Tax Evasion

TAX EVASION IS defined as “the willful attempt to defeat or circumvent the tax law in order to illegally reduce one's tax liability.” The crime of tax evasion, defined within 26 U.S.C. §7201 and amended in 1984 under 18 U.S.C. §3623, carries the severest criminal penalties and requires the greatest burden of proof on behalf of the U.S. government in comparison to any other tax crime.

The exact statutory language of 26 U.S.C. §7201, entitled “Attempt To Defeat or Evade Tax” reads, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or 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.” The Criminal Fines Enforcement Act of 1984, codified at 18 U.S.C. §3623, substantially increased the maximal permissible fines for both misdemeanors and felonies as set forth in §7201. For felony offenses committed after December 31, 1984, the maximum permissible fine is $250,000 for an individual and $500,000 for a corporation. Moreover, if any person derives financial gain from the offense or if the offense results in a financial 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.”

According to the U.S. Supreme Court in Sansone v. United States (1965) §7201 contains two distinct criminal offenses, “the willful attempt to evade or defeat the assessment of a tax; and the willful attempt to evade or defeat the payment of a tax.” Evasion or defeat of an assessment involves an attempt by the taxpayer to prevent the government from determining her true tax liability while evasion or defeat of payment involves an attempt by a taxpayer to evade payment of that liability.