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In the past, tax crimes like failure to pay or evading payments were not often considered serious enough to pursue a criminal conviction; however, trends are starting to change. Prosecution of federal tax crimes is steadily on the rise, and some experts predict that it will continue to increase. Although they’re becoming more common, that doesn’t mean that it’s easier for prosecutors to send taxpayers to jail. In this post, we’ll give an overview of tax codes 7202 and 7203, what they mean, and what happens if you’re convicted.
Willful Failure
Internal Revenue Code § 7202, also known as the “willful failure to collect or pay over tax,” is a law that outlines the penalties for taxpayers who fail to truthfully account for and pay taxes. Willfully neglecting to pay taxes is considered a felony that, if convicted, could land defendants in jail for up to 5 years or fines up to $10,000. This generally applies to employers responsible for withholding and paying federal taxes such as income tax, Social Security tax, Medicare tax, and federal unemployment tax for their employees.
Internal Revenue Code § 7203 is the “willful failure to file return, supply information, or pay tax,” which establishes that taxpayers must file and pay taxes. Explicitly speaking, tax payers are responsible for keeping records, supplying information, and paying the estimated tax amount owed, and failure to do so is considered a misdemeanor. If convicted, defendants can face up to a year of jail time, or receive a combination of jail time and fines of up to $25,000 (or $100,000 in the case of a corporation).
Criminal Tax Fraud
Prosecutors of these crimes are only successful if they manage to prove that the taxpayer was intentionally committing fraud. The use of the word “willful” within the tax code is very specific, and simply not being good with numbers or failing to pay taxes on time is not grounds for criminal charges. Even if the defendant still owes the money to the IRS in the end, being penalized with fines on top of any financial hardship could lead to additional charges further down the line.
Although that may sound intimidating and the process can be nerve-wracking from start to finish, proving that someone willfully refused to withhold taxes, file a return, or pay taxes isn’t easy with the right defense. For example, waiting years and hoping that the issue will just go away probably will not look good for your defense, but neglecting to pay or even being unable to pay taxes within a year should not lead to criminal charges. When it comes to the difference between willfully failing to pay or report and making an honest mistake, time is of the essence. In order for the federal government to prove that the defendant was willfully failing to pay or file, they must prove one or more of the following criteria:
- That IRS notices were disregarded
- The defendant failed to file taxes for more than one year.
- The defendant is a tax professional or is educated in accounting.
- Received a W-2, thus indicating the defendant was at least aware that income taxes were required to be filed.
This list is not exhaustive but essentially shows that the more the IRS attempted to communicate with you, the more likely the prosecution will perceive these actions as a crime. When attempting to convince a judge or jury that a legitimate mistake was made, it’s important to work with a firm experienced in defending tax crimes for individuals and businesses. If you or your business are experiencing difficulties with the IRS, contact the firm of Weisberg Kainen Mark at (305) 374-5544 for a consultation today.
Weisberg Kainen Mark, PL
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