Tax Evasion: Evading the Payment of Tax

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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).

 

The crime of tax evasion can be established where a taxpayer willfully fails to pay the IRS a tax that is owed. While charges of tax evasion are more common in the context of a fraudulent tax return that is filed in an effort to evade the assessment of tax in the first place, the fraudulent failure to pay a tax is also a standalone federal crime.

In order to establish the crime of tax evasion under section 7201 of the Internal Revenue Code for the attempted evasion of the payment of tax, the government must prove the following elements beyond a reasonable doubt:

[a] An attempt to evade or defeat the payment of a tax;

[b] An additional tax due and owing; and,

[c] Willfulness.

Attempt to Evade Payment

Attempts to evade the payment of tax typically involve a form of concealing money or assets–for example, removing assets from the reach of the IRS. The affirmative act necessary to establish the crime of evading the payment of tax often involves schemes that deal heavily in cash, the placement of assets under the name of others, transferring assets outside the United States, or omitting assets from a form 433-A, Collection Information Statement.  Some common examples include:

  1. concealing assets in bank accounts of family members;
  2. placing assets in the name of other people;
  3. cash expenditures;
  4. false statements to an IRS agent;
  5. conducting business purely in cash; and
  6. fraud during a bankruptcy

Additional Tax Due and Owing

The government is generally required to prove that a tax was actually due and owing–that is, that there is a tax deficiency.

There are a number of items of taxable income that may satisfy this requirement, even though they are not expressly specified in the tax code, including:

  1. gambling income
  2. embezzlement proceeds
  3. extortion proceeds
  4. income from a fraud
  5. loans received with no intent to repay them
  6. kickbacks

The outstanding tax can, however, come from virtually any source, and need not be related to nefarious or illegal conduct.

Notably, while most circuit courts require that the government show that there was a substantial tax deficiency, not all courts require the showing, and the government maintains that it is not required to prove the precise amount of tax due and owing in order to successfully prosecute a taxpayer for tax evasion.

Willfulness

Willfulness is defined as the “voluntary, intentional violation of a known legal duty.”  Thus, a good faith belief that one is not violating the tax laws is, as a general matter, a defense against a charge of tax evasion.  The government may argue that the willful evasion of the payment of tax can be inferred from a number of acts, including conduct that  attempts to place assets beyond the government’s reach.

 

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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