The Crime of Tax Evasion

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

Tax evasion is a phrase that is often used to describe a wide variety of tax-related violations.  In the world of tax administration/enforcement, however, it has a specific statutory meaning.  It has been the charge of choice in a number of high-profile cases throughout history—from the convictions of Al Capone to Leona Helmsley to Wesley Snipes.  With IRS estimates indicating that the annual tax gap exceeds $450 billion, tax evasion, which makes up a substantial portion of that figure, costs the federal government billions every year.

Section 7201 of the Internal Revenue Code criminalizes tax evasion.  That section provides that:

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.

Section 7201 thus criminalizes two separate events: (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.

The Elements

In order to prove tax evasion, the government is required to prove the existence of the following three elements beyond a reasonable doubt:

The Affirmative Act Requirement

In order to violate Section 7201, the taxpayer generally must take some affirmative action with an intent to evade tax.  For these purposes, an affirmative act is construed rather broadly: Courts generally find that “any conduct, the likely effect of which would be to mislead or to conceal” is sufficient to constitute an affirmative attempt to evade tax. United States v. Spies, 317 U.S. at 499.  Even an act that would otherwise be perfectly legal can satisfy the affirmative-act element if the government can demonstrate that it was committed with the intent to evade tax.  This is often established, for example, by showing that the taxpayer hid assets, made false statements to IRS agents, or filed a false tax return.

Tax Evasion Investigations

Tax evasion charges are generally investigated by the IRS Criminal Investigation Division (“CID”), and can come with serious consequences.  CID employs sophisticated investigatory procedures to build its case—a process that often takes many months or years.  Tax evasion investigations can arise out of a number of different contexts, from standard civil audits, to disgruntled former employees through the whistleblower program, and even out of other investigations, among other things.  Those facing potential tax evasion charges should seek out competent legal counsel to explore their potential exposure and defenses.  For proactive taxpayers, there are often options available to mitigate criminal exposure.  For related topics, see our prior posts on The Badges of Fraud and The Cheek Defense to Federal Tax Crimes.

White Collar Defense Attorneys

Freeman Law represents companies, executives, and individuals in regulatory and white-collar government investigations and prosecutions. We employ a proactive approach to defend vigorously and strategically position our clients. White-collar matters often involve parallel regulatory and civil proceedings. Freeman Law can navigate the complexities and collateral consequences of multiple proceedings. And when it comes to the court of public opinion, we employ ethical and strategic tactics to manage publicity. Schedule a consultation or call (214) 984-3410 to discuss your allegations and investigations concerns.

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