Criminal Tax: Common Charges

This is a brief and oversimplified explanation of some of the more common criminal felony and misdemeanor tax charges that that IRS uses to prosecute people:

Felony Charges in Criminal Tax

  • Tax Evasion: Willful attempt to evade or defeat a tax assessment or its payment (26 U.S.C. § 7201).
  • Tax Fraud: Falsification of tax documents and false statements, and aiding or assisting in the same (26 U.S.C. § 7206).
  • Trust Fund Taxes / Third Party Taxes / Collected Taxes: Willful failure (usually by employers) to collect, account for, or pay taxes (26 U.S.C. § 7202).  The IRS might also prosecute for Mail Fraud (18 U.S.C. § 1341) or Wire Fraud (18 U.S.C. § 1343) if it believes that the individual embezzled funds that were held in trust.
  • Tax Money Laundering: Financial transaction with sole or principal purpose of violating laws, including tax evasion or the making of false statements to the IRS (18 U.S.C. § 1956(a)(1)(A)(ii)).
  • False, Fictitious or Fraudulent Claims: These charges are traditionally used by the IRS in tax prosecutions that allegedly involve fraudulent refund schemes (18 U.S.C. §§ 287, 286). Or there are the related 18 U.S.C. §§ 1956(h) & 1957.
  • Obstruction: Attempting to interfere with the administration of Internal Revenue Laws or federal agents acting under the Tax Code (26 U.S.C. § 7212).  
  • Conspiracy: Felony for two or more people conspiring to commit a tax offense or to defraud the IRS (18 U.S.C. § 371). 

Misdemeanor Charges in Criminal Tax

  • Failure to File / Failure to Pay: Failure to pay taxes, file a return, keep records, supply information, or pay taxes (26 U.S.C. § 7203).
  • Trust Fund Taxes: If there is no "willfulness," then this might be considered a misdemeanor rather than the above-described felony (26 U.S.C. §§ 7215, 7512).
  • Fraudulent Returns, Statements or Other Documents:  This is often a misdemeanor version of the above-described felony for tax evasion (26 U.S.C. § 7207).

Criminal Tax Sentences

According to the IRS, the average criminal tax prison sentence is almost 4 years (46 months).  And, that is in addition to becoming a convicted felon, paying fines, and getting hit with civil taxes and penalties.  Of course, when the jury says "not guilty," there's no sentence!