Yes, the Internal Revenue Code has its very own perjury and false statements statute. This crime is separate from the tax evasion statute, and different elements must be present for the taxpayer to be charged with perjury and false statements. Under the perjury and false statements statute, there are several different types of conduct which may form the basis for tax fraud penalties and prosecution. The statute makes it a felony for a person to do any of the following:
- Make a false declaration under penalties of perjury;
- Willfully aid or assist in the preparation or presentation of any return or other document that is false as to a material matter;
- Simulate or fraudulently sign or execute any bond, permit any entry, or other document required by the internal revenue laws, or procure the same to be falsely or fraudulently executed, or advises, aids in, or connives at such execution thereof;
- Remove or conceal property with intent to evade or defeat assessment or collection of any tax; or
- In connection with an offer in compromise and closing agreement, either conceal property or withhold, falsify, or destroy records or make any false statement relating to the financial condition of the taxpayer or other person liable for the tax.
The Common False Statement Tax Crime is the False Return Crime
Of the five perjury and false statements crimes listed above, by far the most common is the charge of making a false tax return. In this article, we will describe the basics of the false tax return charge, and being to analyze the various elements of tax crimes, beginning with the false statement requirement. A future article will go over the remaining elements of the criminal offense in detail. Under IRC §7206(1), any person who “willfully makes and subscribes any return, statement or other document which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe true and correct as to every material matter” is guilty of a felony. This crime is closely related to the crime of tax evasion, but in this case, the penalties may be less severe. The government also has an easier time proving the false tax return crime as opposed to the tax evasion charge because unlike tax evasion, the false tax return crime does not require a showing of “additional tax due and owing.” For this reason, the government sometimes attempts to first prosecute taxpayers for tax evasion, and then follow up with a false tax return charge if the taxpayer can successfully defeat the “additional tax due and owing” requirement of the tax evasion charge.
In order to prove its case against a person for making a false tax return, the government must be able to show three things:
- that the person made and subscribed a return or other document under penalties or perjury;
- the person knew that the return was not true and correct as to a material matter; and
- the person acted willfully.
Notably, the criminal charge found in section 7206(1) must relate to written false statements made under penalty of perjury; thus, oral statements and written statements not made under penalty of perjury do not fall within the statute’s reach. However, oral false statements do fall within the Title 18 false statements statute. False written statements not made under penalty of perjury fall within the misdemeanor false statement statute, found at IRC § 7207.
The False Statement Requirement of the False Return Tax Crime
Documents falling within the scope of IRC § 7206 include written statements, tax returns, or other documents containing a jurat or oath. The presence of this requirement – that the false statement must be made under penalty of perjury – is what separates the false statement felony (IRC § 7206) from the false statement misdemeanor (IRC § 7207). Many forms that taxpayers typically file with the IRS, but the most common targets for the false statement felony are tax returns. For these purposes, a return includes the actual income tax return, as well as accompanying schedules and statements or documents incorporated in the return. Another important distinction to recognize is that the criminal prosecution can only apply where the false statement is made on a jurat-containing form which is authorized by a statute or regulation. This means that forms which are not authorized by statute or regulation, such as short-form financial statement (Form 433-AB), is not susceptible to prosecution under section 7206 even though it contains a jurat.
An essential component of the false statement crime is that the false statement must have been made and subscribed by the person charged. A taxpayer can make or subscribe a false statement through his or her accountant or tax preparer, by supplying the accountant or tax preparer with incorrect information. The taxpayer must then sign the document in order to be punishable under the statute, and the government must present some evidence that the taxpayer knew when signing that the form contained false information. In the next article, we will discuss the remaining elements of the false tax return crime: the material matter element and the willfulness element.
How a Tax Attorney Can Help
If you are under investigation by the IRS for criminal tax crimes then you must consult with an experienced tax attorney.
The Tax Lawyer - William D Hartsock Tax Attorney Inc. has been successfully helping clients with criminal tax issues since the early 1980s. Mr. Hartsock offers free consultations with the full benefit and protections of attorney client privilege to help people clearly understand their situation and options based on the circumstances of their case. To schedule your free consultation simply fill out the contact form found on this page, or call (858) 481-4844.
Tax Law References:
- IRC § 7206.
- IRC § 7206(1).
- IRC § 7207.
- United States v. Henderson, 399 F. Supp. 508 (SDNY 1975).
- United States v. Mal, 942 F2d 682 (9th Cir. 1991).