconciled with reported
income or engaging in surreptitious transactions using cash, money orders, or cashier's
checks. United States v. Kim, 884 F.2d 189, 192-93 (5th Cir. 1989); United States v.
Skalicky, 615 F.2d 1117, 1120 (5th Cir.), cert. denied, 449 U.S. 832 (1980); United
States v. Holladay, 566 F.2d 1018, 1020 (5th Cir.), cert. denied, 439 U.S. 831 (1978);
United States v. Mortiner, 343 F.2d 500 (7th Cir.), cert. denied, 382 U.S. 842 (1965).
12. Holding bank accounts under fictitious names. United States v. Ratner, 464
F.2d 101, 105 (9th Cir. 1972); Elwert v. United States, 231 F.2d 928, 936 (9th Cir. 1956).
13. Handling one's affairs to avoid making the usual records required for such
transactions. United States v. Dowell, 446 F.2d 145, 147-48 (10th Cir.), cert. denied, 404
U. S. 984 (1971); Gariepy v. United States, 189 F.2d 459, 461-63 (6th Cir. 1951).
14. General educational background and experience may be considered as
bearing on a taxpayer's ability to form a willful intent. United States v. Smith, 890 F.2d
711, 715 (5th Cir. 1989)(entrepreneurial experience); United States v. Segal, 867 F.2d
12

1173, 1179 (8th Cir. 1989)(successful and sophisticated businessman). See also, United
States v. Tarwater, 308 F.3d 494, 506-07 (6th Cir. 2002); United States v. Coblentz, 453
F.2d 503, 505 (2d Cir. 1972); United States v. Ostendorff, 371 F.2d 729, 731 (4th Cir.),
cert. denied, 386 U.S. 982 (1967).
15. The defendant's attitude toward the reporting and payment of taxes generally.
United States v. Hogan, 861 F.2d 312, 316 (1st Cir. 1988); United States v. Stein, 437
F.2d 775 (7th Cir.), cert. denied, 403 U.S. 905 (1971); United States v. O'Connor, 433
F.2d 752, 754-755 (1st Cir. 1970), cert. denied, 401 U.S. 911 (1971).
16. Ignorance of law and claims that tax laws are not constitutional. Cheek v.
United States, 498 U.S. 192, 199-201 (1991); United States v. Pensyl, 387 F. 3d 456,
458-60 (6th Cir. 2004), and United States v. Hancock, 231 F. 3d 557, 561-62 (9th Cir.
2000).
[5] Venue
[a] Under the Constitution, venue lies in the judicial district where the crime has been
committed. U.S. Const. art. II, § 2, cl. 3; U.S. Const. amend. VI.
[b] Unless otherwise permitted by statute or rule, criminal prosecution must take place
"in a district in which the offense was committed." Fed. R. Crim. P. 18.
[c] Venue is appropriate in any judicial district where the return was:
1. made;
2. subscribed; or
3. filed.
See, e.g., United States v. Marchant, 774 F.2d 888, 891-92 (8th Cir. 1985), cert. denied, 475
U.S. 1012 (1986)(venue appropriate where accountant prepared return); United States v.
King, 563 F.2d 559, 562 (2d Cir. 1977), cert. denied, 435 U.S. 918 (1978)(prepared and
signed); United States v. Gross, 276 F.2d 816, 819 (2d Cir.), cert. denied, 363 U.S. 831
(1960) (prepared); United States v. Albanese, 224 F.2d 879, 882 (2d Cir.), cert. denied, 350
U.S. 845 (1955)(prepared and mailed).
[d] Venue is also appropriate in any district where any act of the offense was begun,
continued, or completed. United States v. Rooney, 866 F.2d 28, 31-32 (2d Cir. 1989).
[e] For offenses begun in one district and completed in another, or committed in more
than one district, venue lies in each district in which such offense was begun, continued, or
completed. 18 U.S.C. § 3237(a).
[f] General considerations in recommending venue:
1. The underlying basis for venue is the taxpayer's Sixth Amendment right to
trial in the judicial district where the crime was committed.
13

2. Bringing prosecution in taxpayer's home judicial district obviates motion by
defendant to change venue. Publicity more likely in defendant's home district.
3. Proof of venue is by a preponderance of the evidence. United States v.
Maldonado-Rivera, 922 F.2d 934, 968 (2d Cir. 1990), cert. denied, 501 U.S. 1210 (1991);
United States v. Griley, 814 F.2d 967, 973 (4th Cir. 1987). It is enough if the testimony
justifies the reasonable inference that the violation occurred at the place alleged in the
indictment. United States v. Mendell, 447 F.2d 639, 641 (7th Cir.), cert. denied, 404 U.S.
991 (1971).
4. Improper venue may be waived by a defendant. United States v. Netz, 758
F.2d 1308, 1311 (8th Cir. 1985); United States v. Powell, 498 F.2d 890, 891 (9th Cir.
1974). See also, Fed R. Crim. P. 58(c)(2).
[6] Statute of Limitations
[a] There is a six (6) year limitation period for the offense of willfully attempting to
evade or defeat any tax. I.R.C. § 6531(2).
[b] The general rule is that the limitation period begins to run 6 years from the date of the
last affirmative act that took place or the statutory due date of the return, whichever is
later. Specific applications of the rule are:
1. Statutory due date where no return is filed or where the return is filed early.
United States v. Butler, 297 F.3d 505, 511 (6th Cir. 2002), cert. denied, 123 S.Ct. 2074
(2003); United States v. Williams, 928 F.2d 145, 149 (5th Cir.), cert. denied, 502 U.S.
811 (1991); United States v. Myerson, 368 F.2d 393, 395 (2d Cir. 1966), cert. denied,
386 U.S. 991 (1967).
2. Actual filing date where the tax return is filed late. United States v. Habig,
390 U.S. 222, 225-27 (1968); United States v. Daniels, 387 F.3d 636, 641-42 (7th Cir.),
cert. denied, 544 U.S. 911 (2004).

3. Date of the last affirmative act of evasion where acts of evasion occur after the
due date. United States v. Beacon Brass, 344 U.S. 43, 45-46 (1952); United States v.
Anderson, 319 F.3d 1218, 1219-20 (10th Cir. 2003); United States v. Carlson, 235 F.3d
466, 470-71 (9th Cir. 2000), cert. denied, 532 U.S. 983 (2001); United States v. Winfield,
960 F.2d 970, 973 (11th Cir. 1992); United States v. DiPetto, 936 F.2d 96, 98 (2d Cir.),
cert. denied, 502 U.S. 866 (1991); United States v. Ferris, 807 F.2d 269, 271-72 (1st Cir.
1986). Contra, United States v. Uscinski, 369 F.3d 1243, 1247 (11th Cir. 2004)(the filing
of a false income tax return completes the offense of tax evasion).
Note: This can be problematic if act does not relate to evasion but, rather may be viewed
as a separate coverup.
14

[c] Tolling, Suspension, and Extension of Statute
1. Tolling. Under I.R.C. § 6531, the statute of limitations is tolled while a person
who has committed tax code violations is outside the United States or is a fugitive from
justice.
(A) "Outside the United States" has been interpreted to mean "whenever
[such persons] cannot be served criminal process within the jurisdiction of the
United States under Fed. R. Crim. P. 4(d)(2)." United States v. Marchant, 774
F.2d 888, 891-92 (8th Cir. 1985), cert. denied, 475 U.S. 1012 (1986).
(B) This includes ordinary business or pleasure trips outside U.S.
jurisdiction. United States v. Myerson, 368 F.2d 393, 395 (2d Cir. 1966), cert.
denied, 386 U.S. 991 (1967).
2. Suspension. Under I.R.C. § 7609(e)(1), the statute of limitations is suspended
in certain types of summons enforcement proceedings. Generally, where an intervener in
a summons enforcement proceeding is the person with respect to whose liability the
summons is issued, the running of any period of limitations under section 6531(relating
to criminal prosecutions) with respect to such person shall be suspended for the period
during which such a proceeding, and appeals therein, with respect to the enforcement of
such summons is pending.
3. Time Extension. Under I.R.C. § 6531, the statute of limitations may be
extended. When an adequate complaint is instituted before a commissioner of the United
States within the prescribed limitation period, the period is extended 9 months from the
date of the complaint. This extension of time is not meant to allow the government
additional time to develop its case, but rather is designed for use when the grand jury
would not be able to return an indictment within the statutory time because of its
schedule. See, Jaben v. United States, 381 U.S. 214, 219-20 (1964).
1-1.04 Evasion of Payment
[1] Elements of the Offense:
[a] An attempt to evade or defeat the payment of a tax;
[b] An additional tax due and owing; and,
[c] Willfulness.
Sansone v. United States, 380 U.S. 343, 351 (1965); Spies v. United States, 317 U.S. 492, 49394 (1943); United States v. Daniel, 956 F.2d 540, 542 (6th Cir. 1992); United States v. Masat,
948 F.2d 923, 931 (5th Cir. 1991).

15

[2] The Attempt
[a] Attempt to evade payment. Affirmative acts of evasion of payment almost always
involve some form of concealment of money or assets with which the tax could be paid or the
removal of assets from the reach of the I.R.S. Merely failing to pay assessed taxes, without
more, does not constitute evasion of payment (though it may constitute willful failure to pay
taxes under § 7203). Thus, in the absence of an affirmative act, obstinate refusal to pay taxes
due and the possession of the funds needed to pay the taxes is insufficient for an evasion
charge.
[b] Affirmative acts of evasion of payment generally involve schemes to deal in currency,
place assets in the names of others, transfer assets abroad or omit assets on a Form 433-A,
Collection Information Statement. Examples include:
1. Concealing assets by using bank accounts of family members and coworkers.
United States v. Shoppert, 362 F.3d 451, 460 (8th Cir.), cert. denied, 543 U.S. 911
(2004); United States v. McGill, 964 F.2d 222, 233 (3d Cir. 1992).
2. Making expenditures extensively by cash and through the use of third parties'
credit cards and placing assets in the names of third parties. United States v. Shoppert,
362 F.3d 451 (8th Cir.), cert. denied, 543 U.S. 911 (2004); United States v. Daniel, 956
F.2d 540, 543 (6th Cir. 1992).
3. Taxpayer's false statement to I.R.S. agent that she owned no real estate and
had no other assets with which to pay tax. United States v. Shoppert, 362 F.3d 451, 460
(8th Cir.), cert. denied, 543 U.S. 911 (2004); United States v. Brimberry, 961 F.2d 1286,
1290-91 (7th Cir. 1992).
4. Maintaining a cash lifestyle by conducting all personal and professional
business in cash, possessing no credit cards, bank accounts, or accounting records and
never acquiring any attachable assets. United States v. Shorter, 809 F.2d 54, 56-57 (D.C.
Cir.), cert. denied, 484 U.S. 817 (1987).
5. Bankruptcy fraud. A legitimate goal of a bankruptcy petitioner may be
immediate protection from I.R.S. collection activities (stay of collection and removal of
levies). While the act of voluntarily filing a petition for bankruptcy may not constitute an
affirmative act in and of itself, if it can be shown through other affirmative acts (e.g.,
predicating the petition on false or fraudulent obligations) that the petitioner's purpose in
filing the bankruptcy petition was to prevent or delay I.R.S. collection efforts, the act of
filing may constitute an affirmative act of evasion. See, e.g., United States v. Huebner, 48
F.3d 376, 379-80 (9th Cir. 1994)(the defendant, having created false loan documents and
then filed for bankruptcy, was successfully prosecuted for evasion of payment.).
6. See also, United States v. Hook, 781 F.2d 1166, 1169 (6th Cir.), cert. denied,
479 U.S. 882 (1986); United States v. Lamp, 779 F.2d 1088, 1092-93 (5th Cir. 1986);
United States v. Swallow, 511 F.2d 514, 521 (10th Cir.), cert. denied, 423 U.S. 845
(1975); United States v. Trownsell, 367 F.2d 815, 816 (7th Cir. 1966); Cohen v. United
16

States, 297 F.2d 760, 762 (9th Cir.), cert. denied, 369 U.S. 865 (1962); United States v.
Mollet, 290 F. 2d 273, 274-75 (2d Cir. 1961), for additional examples of acts to evade
payment.
[c] Evasion of payment may involve a single affirmative act intended to evade the payment of
several years of tax due. In this situation, it is permissible to charge multiple years of evasion in one
count. United States v. Shorter, 809 F.2d 54, 56-57 (D.C. Cir.), cert. denied, 484 U.S. 817
(1987)(upholding use of a single count of tax evasion covering twelve years of evasion of payment
where the underlying basis of the count is an allegedly consistent, long-term pattern of conduct directed
at the evasion of payment of taxes for those years). See also, United States v. Hook, 781 F.2d 1166,
1169 (6th Cir.), cert. denied, 479 U. S. 882 (1986).

[3] Additional Tax Due and Owing
[a] Generally. The government must demonstrate the existence of a tax due and owing,
i.e., a tax deficiency, to prove tax evasion. For further information see discussion of this
element in the evasion of assessment section above.
[b] It is not essential that the I.R.S. have made a formal assessment of taxes owed and a
demand for payment in order to bring tax evasion charges on an evasion of payment theory. Tax
deficiency can arise by operation of law when there is a failure to file and the government later
determines the tax liability. See, United States v. Daniel, 956 F.2d 540, 542 (6th Cir. 1992);
United States v. Hogan, 861 F.2d 312, 315-16 (1st Cir. 1988).
The law is not so clear in the Third Circuit. See the discussion in United States v.
Farnsworth, 456 F.3d 394, 402-03 (3d Cir. 2006), where the court stated that no assessment is
required but noted that United States v. McGill, 964 F.2d 222, 233 (3d Cir. 1992), suggested
otherwise.
[c] Right of defendant to dispute assessment. Although an assessment is prima facie proof of a
tax deficiency, the defendant has a constitutional right to present rebuttal evidence and have the jury
decide his guilt on each element of the crime. United States v. Silkman, 156 F.3d 833, 835 (8th Cir.
1998).
[4] Willfulness
[a] Willfulness is defined as the "voluntary, intentional violation of a known legal duty."
Cheek v. United States, 498 U.S. 192, 201 (1991); United States v. Pomponio, 429 U.S. 10, 12
(1976); United States v. Bishop, 412 U.S. 346, 360 (1973). See discussion of this element in the
evasion of assessment section above.
[b] Willfulness is subjectively measured. A defendant's good faith belief that he is not
violating the tax laws, no matter how objectively unreasonable that belief may be, is a defense
in a tax prosecution. Cheek v. United States, 498 U.S. 192, 199-201 (1991). See also, United
States v. Grunewald, 987 F.2d 531, 535-36 (8th Cir. 1993).
17

[c] Indirect proof of willfulness is the typical means of establishing the element.
Willfulness may be inferred from "any conduct the likely effect of which would be to mislead
or to conceal." Spies v. United States, 317 U.S. 492, 499 (1943).
[d] Conduct from which the willful evasion of payment can be inferred includes conduct
designed to place assets beyond the government's reach after a tax liability has been assessed.
United States v. Mal, 942 F. 2d 682, 687 (9th Cir. 1991); United States v. Dunkel, 900 F.2d
105, 107 (7th Cir. 1990); United States v. Masat, 896 F.2d 88, 97-99 (5th Cir. 1990).
[e] Paying taxes due after the criminal investigation commenced does not negate
willfulness. United States v. Pang, 362 F.3d 1187, 1194 (9th Cir.), cert. denied, 543 U.S. 943
(2004).
[5] Venue
[a] Venue is appropriate in any judicial district where the return was:
1. made;
2. subscribed; or
3. filed.
See, e.g., United States v. Marchant, 774 F.2d 888, 891-92 (8th Cir. 1985), cert. denied, 475
U.S. 1012 (1986) (venue appropriate where accountant prepared return); United States v. King,
563 F.2d 559, 562 (2d Cir. 1977), cert. denied, 435 U.S. 918 (1978) (prepared and signed);
United States v. Gross, 276 F.2d 816, 819-20 (2d Cir.), cert. denied, 363 U.S. 831 (1960)
(prepared); United States v. Albanese, 224 F.2d 879, 882 (2d Cir.), cert. denied, 350 U.S. 845
(1955)(prepared and mailed).
[b] Venue is also appropriate in any district where any act of the offense was begun,
continued, or completed. United States v. Rooney, 866 F.2d 28, 31-32 (2d Cir. 1989).
[c] For offenses begun in one district and completed in another, or committed in more
than one district, venue lies in each district in which such offense was begun, continued, or
completed. 18 U.S.C. § 3237(a).
[6] Statute of Limitations
To determine whether the statute of limitations is open for evasion of payment cases,
begin with the present date, and inquire whether affirmative acts in furtherance of the crime
were committed in the preceding 6 years. United States v. Shorter, 809 F.2d 54 (D.C. Cir.),
aff’g 608 F. Supp. 871, 873-74, and cert. denied, 484 U.S. 817 (1987); United States v. Hook,
781 F.2d 1166, 1171-73 (6th Cir. 1986). For example, in United States v. Voorhies, 658 F. 2d
710 (9th Cir. 1981), the defendant committed five affirmative acts of evading payment within
six years prior to the date he was indicted.

18

1-1.05 Collateral Estoppel
I.R.C. § 7201 is a broad provision and carries the most severe penalty of the criminal tax
offenses. Since criminal convictions are founded on the beyond a reasonable doubt standard, a
conviction for tax evasion will collaterally estop denial of the civil fraud penalty under I.R.C. §
6663 for the same taxpayer, tax year, and type of tax. See Wright v. Commissioner, 84 T.C. 636
(1985); Amos v. Commissioner, 43 T.C. 50 (1964).
1-1.06 Lesser Included Offenses
[1] Lesser included offenses are offenses whose statutory elements comprise part of the
elements needed to prove another offense, i.e., they are a subset of a "greater" or "major"
offense. For example, filing a false return or failing to file a return are each substantive tax
offenses which under certain circumstances could be a lesser included offense of tax evasion.
Filing a false return may constitute an affirmative act of tax evasion, and when coupled with a
tax deficiency, could form the basis for an evasion charge. Similarly, failing to file a return,
when coupled with the requisite affirmative act(s) of evasion and a tax deficiency, also may
support an evasion charge. Accordingly, such offenses are considered lesser included offenses
of the major offense of tax evasion.
[2] Congress, in fixing varying penalties for offenses of attempting to evade federal income tax
and for willfully making and subscribing a tax return not believed to be correct, did not intend
to pyramid penalties and authorize a separate penalty for a lesser included offense, which arose
out of the same transaction and which would be established by proof of guilt of the greater
offense of attempting to evade income tax. United States v. Lodwick, 410 F.2d 1202, 1206 (8th
Cir.), cert. denied, 396 U.S. 841 (1969). See also, United States v. Dale, 991 F.2d 819, 858-59
(D.C. Cir. 1993); United States v. Kaiser, 893 F.2d 1300, 1307 (11th Cir. 1990); United States
v. Citron, 783 F.2d 307, 312-14 (2d Cir. 1986). Thus, in cases where a § 7203 or § 7206(1)
violation is a predicate offense to a § 7201 violation, the § 7203 or § 7206(1) violation would
be considered a lesser included offense in the § 7201 offense.
[3] The Department of Justice, Tax Division, has adopted the so-called "elements" test for
lesser included offenses from Schmuck v. United States, 489 U.S. 705, 709-10 (1989). The
standard is whether the statutory elements of the lesser offense are a subset of the elements of
the greater offense. Schmuck, 489 U.S. at 709-10.
[4] One result of this policy is that an instruction of failure to file is not automatic in a Spies
evasion case involving failure to file, failure to pay, and an affirmative act of evasion. If there is
any doubt as to the strength of evidence on any section 7201 element, charging a section 7203
violation should also be considered.
[5] Similarly, charging both sections 7201 and 7206(1) should be considered in evasion cases
where filing a false return can be established, but the evidence supporting a tax deficiency may
not be strong enough for an evasion conviction.

19

1-1.07 Table of Cases
Afflerbach, United States v., 547 F.2d 522 (10th Cir. 1976) ....................................................................6
Albanese, United States v., 224 F.2d 879 (2d Cir.), cert. denied, 350 U.S. 845 (1955).....................13, 18
Alker, United States v., 260 F.2d 135 (3d Cir. 1958), cert. denied, 359 U.S. 906 (1959)....................8, 11
American Stevedores, Inc., United States v., 310 F.2d 47 (2d Cir. 1962), cert. denied, 371 U.S. 969
(1963) .............................................................................................................................................3, 5
Amos v. Commissioner, 43 T.C. 50 (1964) ...........................................................................................19
Anderson, United States v., 319 F.3d 1218 (10th Cir. 2003)..............................................................4, 14
Aracri, United States v., 968 F.2d 1512 (2d Cir. 1992) ........................................................................... 7
Ashfield, United States v., 735 F.2d 101 (3d Cir.), cert. denied, 469 U.S. 858 (1984)............................11
Beacon Brass Company, Inc., United States v., 344 U.S. 43 (1952)...................................................5, 14
Bender, United States v., 606 F.2d 897 (9th Cir. 1979) ...........................................................................8
Berger, United States v., 325 F. Supp. 1297 (S.D. N.Y. 1971), aff'd, 456 F.2d 1349 (2d Cir. 1972), cert.
denied, 409 U.S. 892 (1972)................................................................................................................3
Bishop, United States v., 291 F.3d 1100 (9th Cir. 2002)........................................................................11
Bishop, United States v., 412 U.S. 346 (1973)...................................................................................9, 17
Boone, United States v., 951 F.2d 1526 (9th Cir. 1991)...........................................................................5
Boulware, United States v., 384 F.3d 794 (2004), 470 F.3d 931 (9th Cir. 2006), reversed on other
grounds, 128 S. Ct. 1168 (2008)......................................................................................................4, 8
Brill, United States v., 270 F.2d 525 (3d Cir. 1959).................................................................................5
Brimberry, United States v., 961 F.2d 1286 (7th Cir. 1992).............................................................11, 16
Brooks, United States v., 174 F.3d 950 (8th Cir. 1999) ............................................................... 5, 11, 12
Burkhart, United States v., 501 F.2d 993 (6th Cir. 1974), cert. denied, 420 U.S. 946 (1975)....................8
Butler, United States v., 297 F.3d 505 (6th Cir. 2002), cert. denied, 123 S.Ct. 2074(2003)....................14

20

Campbell, United States v., 351 F.2d 336 (2d Cir. 1965), cert. denied, 383 U.S. 907 (1966) ...................9
Carlson, United States v., 235 F.3d 466 (9th Cir. 2000), cert. denied, 532 U.S. 983 (2001) ..............6, 14
Cheek v. United States, 498 U.S. 192 (1991)......................................................................... 9, 10, 13, 17
Chesson, United States v., 933 F.2d 298 (5th Cir. 1991)..................................................................11, 12
Citron, United States v., 783 F.2d 307 (2d Cir. 1986)............................................................................19
Clark v. United States, 211 F.2d 100 (8th Cir. 1954), cert. denied, 348 U.S. 911 (1955)..........................9
Coblentz, United States v., 453 F.2d 503 (2d Cir. 1972)........................................................................13
Cody, United States v., 722 F.2d 1052 (2d Cir. 1983) .............................................................................7
Cohen v. United States, 297 F.2d 760 (9th Cir.), cert. denied, 369 U.S. 865 (1962)...............................16
Condo, United States v., 741 F.2d 238 (9th Cir. 1984) ............................................................................3
Conforte, United States v., 624 F.2d 869 (9th Cir.), cert. denied, 449 U.S. 1012 (1980) ........................12
Connor, United States v., 898 F.2d 942 (3d Cir.), cert. denied, 497 U.S. 1029 (1990)..............................5
Copeland, United States v., 786 F.2d 768 (7th Cir. 1985)........................................................................5
Coppola, United States v., 425 F.2d 660 (2d Cir. 1969)...........................................................................4
Cor-Bon Custom Bullet Co., United States v., 287 F.3d 576 (6th Cir.), cert. denied, 537 U.S. 880 (2002)
...........................................................................................................................................................4
Critzer, United States v., 498 F.2d 1160 (4th Cir. 1974) ........................................................................10
Crooks, United States v., 804 F.2d 1441 (9th Cir. 1986)........................................................................10
Cruz, United States v., 698 F.2d 1148 (11th Cir. 1983) ...........................................................................9
Currier v. United States, 166 F.2d 346 (1st Cir. 1948).............................................................................3
Curtis, United States v., 782 F.2d 593 (6th Cir. 1986) .......................................................................7, 10
D’Agostino, United States v., 145 F.3d 69 (2d Cir. 1998) .......................................................................9
Dack, United States v., 747 F.2d 1172 (7th Cir. 1984).............................................................................8
Dale, United States v., 991 F.2d 819 (D.C. Cir. 1993) ...........................................................................19

21

Daniel, United States v., 956 F.2d 540 (6th Cir. 1992) .............................................2, 4, 8, 12, 15, 16, 17
Daniels, United States v., 387 F.3d 636 (7th Cir.), cert. denied, 544 U.S. 911 (2004) ....................4, 8, 14
Daniels, United States v., 617 F.2d 146 (5th Cir. 1980).........................................................................12
Davis v. United States, 226 F.2d 331 (6th Cir. 1955), cert. denied, 350 U.S. 965 (1956). ........................9
Dean, United States v., 487 F.3d 840 (11th Cir. 2007)...........................................................................11
DiPetto, United States v., 936 F.2d 96 (2d Cir.), cert. denied, 502 U.S. 866 (1991) ...............................14
Dixon, United States v., 698 F.2d 445 (11th Cir. 1983) ...........................................................................7
Donovan, United States v., 250 F. Supp. 463 (W.D. Tex. 1966) ..............................................................3
Dowell, United States v., 446 F.2d 145 (10th Cir.), cert. denied, 404 U. S. 984 (1971)..........................12
Drape, United States v., 668 F.2d 22 (1st Cir. 1982)..............................................................................12
Dunkel, United States v., 900 F.2d 105 (7th Cir. 1990) .........................................................................18
Eaken, United States v., 17 F.3d 203 (7th Cir. 1994)...............................................................................7
Elwert v. United States, 231 F.2d 928 (9th Cir. 1956) ...........................................................................12
Farnsworth, United States v., 456 F. 3d 394 (3d Cir. 2006) ...............................................................4, 17
Ferris, United States v., 807 F.2d 269 (1st Cir. 1986) ............................................................................14
Fogg, United States v., 652 F.2d 551 (5th Cir. 1981), cert. denied, 456 U.S. 905 (1982) .........................7
Fowler v. United States, 352 F.2d 100 (8th Cir. 1965), cert. denied, 383 U.S. 907 (1966) .......................9
Frazier, United States v., 365 F.2d 316 (6th Cir. 1966), cert. denied, 386 U.S. 971 (1967) ..................3, 7
Frederickson, United States v., 846 F.2d 517 (8th Cir. 1988) ................................................................12
Garavaglia, United States v., 566 F.2d 1056 (6th Cir. 1977)..................................................................12
Garber, United States v., 607 F.2d 92 (5th Cir. 1979)............................................................................10
Gardner, United States v., 611 F.2d 770 (9th Cir. 1980) ........................................................................11
Gariepy v. United States, 189 F.2d 459 (6th Cir. 1951) .........................................................................12
Garner v. United States, 501 F.2d 228 (9th Cir. 1974), aff'd on other grounds, 424 U.S. 648 (1976)........7

22

George, United States v., 420 F. 3d 991 (9th Cir. 2005) ....................................................................9, 10
Gricco, United States v., 277 F.3d 339 (3d Cir. 2002) .............................................................................4
Griley, United States v., 814 F.2d 967 (4th Cir. 1987)...........................................................................14
Gross, United States v., 276 F.2d 816 (2d Cir.), cert. denied, 363 U.S. 831 (1960) ..........................13, 18
Grunewald, United States v., 987 F.2d 531 (8th Cir. 1993).............................................................10, 17
Habig, United States v., 390 U.S. 222 (1968) ....................................................................................4, 14
Hancock, United States v., 231 F. 3d 557 (9th Cir. 2000) ......................................................................13
Harris, United States v., 942 F.2d 1125 (7th Cir. 1991) .........................................................................10
Hecht, United States v., 705 F. 2d 976 (8th Cir. 1983) ............................................................................9
Heller, United States v., 830 F. 2d 150 (11th Cir. 1987) ........................................................................10
Helmsly, United States v., 941 F.2d 71 (2d Cir. 1991).............................................................................9
Hestnes, United States v., 492 F Supp. 999 (W.D. Wis. 1980).................................................................9
Hogan, United States v., 861 F.2d 312 (1st Cir. 1988).....................................................................13, 17
Holladay, United States v., 566 F.2d 1018 (5th Cir.), cert. denied, 439 U.S. 831 (1978) ........................12
Holovachka, United States v., 314 F.2d 345 (7th Cir.), cert. denied, 374 U.S. 809 (1963) .....................12
Hook, United States v., 781 F.2d 1166 (6th Cir.), cert. denied, 479 U.S. 882 (1986) ............... ..16, 17, 18
Huebner, United States v., 48 F.3d 376 (9th Cir. 1994) .........................................................................16
Ingredient Technology, United States v., 698 F. 2d 88 (2d Cir.), cert. denied, 462 U.S. 1131 (1983) ....11
Jaben v. United States, 381 U.S. 214 (1964)..........................................................................................15
James v. United States, 366 U.S. 213 (1961) ...........................................................................................7
Jenning, United States v., 31 A.F.T.R.2d 73-782 (9th Cir. 1973).............................................................3
Johnson, United States v., 319 U.S. 503 (1943).......................................................................................8
Johnson, United States v., 386 F.2d 630 (3d Cir. 1967) .........................................................................11
Kaiser, United States v., 893 F.2d 1300 (11th Cir. 1990).......................................................................19

23

Katz v. United States, 321 F.2d 7 (1st Cir.), cert. denied, 375 U.S. 903 (1963)........................................5
Kayser, United States v., 488 F.3d 1070 (9th Cir. 2007)......................................................................4, 9
Keenan, United States v., 267 F.2d 118 (7th Cir.), cert. denied, 361 U.S. 863 (1959) ..............................6
Keller, United States v., 523 F.2d 1009 (9th Cir. 1975) ...........................................................................8
Kim, United States v., 884 F.2d 189 (5th Cir. 1989)........................................................................11, 12
King, United States v., 126 F.3d 987 (7th Cir. 1997)...............................................................................5
King, United States v., 563 F.2d 559 (2d Cir. 1977), cert. denied, 435 U.S. 918 (1978)...................13, 18
Kleifgen, United States v., 557 F.2d 1293 (9th Cir. 1977) .......................................................................7
Knox Coal Co., United States v., 347 F.2d 33 (3d Cir.), cert. denied, 382 U.S. 904 (1965)......................3
Krall, United States v., 835 F.2d 711 (8th Cir. 1987).............................................................................10
Krzyske, United States v., 836 F.2d 1013 (6th Cir. 1988)......................................................................11
Lamp, United States v., 779 F.2d 1088 (5th Cir. 1986)..........................................................................16
Larson, United States v., 612 F.2d 1301 (8th Cir.), cert. denied, 446 U.S. 936 (1980) ...........................11
Lavoie, United States v., 433 F.3d 95 (1st Cir. 2005) .......................................................................4, 11
Locke v. United States, 166 F.2d 449 (5th Cir. 1948) ..............................................................................3
Lodwick, United States v., 410 F.2d 1202 (8th Cir.), cert. denied, 396 U.S. 841 (1969) ........................19
Lumetta v. United States, 362 F.2d 644 (8th Cir. 1966)...........................................................................3
Lustig, United States v., 163 F.2d 85 (2d Cir. 1947), cert. denied, 332 U.S. 775 (1947)...........................3
MacKenzie, United States v., 777 F.2d 811 (2d Cir. 1985)....................................................................10
Magnus, United States v., 365 F.2d 1007 (2d Cir. 1966) .......................................................................11
Mal, United States v., 942 F. 2d 682 (9th Cir. 1991) .....................................................................2, 7, 18
Maldonado-Rivera, United States v., 922 F.2d 934 (2d Cir. 1990), cert. denied, 501 U.S. 1210 (1991) .14
Mallas, United States v., 762 F .2d 361 (4th Cir. 1985) .........................................................................11
Marashi, United States v., 913 F.2d 724 (9th Cir. 1990) ......................................................................4, 8

24

Marchant, United States v., 774 F.2d 888 (8th Cir. 1985), cert. denied, 475 U.S. 1012 (1986)... 13, 15, 18
Marcus, United States v., 401 F.2d 563 (2d Cir. 1968), cert. denied, 393 U.S. 1023 (1969).....................8
Masat, United States v., 896 F.2d 88 (5th Cir. 1990) .........................................................................4, 18
Masat, United States v., 948 F.2d 923 (5th Cir. 1991) ...........................................................................15
McClanahan v. United States, 292 F.2d 630 (5th Cir.), cert. denied, 368 U.S. 913 (1961) .......................7
McGill, United States v., 964 F.2d 222 (3d Cir. 1992).....................................................................16, 17
Meek, United States v., 998 F.2d 776 (10th Cir. 1993) ............................................................................5
Mendell, United States v., 447 F.2d 639 (7th Cir.), cert. denied, 404 U.S. 991 (1971) ...........................14
Mesheski, United States v., 169 F. Supp. 372 (E.D. Wis. 1959), rev'd, 286 F.2d 345 (7th Cir. 1961).......3
Meyer, United States v., 808 F.2d 1304 (8th Cir. 1987).........................................................................11
Michaud, United States v., 860 F.2d 495 (1st Cir. 1988) .......................................................................11
Miller, United States v., 545 F.2d 1204 (9th Cir. 1976), cert. denied, 430 U.S. 930 (1977)..................3, 9
Mollet, United States v., 290 F. 2d 273 (2d Circ. 1961).........................................................................17
Moore v. United States, 412 F.2d 974 (5th Cir. 1969) .............................................................................7
Mortiner, United States v., 343 F.2d 500 (7th Cir.), cert. denied, 382 U.S. 842 (1965) ..........................12
Mounkes, United States v., 204 F.3d 1024 (10th Cir.), cert. denied, 530 U.S. 1230 (2000)..............4, 6, 8
Murray v. United States, 117 F.2d 40 (8th Cir. 1941) ..............................................................................6
Myerson, United States v., 368 F.2d 393 (2d Cir. 1966), cert. denied, 386 U.S. 991 (1967).............14, 15
Netz, United States v., 758 F.2d 1308 (8th Cir. 1985) ...........................................................................14
Nolen, United States v., 472 F.3d 362 (5th Cir. 2006) .............................................................................4
Norwitt v. United States, 195 F.2d 127 (9th Cir. 1952), cert. denied, 344 U.S. 817 (1952) ......................4
O'Connor, United States v., 433 F.2d 752 (1st Cir. 1970), cert. denied, 401 U.S. 911 (1971).................13
O'Keefe, United States v., 825 F.2d 314 (11th Cir. 1987) ......................................................................12
Olbres, United States v., 61 F.3d 967 (1st Cir.), cert. denied, 516 U.S. 991 (1995) ................................11

25

Ostendorff, United States v., 371 F.2d 729 (4th Cir.), cert. denied, 386 U.S. 982 (1967) .......................13
Paschen v. United States, 70 F.2d 491 (7th Cir. 1934).......................................................................6, 11
Pang, United States v., 362 F.3d 1187 (9th Cir.), cert. denied, 543 U.S. 943 (2004) ..............................18
Pankratz Lumber Co. v. United States, 50 F.2d 174 (9th Cir. 1931)………………………………...……3
Pensyl, United States v., 387 F.3d 456 (6th Cir. 2004) ................................................................ 9, 10, 13
Peterson, United States v., 338 F.2d 595 (7th Cir. 1964), cert. denied, 380 U.S. 911 (1965) ..............6, 12
Pomponio, United States v., 429 U.S. 10 (1976)................................................................................9, 17
Powell, United States v., 498 F.2d 890 (9th Cir. 1974) ..........................................................................14
Ragen, United States v., 314 U.S. 513 (1942)..........................................................................................6
Ratner, United States v., 464 F.2d 101 (9th Cir. 1972) ..........................................................................12
Rice, United States v., 659 F.2d 524 (5th Cir. 1981)................................................................................3
Rochelle, United States v., 384 F.2d 748 (5th Cir. 1967), cert. denied, 390 U.S. 946 (1968)....................7
Romano, United States v., 938 F.2d 1569 (2d Cir. 1991).........................................................................5
Rooney, United States v., 866 F.2d 28 (2d Cir. 1989)......................................................................13, 18
Rosenthal, United States v., 470 F.2d 837 (2d Cir. 1972), cert. denied, 412 U.S. 909 (1973) ...................7
Rutkin v. United States, 343 U.S. 130 (1952)..........................................................................................7
Sallee, United States v., 984 F.2d 643 (5th Cir. 1993) .............................................................................7
Samara, United States v., 643 F.2d 701 (10th Cir.), cert. denied, 454 U.S. 829 (1981).......................4, 11
Sansone v. United States, 380 U.S. 343 (1965)..............................................................................2, 4, 15
Schmuck v. United States, 489 U.S. 705 (1989) ....................................................................................19
Schuermann v. United States, 174 F.2d 397 (8th Cir.), cert. denied, 338 U.S. 831 (1949)......................12
Scott, United States v., 660 F.2d 1145 (7th Cir. 1981), cert. denied, 455 U.S. 907 (1982)........................7
Segal, United States v., 867 F.2d 1173 (8th Cir. 1989) ..........................................................................12
Shoppert, United States v., 362 F.3d 451 (8th Cir.), cert. denied, 543 U.S. 911 (2004) .............. 2, 4, 6, 16

26

Shorter, United States v., 809 F.2d 54 (D.C. Cir.), cert. denied, 484 U.S. 817 (1987) ................ 16, 17, 18
Silkman, United States v., 156 F.3d 833 (8th Cir. 1998)........................................................................17
Skalicky, United States v., 615 F.2d 1117 (5th Cir.), cert. denied, 449 U.S. 832 (1980)...................11, 12
Sloan, United States v., 939 F.2d 499 (7th Cir. 1991)..............................................................................3
Smith, United States v., 890 F.2d 711 (5th Cir. 1989) ...........................................................................12
Spies v. United States, 317 U.S. 492 (1943) .................................................................4, 5, 11, 12, 15, 18
Spinelli, United States v., 443 F.2d 2 (9th Cir. 1971) ............................................................................11
Stein, United States v., 437 F.2d 775 (7th Cir.), cert. denied, 403 U.S. 905 (1971) ................................13
Swallow v. United States, 307 F.2d 81 (10th Cir. 1962), cert. denied, 371 U.S. 950 (1963).....................8
Swallow, United States v., 511 F.2d 514 (10th Cir.), cert. denied, 423 U.S. 845 (1975).....................7, 16
Tarwater, United States v., 308 F.3d 494 (6th Cir. 2002).......................................................................13
Thetford, United States v., 676 F.2d 170 (5th Cir. 1982) .........................................................................9
Tinkoff v. United States, 86 F.2d 868 (7th Cir. 1937)..........................................................................3, 7
Tranakos, United States v., 911 F.2d 1422 (10th Cir. 1990) ..................................................................10
Trevino, United States v., 394 F.3d 771 (9th Cir. 2005), cert. denied, 547 U.S. 1022 (2006) ...................6
Trov, United States v., 293 U.S. 58 (1934)..........................................................................................3, 7
Trownsell, United States v., 367 F.2d 815 (7th Cir. 1966) .....................................................................16
Uscinski, United States v., 369 F.3d 1243 (11th Cir. 2004) ...................................................................14
Vardine, United States v., 305 F.2d 60, 64 (2d Cir. 1962) .......................................................................9
Voight, United States v., 89 F.3d 1050 (3d Cir.), cert. denied, 519 U.S. 1047 (1996) ..............................6
Voorhies, United States v., 658 F. 2d 710 (9th Cir. 1981)......................................................................18
Walker, United States v., 896 F.2d 295 (8th Cir. 1990) .........................................................................12
Walsh, United States v., 627 F.2d 88 (7th Cir. 1980).............................................................................12
Williams, United States v., 875 F.2d 846 (11th Cir. 1989)...................................................................4, 9

27

Williams, United States v., 928 F.2d 145 (5th Cir.), cert. denied, 502 U.S. 811 (1991)......................5, 14
Willingham v. United States, 289 F.2d 283 (5th Cir. 1961), cert. denied, 368 U.S. 826 (1961)................8
Willis, United States v., 277 F.3d 1026 (8th Cir. 2002) .....................................................................5, 11
Wilson, United States v., 118 F.3d 228 (4th Cir. 1997) ............................................................. 3, 5, 6, 11
Winfield, United States v., 960 F.2d 970 (11th Cir. 1992) .................................................................5, 14
Woodner, United States v., 317 F.2d 649 (2d Cir.), cert. denied, 375 U. S. 903 (1963)..........................12
Wright v. Commissioner, 84 T.C. 636 (1985)........................................................................................19
Wyss, United States v., 239 F.2d 658 (7th Cir. 1957) ..............................................................................7
Zacher v. United States, 227 F.2d 219 (8th Cir. 1955), cert. denied, 350 U.S. 993 (1956)........................6
Zimmerman, United States v., 108 F.2d 370 (7th Cir.1939).....................................................................6

28

CHAPTER 1

SECTION 2

TITLE 26 TAX VIOLATIONS

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

29

1-2.01 Statutory Language
I.R.C. § 7202 - WILLFUL FAILURE TO COLLECT OR PAY OVER TAX
Any person required under this title to collect, account for, and pay over any tax
imposed by this title who willfully fails to collect or truthfully account for and pay
over such tax shall, in addition to other penalties provided by law, be guilty of a
felony and, upon conviction thereof, be fined* not more than $10,000, or imprisoned
not more than fie years, or both, together with the costs of prosecution.
* For offenses committed after December 31, 1984, the Criminal Fine Enforcement Act of
1984 (P.L. 98-596) enacted 18 U.S.C. § 3623, which increased the maximum permissible
fines for misdemeanors and felonies. Where 18 U.S.C. § 36231 is applicable, the
maximum fine under section 7202 for offenses committed after December 31, 1984, would
be at least $250,000 for individuals and $500,000 for corporations. Alternatively, if any
person derives pecuniary gain from the offense, or if the offense results in a pecuniary loss
to a person other than the defendant, the defendant may be fined not more than the greater
of twice the gross gain or twice the gross loss.
1-2.02 Generally
[1] This statute describes two offenses: (1) a willful failure to collect; and (2) a willful failure to
truthfully account for and pay over tax. It was designed primarily to assure compliance by third
parties obligated to collect excise taxes and to deduct from wages paid to employees the
employees’ share of Federal Insurance Contribution Act (FICA) taxes and the withholding tax
on wages applicable to individual income taxes. The withheld sums are commonly referred to
as “trust fund taxes.” See Slodov v. United States, 436 U.S. 238, 242-249 (1978); United States
v. Simkanin, 420 F.3d 397, 404-08 (5th Cir. 2005), cert. denied, 547 U.S. 1111 (2006); United
States v. H.J.K. Theatre Corporation, 236 F.2d 502, 504-06 (2d Cir. 1956), cert. denied, 352
U.S. 969 (1957). The legislative history of the statute prior to 1975 is discussed in United States
v. Poll, 521 F.2d 329, 333-34 n.2 (9th Cir. 1975). See also, United States v. Poll, 538 F.2d 845,
847-48 (9th Cir.), cert. denied, 429 U.S. 977 (1976).
1-2.03 § 7202 - Elements of the Offense
To establish a violation of I.R.C. § 7202, the following elements must be proved beyond a
reasonable doubt:
[1] Duty to collect, and/or to truthfully account for and pay over;
[2] Failure to collect, or truthfully account for and pay over; and
[3] Willfulness.
1

Changed to 18 U.S.C. 3571, commencing November 1, 1986.

30

[1] Duty to collect, and/or to truthfully account for and pay over taxes. The duty of employers
to truthfully account for and pay over is created by I.R.C. §§ 3102(s), 3111(a), and 3402 (1986).
See United States v. Porth, 426 F.2d 519, 522 (10th Cir.), cert. denied, 400 U.S. 824 (1970).
Specifically, it is the individual with the duty to truthfully account for and pay over who is
culpable when there is a failure to perform this duty. For an example of the criteria used to
determine the individual with the duty to truthfully account for and pay over, see Datlof v.
United States, 252 F. Supp. 11, 32 (E.D. Pa.), aff’d., 370 F.2d 655, 656 (3d Cir. 1966), cert.
denied, 387 U.S. 906 (1967), involving a civil penalty under 26 U.S.C. § 6672 for unpaid federal
withholding and employment taxes.
[2] Failure to collect, or truthfully account for and pay over. The Department of Justice Tax
Division’s position historically has been that a willful failure to truthfully to account for and pay
over is a “breach of an inseparable dual obligation.” 2008 Criminal Tax Manual, United States
Department of Justice, Tax Division, Criminal Section, p. 9-4. Under this theory, a willful failure
to pay after a truthful accounting is made, by filing a return, would still leave “the duty as a
whole unfulfilled and the responsible person subject to prosecution.”
Some defendants have argued § 7202 is a conjunctive statute requiring the government to
prove both a failure to account for and a failure to pay withholding tax to establish a violation of
the statute. See also United States v. Thayer, 201 F.3d 214, 219-22 (3d Cir. 1999), cert. denied,
530 U.S. 1244 (2000); United States v. Evangelista, 122 F.3d 112, 120-22 (2d Cir. 1997); United
States v. Brennick, 908 F. Supp. 1004, 1011 (D. Mass. 1995). In Evangelista, the Second Circuit
held a violation of § 7202 can result from either a failure to account for withholding taxes and
FICA contributions or a failure to pay over such taxes, but the statute does not require both to
sustain a conviction. See United States v. Thayer, 201 F.3d 214, 219-22 (3d Cir. 1999), cert.
denied, 530 U.S. 1244 (2000)); United States v. Brennick, 908 F. Supp. 1004, 1007 (D. Mass.
1995). In Thayer, the defendant argued the statute was conjunctive; therefore, if both
requirements of § 7202 were not met, he could not be convicted. The Third Circuit disagreed and
relied on the decision in Brennick: “A conjunctive interpretation of § 7202 would result in a
greater penalty for one who simply failed to collect trust fund taxes than for one who collected
them. . . [t]hat Congress intended to make such a distinction is simply inconceivable.” United
States v. Brennick, 908 F. Supp. 1004, 1017 (D. Mass. 1995). The Third Circuit affirmed
Thayer’s conviction, stating the defendant’s argument did not convincingly answer the Brennick
court’s Congressional intent analysis. In United States v. Gilbert, 266 F.3d 1180, 1183-85 (9th
Cir. 2001), the Ninth Circuit relied on the decisions in Evangelista and Thayer in arriving at the
same holding.
[3] Willfulness. The requisite element of willfulness under section 7202 is the same as in other
offenses under Title 26. It must be shown that a defendant voluntarily and intentionally acted in
violation of a known legal duty. Cheek v. United States, 498 U.S. 192, 201 (1991); United
States v. Pomponio, 429 U.S. 10, 12 (1976); United States v. Bishop, 412 U.S. 346, 360 (1973);
United States v. Simkanin, 420 F.3d 397, 404 (5th Cir. 2005), cert. denied, 547 U.S. 1111
(2006).

31

The question of proving available funds to pay the taxes is found in United States v. Poll,
521 F.2d 329, 332-33 (9th Cir. 1975). In Poll, the parties stipulated that the amount of taxes
which should have been withheld was correctly shown on the corporate books but that the
defendant knowingly signed and filed false returns (Forms 941), which did not correctly reflect
the amount withheld from wages. In reversing the conviction, the Ninth Circuit held that to
establish a willful failure to truthfully account for and pay over taxes, both the failure to
truthfully account for and the failure to pay over must be willful. As the Ninth Circuit viewed it,
in addition to establishing a willful failure to truthfully account for taxes required to be withheld:
[t]he Government must establish beyond a reasonable doubt that at the time payment was
due the taxpayer possessed sufficient funds to enable him to meet his obligation or that the
lack of sufficient funds on such date was created by (or was the result of) a voluntary and
intentional act without justification in view of all the financial circumstances of the
taxpayer.
Poll, 521 F.2d at 333.
The Poll court also concluded that it was error not to allow the defendant to introduce
evidence that the corporation lacked the money to pay the full amount of the taxes and that the
defendant intended to make up the deficiencies later. This view ignores the fact that the duty
imposed is not simply the duty to pay taxes, but also includes the duty to truthfully account for
taxes, and that defendant Poll admittedly filed false returns. Contrary to the Poll decision, an
inability to pay does not excuse the duty to truthfully account for the taxes that are due.2
Where there is a willful failure to truthfully account for withheld taxes and some
additional burden is imposed by the court, as suggested by Poll, the government can meet that
burden with testimony by employees or suppliers that other creditors were paid during the
period in question and that any lack of funds to pay was voluntary and intentional. 3
In United States v. Gilbert, 266 F.3d 1180, 1185 (9th Cir. 2001), without overruling
Poll, the Ninth Circuit held that paying employees while not remitting employment taxes to the
government was a willful act despite a claim of lack of funds. For a successful conviction under
section 7202, see United States v. Scharf, 558 F.2d 498, 501 (8th Cir. 1977), where the court
held that evidence the defendant had altered records was admissible for the purpose of showing,

2

§

For cases holding that in a prosecution under 26 U.S.C. 7203, the government need not prove that at the time the
defendant filed his returns, he possessed readily available funds. with which to pay his taxes, see United States v. Ausmus,
774 F.2d 722, 725 (6th Cir. 1985), and United States v. Tucker, 686 F.2d 230, 233 (5th Cir. 1982). Ausmus and Tucker
rejected United States v. Andros, 484 F.2d 531, 533-34 (9th Cir. 1973), a case in which the Ninth Circuit stated, in dicta, that
to establish a willful failure to pay under section 7203, the government must prove that the taxpayer possessed sufficient
funds to meet his tax obligations and that the taxpayer voluntarily and intentionally did not pay the tax due.
3

It should be noted that Poll did not go free. Following the reversal of Poll’s conviction, the government promptly secured a
new indictment that did not charge him with a section 7202 violations, but with filing a false return in violation of section
7206(1). His conviction was affirmed on appeal. United States v. Poll, 538 F. 2d 845, 848 (9th Cir.), cert. denied, 429 U.S.
977 (1976).

32

“motive, intent, and willfulness.” Scharf, 558 F.2d at 501. For a case in which the court had no
difficulty in concluding that defendant’s conduct was willful in a section 7202 prosecution, see
United States v. Bailey, 789 F. Supp. 788, 814 (N.D. Tex. 1992) (failure to pay over taxes
withheld from employees’ paychecks for almost a decade found to be willful).
1-2.04 § 7202 - Motor Fuel Excise Tax Prosecutions
Care must be exercised to ensure that section 7202 is applied to those who have the duty
to pay the tax at issue. Section 7202 applies to a person who is not the taxpayer but is under a
duty to collect the tax from the taxpayer and then to truthfully account for the collected tax to
the government and pay it over. Often, the one responsible for the tax will pass it on to another,
as, for example, by including it as part of the price of goods. But the fact that the taxpayer
“collects” the tax from another in this sense does not mean that he is responsible under the law
for collecting the tax and, thus, potentially subject to prosecution under section 7202.
1-2.05 Venue
If a statute does not indicate where Congress considers the place of committing a crime to
be, “the locus delicti must be determined from the nature of the crime alleged and the location of
the act or acts constituting it.” United States v. Anderson, 328 U.S. 699, 703 (1946). Although no
venue cases have been found, venue would appear to be proper in a section 7202 prosecution in
the judicial district in which the defendant was required to collect or pay over the tax.
1-2.06 Statute of Limitations
In § 7202 prosecutions, the statute of limitations is six years. See United States v. Adam,
296 F.3d 327, 330-31 (5th Cir. 2002); United States v. Gilbert, 266 F.3d 1180, 1185-86 (9th Cir.
2001); United States v. Musacchia, 900 F.2d 493, 499-500 (2d Cir. 1990), vacated in part on
other grounds, 955 F.2d 3, 4 (2d Cir.), cert. denied, 501 U.S. 1250 (1991); United States v. Porth,
426 F.2d 519, 522 (10th Cir.), cert. denied, 400 U.S. 824 (1970); United States v. Anglin, 999 F.
Supp. 1378, 1379-80 (D. Haw. 1998). Be aware, however, that two district courts have
concluded that the statute of limitations for section 7202 prosecutions is three years. United
States v. Brennick, 908 F. Supp. 1004, 1018-19 (D. Mass. 1995); United States v. Block, 497 F.
Supp. 629, 630-32 (N.D. Ga.), aff’d, 660 F.2d 1086 (5th Cir. 1980).
In the Block court’s view, the omission of the language “collect, account for, and pay
over” from the subsections of 26 U.S.C. § 6531, which establish the longer six-year period of
limitations, demonstrates that Congress did not intend to make the failure to “pay over” third
party taxes subject to the six-year statute of limitations. Block, 497 F. Supp. at 631-32. The
Block court also noted that section 6531(4) was not directed at a class of offenses but rather to
“the offense of willfully failing to pay any tax.” The court reasoned that it was “quite clear” that
failure to pay over third-party taxes was substantively different from a failure to pay taxes,
Block, at 632; thus, the exception contained in section 6531(4) was found not to apply to the
failure to pay over third-party taxes. See United States v. Brennick, 908 F. Supp. 1004, 1018-19
(D. Mass. 1995)(§ 6531(4) providing a six-year statute of limitations for the offense of willfully
33

failing to pay and tax or make any return . . .refers only to the offense described under § 7203
and not to that under § 7202). But see Wilson v. United States, 250 F.2d 312, 320 (9th Cir.
1958).
The Second Circuit, in Musacchia, considered the Block decision but concluded that the
Block “court’s analysis is not convincing.” Musacchia, 900 F.2d at 499-500. The Musacchia
court found that although 26 U.S.C. § 6531(4) does not track the language of section 7202
exactly, the terms “pay” and “pay over” were used interchangeably by the Supreme Court in
deciding Slodov v. United States, 436 U.S. 238, 249 (1978) and thus the fact that section 6531(4)
uses the term “pay” rather than “pay over” is not dispositive.
Instead, the Musacchia court found persuasive the government’s argument that “it would
be inconsistent for Congress to have prescribed a six-year limitations period for the misdemeanor
offense defined in 26 U.S.C. § 7203. . . while providing only a three-year limitation period for
the felony offense defined in Section 7202.” Musacchia, 900 F.2d at 500. The court also noted
the language of section 6531(4) supports the conclusion that the six-year limitations period
applies in a section 7202 prosecution. Musacchia, 900 F.2d at 500.
The court in United States v. Gollapudi, 130 F. 3d 66, 68-71 (3d Cir. 1997) concluded the
court’s rationale in Musacchia was more persuasive than the court in Block, and held that
violations of 26 U.S.C. § 7202 are subject to a six-year statute of limitations. Since no court in
the Third Circuit had yet addressed the issue, the Gollapudi court reviewed the Second and Tenth
Circuits which had applied § 6531(4) to § 7202 offenses, as well as the opposite holdings of two
district courts, and agreed with the Musacchia court. See also United States v. Anglin, 999 F.
Supp. 1378, 1379-80 (D. Haw. 1998) (despite the disagreement among courts as to whether the
three-year or six-year statute of limitations applies to § 7202 offenses, the failure to pay thirdparty taxes as covered by § 7202 constitutes failure to pay ‘any tax,’ and thus is subject to the
six-year statute of limitations under § 6531(4)).
The other question is does the statute of limitations begin to run (1) on the due date of
the return and payment (30 days after the end of the quarter for Forms 941) or (2) on April 15 of
the year following the year for which the employment taxes are due? The more conservative
view of the due date of the Form 941 (for filing and paying) was adopted by the Northern
District of Illinois since the payment due date was the date on which the crime of not paying over
the withheld taxes was committed. United States v. Creamer, 370 F. Supp. 2d 715, 727-28 (N.D.
Ill. 2005), reversed in an uncontested motion for reconsideration, 2006 WL 2037326 (N.D. Ill.).

34

1-2.07 Table of Cases
Adam, United States v., 296 F.3d 327 (5th Cir. 2002) ...........................................................................33
Anderson, United States v., 328 U.S. 699 (1946) ..................................................................................33
Andros, United States v., 484 F.2d 531 (9th Cir. 1973) .........................................................................32
Anglin, United States v., 999 F. Supp. 1378 (D. Haw. 1998)...........................................................33, 34
Ausmus, United States v., 774 F.2d (6th Cir. 1985)...............................................................................32
Bailey, United States v., 789 F. Supp. 788 (N.D. Tex. 1992) .................................................................33
Bishop, United States v., 412 U.S. 346 (1973).......................................................................................31
Block, United States v., 497 F. Supp. 629 (N.D. Ga.), aff’d, 660 F.2d 1086 (5th Cir. 1980) ............33, 34
Brennick, United States v., 908 F. Supp. 1004 (D. Mass. 1995).......................................................31, 33
Cheek v. United States, 498 U.S. 192 (1991).........................................................................................31
Creamer, United States v., 370 F. Supp. 2d 715 (N.D. Ill. 2005)............................................................34
Datlof v. United States, 252 F. Supp. 11 (E.D. Pa.), aff’d., 370 F.2d 655 (3d Cir. 1966), cert. denied, 387
U.S. 906 (1967).................................................................................................................................31
Evangelista, United States v., 122 F.3d 112 (2d Cir. 1997)....................................................................31
Gilbert, United States v., 266 F.3d 1180 (9th Cir. 2001)........................................................... 31, 32, 33
Gollapudi, United States v., 130 F. 3d 66 (3d Cir. 1997) .......................................................................34
H.J.K. Theatre Corporation, United States v., 236 F.2d 502 (2d Cir. 1956), cert. denied, 352 U.S. 969
(1957) ...............................................................................................................................................30
Musacchia, United States v., 900 F.2d 493 (2d Cir. 1990) ...............................................................33, 34
Poll, United States v., 521 F.2d 329 (9th Cir. 1975) .........................................................................30,32
Poll, United States v., 538 F.2d 845 (9th Cir.), cert. denied, 429 U.S. 977 (1976)............................30, 32
Pomponio, United States v., 429 U.S. 10 (1976)....................................................................................31
Porth, United States v., 426 F.2d 519 (10th Cir.), cert. denied, 400 U.S. 824 (1970)........................31, 33
35

Scharf, United States v., 558 F.2d 498 (8th Cir. 1977)...........................................................................32
Simkanin, United States v., 420 F.3d 397 (5th Cir. 2005), cert. denied, 547 U.S. 1111 (2006).........30, 31
Slodov v. United States, 436 U.S. 238 (1978) .................................................................................30, 34
Thayer, United States v., 201 F.3d 214 (3d Cir. 1999), cert. denied, 530 U. S. 1244 (2000).................. 31
Tucker, United States v., 686 F.2d 230 (5th Cir. 1982), cert. denied, 530 U. S. 1244 (2000)................ 32
Wilson v. United States, 250 F.2d 312 (9th Cir. 1958) ..........................................................................34

36

CHAPTER 1

SECTION 3

TITLE 26 TAX VIOLATIONS

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

37

1-3.01 Statutory Language
I.R.C. § 7203 - FAILURE TO FILE RETURN, SUPPLY INFORMATION, OR PAY TAX
Any person required under this title to pay any estimated tax or tax, or required by
this title or by regulations made under authority thereof to make a return, keep any
records, or supply any information, who willfully fails to pay such estimated tax or
tax, make such return, keep such records, or supply such information, at the time or
times required by law or regulations, shall, in addition to other penalties provided by
law, be guilty of a misdemeanor and, upon conviction, thereof, shall be fined not
more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more
than 1 year, or both, together with the costs of prosecution. In the case of any person
with respect to whom there is a failure to pay any estimated tax, this section shall not
apply to such person with respect to such failure if there is no addition to tax under
section 6654 or 6655 with respect to such failure. In the case of a willful violation of
any provision of section 6050I, the first sentence of this section shall be applied by
substituting "5 years" for "1 year."
(Emphasis added.)
* Added by section 7601(a)(2)(B), 1988 Anti-Drug Abuse Act (P.L. 100-690) 11-18-88.
* For offenses committed after December 31, 1984, the Criminal Fine Enforcement Act of
1984 (P.L. 98-596) enacted 18 U.S.C. § 3623 (changed to 18 U.S.C. § 3571, commencing
Nov. 1, 1986) increased the maximum permissible fines for both misdemeanors and
felonies.
Note: For the misdemeanor offenses set forth in § 7203, the maximum permissible fine for
offenses committed after December 31, 1984 is at least $100,000 in the case of
individuals. As to corporations, the maximum permissible fine is at least $200,000. 18
U.S.C. § 3571(b).
For felony offenses of § 7203 involving willful violations of § 6050I, the maximum
permissible fine is at least $250,000 for individuals and $500,000 for corporations. 18
U.S.C. § 3571(c). Alternatively, if any person derives pecuniary gain from the offense, or
if the offense results in pecuniary loss to a person other than the defendant, the defendant
may be fined not more than the greater of twice the gross gain or twice the gross loss. 18
U.S.C. § 3571(e).

38

1-3.02 Generally
[1] There are four separate offenses described in I.R.C. § 7203:
[a] Failure to pay an estimated tax or tax;
[b] Failure to make (file) a return;
[c] Failure to keep records; and,
[d] Failure to supply information.
1-3.03 Failure to Pay a Tax - Offense #1
[1] Elements of the offense:
[a] Person required by law to pay a tax;
[b] A failure to pay a tax at the time required by law; and,
[c] Willfulness.
United States v. Tucker, 686 F.2d 230, 232 (5th Cir.), cert. denied, 459 U.S. 1071 (1982).
[2] Required by law to pay
[a] This element is predicated on the requirement imposed on taxpayers under I.R.C.
§ 6151(a) that:
Except as otherwise provided in this subchapter, when a return of tax is required under this
title or regulations, the person required to make such return shall, without assessment or
notice and demand from the Secretary, pay such tax to the internal revenue officer with
whom the return is filed, and shall pay such tax at the time and place fixed for filing the
return ....
See, United States v. Drefke, 707 F.2d 978, 981 (8th Cir.), cert. denied, 464 U.S. 359 (1983).
[b] While most failure to pay cases involve a factual situation in which the taxpayer filed a
return but did not pay the self-assessed tax declared thereon, one circuit has apparently upheld a
conviction for both failure to file a tax return and failure to pay for the same year. United States
v. Lewis, 651 F.2d 1163, 1165 (6th Cir. 1981).
[c] The difference between an attempted evasion of payment in violation of I.R.C. § 7201 and a
failure to pay a tax in violation of I.R.C. § 7203 is the existence of an affirmative act required to make
out the evasion of payment offense, e.g., the concealment of assets or use of nominees.
39

1. Obstinately refusing to pay taxes due, failure to file a tax return, or possession of
the funds needed to pay the taxes, without more, merely constitute a willful failure to file
returns or pay taxes and does not constitute tax evasion even though done willfully.
2. If the taxpayer failed to file a tax return, an evasion case can be maintained
only if the taxpayer also willfully engaged in affirmative acts to conceal or mislead.
United States v. McGill, 964 F.2d 222, 231 (3d Cir. 1992).
[3] Failure to pay a tax
Proof of a taxpayer's failure to pay is established with a certified transcript of account or a
certificate of assessments and payments. Such documents routinely withstand hearsay and
Confrontation Clause challenges because the documents are admissible under a hearsay
exception and because the documents are not the inherently unreliable out-of-court statements at
which the Confrontation Clause was directed. See, Federal Rules of Evidence, Rule 803(10);
United States v. Neff, 615 F.2d 1235, 1241-42 (9th Cir. 1980). It is important to note, however,
that where the Service has granted the taxpayer an extension of time, the tax due would not have
to be paid until the extended date. See, United States v. Voorhies, 658 F.2d 710, 713 (9th Cir.
1981).
[4] Willfulness (See generally, discussion in Section 1-1.03[4])
[a] Willfulness in misdemeanor failure to pay cases is the same as in the felony hierarchy
of tax offenses. Willfulness in this context simply means a voluntary, intentional violation of a
known legal duty. Cheek v. United States, 498 U.S. 192, 201 (1991); United States v. Powell,
955 F.2d 1206, 1210 (9th Cir. 1992).
[b] There is a strict necessity as a part of showing willfulness to establish an ability to pay,
thereby avoiding imprisonment for debt. Spies v. United States, 317 U.S. 492, 498 (1943). A
claim that the taxpayer lacks liquid assets to pay the tax where the taxpayer has been living high
and spending freely will not prevent a showing of willfulness. United States v. Tucker, 686 F.2d
230, 233-34 (5th Cir.), cert. denied, 459 U.S. 1071 (1982).
[c] The mere fact that the defendant lives in luxury, while of some probative value, is not
enough, in and of itself, to establish that the taxpayer willfully failed to pay. Palermo v. United
States, 259 F.2d 872, 880-82 (3d Cir. 1958). Taxpayer’s professional success, financial security,
ability to raise three children, and habit of always paying other obligations on time was
probative. United States v. McCaffrey, 181 F.3d 854, 856 (7th Cir. 1999).

1-3.04 Failure to File a Return - Offense #2
[1] Elements of the offense:
[a] Person required by law to file a return for the taxable period [I.R.C. § 6012];
40

[b] A failure to file a return at the time required by law [I.R.C. § 6072]; and,
[c] Willfulness.
See, United States v. Vroman, 975 F.2d 669, 671 (9th Cir. 1992), cert. denied, 507 U.S. 996
(1993); United States v. Harting, 879 F.2d 765, 766-67 (10th Cir. 1989); United States v.
Williams, 875 F.2d 846, 849 (11th Cir. 1989); United States v. Gleason, 726 F.2d 385, 388
(8th Cir. 1984); United States v. Matosky, 421 F.2d 410, 412-13 (7th Cir. 1970), cert. denied,
398 U.S. 904 (1970); United States v. Ostendorff, 371 F.2d 729, 730 (4th Cir.), cert. denied,
386 U.S. 982 (1967); United States v. McCormick, 67 F.2d 867, 868 (2d Cir. 1933), cert.
denied, 291 U.S. 662 (1934).
[2] Required by law to file a return
[a] Various Code provisions (and regulations thereunder) specify the events which trigger
the obligation to file a return. I.R.C. § 6012 lists the persons and entities required to make returns
with respect to income taxes.
[b] The government need not prove that any taxes are due, but only that gross income
requirements have been met so as to trigger the filing requirement. United States v. Bell, 734
F.2d 1315, 1316 (8th Cir. 1984); United States v. Wade, 585 F.2d 573, 574 (5th Cir. 1978), cert.
denied, 440 U.S. 928 (1979). But proof of taxes due will help to establish willfulness.
[c] Individuals. Filing requirements for individuals are governed by (1) filing status,
(2) age, and (3) gross income.
1. Generally, the filing requirement imposed on taxpayers is based on the receipt of
a pecified amount of gross income. The term "gross income" is broadly defined as income from
"whatever source derived." I.R.C. § 61(a).
2. Periodically, legislation changes the specified amount of gross income which
triggers the duty to file a return. Therefore, whether a taxpayer is required to file a return must be
determined for each year under consideration.
[d] Corporations are required to file a Form 1120 regardless of the amount of gross
income involved.
1. The corporate officer responsible for filing may be prosecuted for a willful
failure to file. United States v. Neal, 93 F.3d 219, 223 (6th Cir. 1996), cert. denied, 519
U.S. 1115 (1997); Heligman v. United States, 407 F.2d 448, 451 (8th Cir. 1969), cert.
denied, 395 U.S. 977 (1969); Lumetta v. United States, 362 F.2d 644, 647 (8th Cir.
1966); Bloom v. United States, 272 F.2d 215, 222-23 (9th Cir. 1959), cert. denied, 363
U.S. 803 (1960).
2. If more than one corporate officer shared the responsibility of filing the
corporate return, it may be impossible to convict any officer under I.R.C. § 7203. United
States v. Fago, 162 F. Supp. 125, 129 (W.D. N.Y. 1958).
41

3. For manufacturing, merchandising, or mining enterprises, where the filing
requirement is predicated upon gross income, gross income is determined, in part, by
subtracting the cost of goods sold from gross receipts or total sales. Treasury Regulations
on Income Tax (1986 Code), Sec. 1.61-3 (26 C.F.R.); United States v. Ballard, 535 F.2d
400, 404 (8th Cir.), cert. denied, 429 U.S. 918 (1976). To meet its burden, the
government need prove only that gross receipts exceed the cost of goods sold by an
amount sufficient to trigger the reporting requirement. United States v. Francisco, 614
F.2d 617, 618 (8th Cir.), cert. denied, 446 U.S. 922 (1980); Siravo v. United States, 377
F.2d 469, 473 (1st Cir. 1967). This rule applies even if the business is illegal.
[e] Partnerships are required to file Form 1065. The gross income of a partner includes his
or her share of the partnership's gross income. Treas. Reg. § 1.61-13(a).
[f] Employers are required to file Forms 940 and 941.
[g] Fiduciaries of an estate or trust are required to file Form 1041.
[h] Person engaged in a trade or business who in the course of such trade or business
receives more than $10,000 in cash in one transaction (or two or more related transactions) must
file a Form 8300. I.R.C. § 6050I.
[3] Failure to file a return at time required by law
[a] What constitutes a return.
1. Generally, a Form 1040 does not constitute a return unless it discloses
sufficient information about the taxpayer's income to allow computation of the tax.
United States v. Porth, 426 F.2d 519, 522-23 (10th Cir.), cert. denied, 400 U.S. 824
(1970).
2. Several circuits have held that a tax return which contains blanks, zeros
throughout the return, or only a bottom-line figure does not constitute a return and
therefore, a failure to file charge is appropriate. United States v. Mosel, 738 F.2d 157, 15859 (6th Cir. 1984); United States v. Farber, 630 F.2d 569, 571 (8th Cir. 1980), cert. denied,
449 U.S. 1127 (1981); United States v. Moore, 627 F.2d 830, 834-35 (7th Cir. 1980), cert.
denied, 450 U.S. 916 (1981); United States v. Rickman, 638 F.2d 182, 184 (10th Cir.
1980); United States v. Smith, 618 F.2d 280, 281 (5th Cir. 1980), cert. denied, 449 U.S.
868 (1980); United States v. Edelson, 604 F.2d 232, 234 (3d Cir. 1979).
3. Ninth Circuit recognizes a distinction between a return that contains any
numerical entries, even if they are all zeros, and returns left blank or containing other nonnumeric entries, e.g., asterisks. The former constitutes a return under United States v.
Long, 618 F.2d 74, 75-76 (9th Cir. 1980) (because a tax could be computed from the
information contained on the form), and the latter does not. United States v. Kimball, 896
F.2d 1218 (9th Cir.), reh'g granted, 914 F.2d 1386 (9th Cir. 1990), rev'd in part, remanded
in part, 925 F.2d 356 (9th Cir. 1991)(per curiam).
42

4. Also, a blank return with a Form W-2 attached showing the salary and tax
withheld has been held to constitute a return because the information necessary to allow
computation of the tax was present. United States v. Crowhurst, 629 F.2d 1297, 1300 (9th
Cir.), cert. denied, 449 U.S. 1021 (1980).
[b] The time prescribed for filing an income tax return is generally governed by I.R.C. § 6072.
1. Individuals are required to file on or before the 15th day of the fourth month
following the close of their taxable year.
2. Corporations are required to file on or before the 15th day of the third month
following the close of their tax year. Time for filing will obviously differ depending on whether
the corporation is on calendar year or fiscal year. Caution: A new corporation has election of
adopting taxable year filing period. Treas. Reg. § 1.4411(b)(3). See also, United States v.
Bourque, 541 F.2d 290, 293-94 (1st Cir. 1976).
3. Partnerships are required to file on or before the 15th day of the fourth month
following the close of their tax year.
4. I.R.C. § 6071 fixes the time for filing all other returns for which a time for
filing is not otherwise enumerated in the Code, and I.R.C. § 6075 fixes the time for filing estate
and gift tax returns.
5. Although taxpayers legitimately may seek and obtain an extension of time to
file a return under the I.R.C. § 6081 (extension of time for filing returns), abuse of this
provision can support a § 7203 conviction. See, United States v. Goldstein, 502 F.2d 526, 528
(3d Cir. 1974) (filing extension request was not intended as an attempt to comply with the legal
requirement to file an income tax return, but solely in an attempt to postpone any possible day
of reckoning).
6. Proof of a taxpayer's failure to file is established with a certified transcript of
account or a certificate of assessments and payments. Such documents routinely withstand
hearsay and Confrontation Clause challenges because the documents are admissible under a
hearsay exception and because the documents are not the inherently unreliable out-of-court
statements at which the Confrontation Clause was directed. See, Federal Rules of Evidence, Rule
803(10); United States v. Neff, 615 F.2d 1235, 1241-42 (9th Cir. 1980).
[c] Willfulness. (See generally, discussion in Section 1-1.03[4])
1. Willfulness in misdemeanor failure to file cases is the same as in the felony hierarchy of
tax offenses. Willfulness in this context simply means a voluntary, intentional violation of a known
legal duty. United States v. Murphy, 469 F.3d 1130, 1137 (7th Cir. 2006); United States v. Powell,
955 F.2d 1206, 1210 (9th Cir. 1992). Similarly, the Cheek defense applies in failure to file cases.
United States v. Gaumer, 972 F.2d 723, 724-25 (6th Cir. 1992); United States v. Willie, 941 F.2d
1384, 1394-95 (10th Cir. 1991), cert. denied, 502 U.S. 1106 (1992).
43

2. Examples from which willfulness may be inferred include:
(A) The failure to file returns in successive years suggests willfulness. United
States v. McCaffrey, 181 F.3d 854, 857 (7th Cir. 1999) (admission of evidence of failure
to file income tax returns for nine previous uncharged years was not unduly prejudicial);
United States v. Crawford, 1997 WL 532495 * 2 (4th Cir. Aug. 29, 1997) (unpublished),
cert. denied, 522 U.S. 1117 (1998) (taxpayer’s earlier delinquent filing or non-filing
could be evidence of willfulness); United States v. Greenlee, 517 F.2d 899, 903 (3d Cir.),
cert. denied, 423 U.S. 985 (1975); United States v. Ostendorff, 371 F.2d 729, 731(4th
Cir.), cert. denied, 386 U.S. 982 (1967). Both prior and subsequent failures to file may
be presented on the issue of willfulness. United States v. Farris, 517 F.2d 226, 229 (7th
Cir. 1975); United States v. Thompson, 513 F.2d 577, 578-79 (8th Cir. 1975).
(B) The taxpayer's filing of timely returns in prior years is evidence which permits the
inference that he knew the law required him to file returns and that he willfully failed to
do so. United States v. Poschwatta, 829 F.2d 1477, 1481 (9th Cir. 1987); United States v.
Shivers, 788 F.2d 1046, 1049-50 (5th Cir. 1986); United States v. McCabe, 416 F.2d 957,
957-58 (7th Cir. 1969), cert. denied, 396 U.S. 1058 (1970).
(C) The taxpayer's failure to file state income tax returns may be probative of his
willful failure to file federal returns. United States v. Magnus, 365 F.2d 1007, 1011-12
(2d Cir. 1966), cert. denied, 386 U.S. 909 (1967); United States v. Taylor, 305 F.2d 183,
185-86 (4th Cir.), cert. denied, 371 U.S. 894 (1962).
(D) The taxpayer's receipt of Forms W-2 received

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A4054efb870ca3ded. Public record. Not legal advice.