Section 7205 of the Internal Revenue Code establishes the federal tax crime of fraudulently providing false information relating to tax withholding.
The statute provides as follows:
I.R.C. § 7205 – FRAUDULENT WITHHOLDING EXEMPTION OR FAILURE TO SUPPLY INFORMATION
(a) Withholding on Wages. Any individual required to supply information to his employer under section 3402 who willfully supplies false or fraudulent information, or who willfully fails to supply information thereunder which would require an increase in the tax to be withheld under section 3402, shall, in addition to any other penalty provided by law, upon conviction thereof, be fined* not more than $1,000, or imprisoned not more than 1 year, or both.
(b) Backup Withholding on Interest and Dividends. If any individual willfully makes any false certification under paragraph (1) or (2)(c) of section 3406(d), then such individual shall in addition to any other penalty provided by law, upon conviction thereof, be fined* not more than $1,000, or imprisoned not more than 1 year, or both.
Section 7205(a) Offense
In order to establish a violation of section 7205(a), the government must prove the following elements beyond a reasonable doubt:
- [a] The individual had a duty to supply information to employer under I.R.C. § 3402.
- [b] The individual supplied false or fraudulent information or failed to supply information which would require increase in tax withheld.
- [c] The act or failure to act was willful.
Duty to supply information
I.R.C. § 3402(f)(2)(A) imposes a duty on an employee to provide their employer with information:
On or before the date of commencement of employment with an employer, the employee shall furnish the employer with a signed withholding exemption certificate relating to the number of withholding exemptions which he claims, which shall in no event exceed the number to which he is entitled.
False or fraudulent information
Generally, courts do not require that the information provided the deceptive or provided with the intent to deceive in order to satisfy the false-or-fraudulent-information element.
Willfulness
Willfulness for section 7205 purposes carries the same meaning as in the context of other criminal tax offenses. It is, therefore, defined as “a voluntary, intentional violation of a known legal duty.”
Section 7205(b) Offense
In order to establish a violation of section 7205(b), the government must establish the following elements beyond a reasonable doubt:
- [a] Making false certification or affirmation on any statement required by a payor who is attempting to satisfy certain dividend or interest information reporting requirements; or
- [b] Making a false certification about not being subject to backup withholding; and
- [c] Willfulness.
