The Crime of Willfully Failing to Collect or Pay Over Tax

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The Crime of Willfully Failing to Collect or Pay Over Tax

In recent years, the Department of Justice has increased the number of prosecutions under 26 U.S.C. § 7202 for willful failures to collect or pay over taxes.  Section 7202 is used to prosecute individual who willfully fail to comply with their statutory obligations to collect, account for, and pay over taxes imposed on another person.  Employment tax crimes are regularly prosecuted under § 7202 (although they are often prosecuted under other statutes as well—e.g., 26 U.S.C. § 7201 (tax evasion), 26 U.S.C. § 7206(1) (false returns), 26 U.S.C. § 7212(a) (obstruction), and 18 U.S.C. § 371 (conspiracy to defraud)).


The relevant statutory provision sets forth the crime of a willful failure to collect or pay over taxes:

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, shall be fined . . . or imprisoned not more than 5 years, or both, together with the costs of prosecution.


26 U.S.C. § 7202.  The maximum fine for a violation of § 7202 is generally $250,000 for individuals and $500,000 for organizations. 18 U.S.C. §§ 3571(b) & (c).

As the statutory language indicates, Section 7202 applies to “[a]ny person required under [Title 26] to collect, account for, and pay over any tax imposed by [Title 26].”  To establish a violation of the statute, the government must demonstrate the following three elements:

  • a duty to collect, account for, and pay over a tax;
  • a failure to collect, truthfully account for, or pay over the tax; and
  • willfulness.

United States v. Thayer, 201 F.3d 214, 219-21 (3d Cir. 1999); see also United States v. Simkanin, 420 F.3d 397, 404-05 (5th Cir. 2005).

Violations of § 7202 most often arise in the context of employment taxes—for example, where a person has an obligation to withhold and pay over payroll taxes and fails to do so.  Employers are required to withhold employee FICA and income tax from the wages paid to their employees, and to pay over the withheld amounts to the United States. 26 U.S.C. §§ 3102(a), 3102(b), 3402, 3403. The employer is required to pay the United States the amount that is required to be collected even if the taxes are not actually withheld from the wages of the employee. See, e.g., United States v. Simkanin, 420 F.3d 397 (5th Cir. 2005) (responsible person’s § 7202 convictions based upon failure to collect).

The employee FICA and income taxes required to be withheld and paid over to the United States are commonly referred to as “trust fund taxes.”  Section 6672 provides for a civil Trust Fund Recovery Penalty applicable against “responsible persons” who willfully fail to collect or pay over such tax.  Such persons can be held personally liable for the entire amount of such taxes.  Notably, the statutory text of § 7202 and of § 6672 largely track each other and are virtually identical.  That means that a person facing a Trust Fund Recovery Penalty assessment may (and often does) exhibit many of the characteristics that the government looks for to justify a criminal referral.  And because of the similarities between the two statutory provisions, the Department of Justice draws on § 6672 Trust Fund Recovery Penalty case law to interpret the scope of § 7202.


For related topics, see The Willful Failure to Collect or Pay over TaxUnderstanding Trust Fund Penalty Liability, and Government Report Recommends More Criminal Referrals for Employment Tax Violations.