Failure to File

Evading payment of income taxes is a federal crime under 26 USC § 7201.  The statute criminalizes both attempts to evade payment as well as attempts to evade assessment.  Evasion of assessment can take a number of forms including concealing income or assets, making false statements, filing false returns or willfully failing to file a tax return.  Failure to file a tax return is also subject to criminal penalties under another statute, 26 USC § 7203, willful failure to file return, supply information, or pay tax.

These two statutes create powerful tools for the IRS to prosecute anyone who fails to file a tax return.  § 7203 criminalizes a failure to file a tax return regardless of whether or not the taxpayer actually owes any taxes.  So an individual who willfully fails to file a tax return can be criminally prosecuted even if he did not actually owe any taxes.  All the government must prove is that the failure to file was willful.

And even if a taxpayer does file the appropriate forms, he can still be prosecuted if too much information is left out.  Courts have ruled that merely submitting a 1040 is not sufficient filing if sufficient information is not included.  A 1040 that includes an excessive number of blanks and zeros can be considered insufficient to constitute a filing.  So a taxpayer can theoretically be prosecuted for a willful failure to file even if he filed a 1040 and did not owe any taxes.

But this is unlikely to happen.  Because the key requirement of the crime under both statutes is that the failure to file be willful.  Merely failing to file is not a crime if done out of neglect or ignorance.  While an individual can conceivably be prosecuted under 26 USC § 7203 for failing to file a tax return even when he did not owe any taxes, a lack of taxes owed is likely to strongly indicate a lack of willfulness.  Likewise, merely failing to file a return is not tax evasion under 26 USC § 7201 without an affirmative act to conceal income or mislead the IRS.  Examples of affirmative acts include, keeping a second set of books, creating false entries or invoices, destroying records, concealing income or other attempts to deliberately mislead the government.

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