26 U.S. Code § 7206 - False Federal Tax Return
Paying and reporting income tax in the U.S. relies on an "honor" system, where the government counts on you to provide truthful information about your taxes.
Intentionally submitting a false federal tax return, known as "tax fraud,' is a federal crime classified as "fraud and false statements" under Title 26, Section 7206 of the United States Code.
Simply put, this federal statute criminalizes the making of false or fraudulent statements on tax returns or other documents submitted to the IRS.
Suppose a successful businessman operates multiple high-revenue-generating establishments nationwide.
To reduce his tax liability, he deliberately omits a significant portion of his income from one of his businesses on his federal tax return.
He intentionally includes false information about his expenses, inflating them to offset the income he has not reported. In that case, he charged under 26 U.S.C. 7206.
IRS tax amnesty programs aim to assist individuals and businesses in complying with federal tax laws by voluntarily revealing unreported income, submitting missing returns, or fixing previous tax mistakes.
What Does Section 7206 Say?
26 U.S.C. 7206 says, "(1) Declaration under penalties of perjury -
Willfully makes and subscribes any return, statement, or other document which contains or is verified by a written declaration that it is made under the penalties of perjury and which he does not believe to be true and correct as to every material matter; or
(2) Aid or assistance -
Willfully aids or assists in, or procures, counsels, or advises the preparation or presentation under, or in connection with any matter arising under, the Internal Revenue laws, of a return, affidavit, claim, or other document which is fraudulent or is false as to any material matter, whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document; or
(3) Fraudulent bonds, permits, and entries -
Simulates or falsely or fraudulently executes or signs any bond, permit, entry, or other document required by the provisions of the Internal Revenue laws, or by any regulation made in pursuance thereof, or procures the same to be falsely or fraudulently executed, or advises, aids in, or connives at such execution thereof."
Which Acts Are Forbidden?
Title 26 U.S.C. 7206 essentially establishes that committing any of the listed actions is a crime:
- To create or sign any return, statement, or other document that you assert to be true under penalty of perjury, which you believe may not be entirely accurate.
- To help anyone file such a return or statement, knowing the information is false, this section makes it a crime for tax preparers to file false returns for others knowingly.
- To simulate or unlawfully execute "any bond, permit, entry, or other document required by the provisions of the internal revenue laws" related to such a return.
- To hide property that the government has the authority to seize for tax payments or
- To hide property or alter/fake records related to an "offer in compromise" with the IRS aimed at settling a tax debt.
- To remove, deposit, conceal, or be involved in removing, depositing, or covering any goods or commodities for which any tax is or will be imposed (Section 7206(4)).
What Factors Must Be Proven for a Conviction?
To secure a conviction for this crime, the prosecution must establish three key elements beyond a reasonable doubt.
- Material Falsification: The accused must have prepared and signed a return, statement, or other document containing false information. "Material" here means any data that could affect the calculation of taxable income.
- False Belief: The prosecution must demonstrate that the accused did not genuinely believe that each claim in return was accurate and correct. This element focuses on intent, a crucial aspect in many criminal cases.
- Willful Violation: To establish this, it must be demonstrated that the accused intentionally acted, meaning they were aware that their behavior was unlawful but proceeded regardless.
What Are the Related Federal Statutes?
Chapter 75, Subchapter A, Part I of the 26 U.S. Code, outlines several federal laws concerning 26 U.S.C. 7206, which addresses fraud and false statements, including the following:
- 26 U.S.C. 7201 - Attempt to evade or defeat tax
- 26 U.S.C. 7202 - Willful failure to collect or pay overtax
- 26 U.S.C. 7203 - Willful failure to file a return, supply information, or pay tax
- 26 U.S.C. 7204 - Fraudulent statement or failure to make a statement to employees
- 26 U.S.C. 7205 - Fraudulent withholding exemption certificate or failure to supply information
- 26 U.S.C. 7207 - Fraudulent returns, statements, or other documents
- 26 U.S.C. 7208 - Offenses relating to stamps
- 26 U.S.C. 7209 - Unauthorized use or sale of stamps
- 26 U.S.C. 7210 - Failure to obey summons
- 26 U.S.C. 7211 - False statements to purchasers or lessees relating to tax
- 26 U.S.C. 7212 - Attempts to interfere with the administration of Internal Revenue laws
- 26 U.S.C. 7213 - Unauthorized disclosure of information
- 26 U.S.C. 7213A - Unauthorized inspection of returns or return information
- 26 U.S.C. 7214 - Offenses by officers and employees of the United States
- 26 U.S.C. 7215 - Offenses concerning collected taxes
- 26 U.S.C. 7216 - Disclosure or use of information by preparers of returns
- 26 U.S.C. 7217 - Prohibition on executive branch influence over taxpayer audits and other investigations.
Under 31 U.S.C. § 5324, making cash deposits below $10,000 with the purpose of avoiding a federal reporting requirement (structuring) is a federal felony.
What are the Penalties Under 26 U.S.C. 7206?
The federal government typically does not prosecute individuals for honest mistakes on their taxes.
However, if there is substantial evidence that you deliberately filed false returns, the consequences of a conviction could be serious. A conviction may result in:
- A fine of up to $100,000 (or $500,000 for corporations), along with the costs of prosecution.
- Imprisonment of up to three years.
It's important to recognize that each false tax return submitted can constitute a distinct offense, which can increase penalties.
What Are the Potential Defenses?
If you're accused of a violation under 26 U.S.C. 7206, an experienced federal criminal defense attorney can utilize various defenses, as outlined below.
We might argue there was no intent. Demonstrating willfulness is essential for prosecutors and often the hardest part to prove.
If you can show that errors were honest mistakes, misunderstandings, incorrect advice from a tax professional, or that you were unaware of legal violations, you could potentially prevent a conviction.
Perhaps we can use the statute of limitations. Typically, the government has a 6-year window from the date the false return was filed to initiate prosecution.
If this period has lapsed, the charges could be dismissed. Perhaps we can negotiate a favorable plea agreement with the federal prosecutor. Contact us for a case review and to discuss legal options. Eisner Gorin LLP has offices in Los Angeles, California.
If you have one phone call from jail, call us! If you are facing criminal charges,