Promotion of Tax Fraud

The First Amendment protects a lot of speech, but this does not include encouraging and helping others break the law, especially in helping others avoid payment of federal income taxes.  It is a federal crime to conspire to evade income taxes, and conspiracy can be broadly defined to include distributing information and ideas for evading income taxes.

Even someone who does nothing to actually prepare a false return can be found guilty of conspiring to defraud the federal government if they distribute information specifically designed to assist others in illegally evading income taxes.  The distributor can be guilty even if the recipient of this information does not intend to break the law.  In fact, the federal government is especially harsh on those who sell illegal tax evasion schemes while claiming they are in fact legal. Teaching someone an illegal method of avoiding income taxes while claiming that this is an acceptable legal practice is a federal crime.

Like their intended audiences, promoters of these schemes have varying views of the law and their conduct.  One of the more famous promoters of tax evasion schemes, Irwin Schiff, has been convicted repeatedly since the seventies.  He has claimed throughout the years that the income tax is illegitimate and he is exempt from paying taxes, and his persistence gives some legitimacy to the claim that this belief is genuine.  Unfortunately for Mr. Schiff, a sincere belief in the rightness of his cause has done nothing to prevent federal prosecution.  The federal government can prosecute an individual for promoting a tax evasion scheme if he knows and understands that the position he takes are contrary to settled and established law.

Of course, it is not a crime to make an innocent misstatement of law or voice opposition to one of the laws of the United States.  And anyone is likely to receive a large receptive audience selling plans to lower taxes.  But if an individual deliberately assists others in filing false tax returns or evading income tax payments, the federal government has taken the view that this is a serious federal crime worthy of prosecution.  The IRS has even taken the position that sometimes advising another to take lawful actions to impede the IRS can also be considered obstruction.  The lesson is clear for anyone who thinks they’ve figured out how to outsmart the IRS.  Keep it to yourself.

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