“Willfulness” is an element of the tax fraud statute that prosecutors often target. Simply put, this element stands for the idea that the defendant knowingly and intentionally committed the affirmative act that constitutes the crime.
For example, in a tax evasion case, the prosecution must show that the defendant “willfully” attempted to evade the tax. There are many ways for criminal defense attorneys to go about attacking the “willfulness” element. The most commonly used defense is known as the inability for the defendant to pay the tax. If a defendant simply lacked the funds to pay their tax liability, it is harder to show that their evasion of the tax was “willful.” That is to say, the defendant wasn’t trying to purposely evade paying taxes, but rather didn’t have the money to.
However, since this defense is only applicable in limited cases, it isn’t a license for anyone to over spend before the tax season starts only to claim financial hardship once tax time arrives: lack of sufficient funds will not negate the “willfulness” requirement if it can be proven that there was a voluntary and intentional act of defrauding.
The inability to pay the tax, often characterized as the “circumstances beyond control” defense, was designed to be a narrow exception. The drafters of the statute included a list of permissible situations in which a lack of sufficient funds will shield a noncompliant taxpayer from criminal liability. This list includes:
- Theft
- embezzlement,
- destruction of business by fire or other casualty,
- failure of the bank in which the taxpayer’s funds are deposited.
The list is not exhaustive, but the extreme situations included on it indicate how rare such an exception would apply.
Notably absent from the list is the payment of other creditors before the payment of taxes. A defendant cannot successfully claim that he simply prioritized his other liabilities ahead of the tax.