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How does the IRS turn a weak misdemeanor case into a multiple felony conviction?  Answer: Find a false verbal or written statement and refer the perjury violation to the U.S. Attorney's office for criminal prosecution.

Let's take a look at the arsenal of weapons the IRS can use to get a felony conviction for someone lying to an IRS employee and/or delivering false documents.  The Internal Revenue Code (IRC) has two types of punishment for tax-related perjury violations: one is a misdemeanor; the other is a felony.  To me, the misdemeanor charge is the appropriate charge for most IRS violations, but it is rarely used. The IRS prefers felony convictions whenever possible!

26 USC Section 7207

Anyone who willfully delivers or discloses to the [IRS] any list, statement or other document, known by him to be fraudulent or to be false as to any material matter, shall be fined not more than $1,000, or imprisoned not more than 1 year, or both.

26 USC Section 7206(1)

Anyone who willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter shall... be guilty of a felony and, upon conviction thereof, shall be fined not more than $5,000, or imprisoned not more than 3 years, or both, together with the costs of prosecution.

Now we enter the murky waters of double and triple charges for the same crime.  If you think these draconian measures are cruel and unusual punishment, you will be surprised to know that multiple charges for the same crime are legal and have been approved by the U.S. Supreme Court.  Multiple perjury violations are left to the discretion of the U.S. Attorney's Office and are oftentimes used as a club to punish aggressive taxpayers.

18 USC Section 1621

Whoever, (1) having taken an oath before a competent tribunal, officer, or person, on any case in which a law of the United States authorizes an oath to be administered, that he will testify, declare, depose, or certify truly, or that any written testimony, declaration, deposition, or certificate by him subscribed is true, willfully subscribes as true any material matter which he does not believe to be true; is guilty of perjury and shall... be fined no more than $2,000 or imprisoned not more than five years, or both.

Together, the so-called tax perjury statute 7206(1) and the general perjury statute 1621 are very serious felonies, but as you have noted, the above statutes require the taxpayer to perform particular overt acts.  The tax perjury statute requires the taxpayer to submit a document (such as a tax return, financial statement, or affidavit) signed under the penalties of perjury.  The general perjury statute requires the taxpayer to commit perjury after taking an oath.

Whenever the federal prosecutors have a weak case and know the jury is likely to acquit, they will crank up "old reliable," the general false statement statute.

18 USC Section 1001

Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully makes any false... statements shall be fined not more than $10,000 or imprisoned not more than five years, or both.

Ironically, you can be charged with failing to file a tax return, which is a misdemeanor, and end up going to jail for up to five years under section 1001 for a careless statement you made to an IRS employee.

Taxpayers who have not filed tax returns for three years or more and owe more than $75,000 in tax must exercise extreme caution when they attempt to re-enter the tax system.  The tax returns you will be submitting will be signed under the penalties of perjury, and if the IRS later proves that you omitted income and/or disguised some of your deductions, the U.S. Attorney will attempt to prosecute you under multiple statutes such as section 7201 for tax evasion, section 7206(1) for tax perjury violations, and section 1001 for the general false statement statute.

Taxpayers attempting to re-enter the tax system must hire the very best tax advisors they can find.  A preference should be given to professionals who specialize in failure-to-file cases and have 20 or more years of experience.

The perjury statutes also affect taxpayers who file every year but take very aggressive positions on their tax returns. The following axiom must be adhered to at all times: Never attempt to explain, clarify, or deny any issue relating to your tax returns with any IRS employee.  All communications must be through your advisors.

If you are approached by IRS Special Agents, you should not open your mouth.  The IRS Special Agent cannot compel you to give testimony or produce documents at this time.  Anything you say or do will be used against you in federal court.  Remember, most criminal tax cases are "made" within the first 20 minutes of conversation.

We have all heard about the "three great lies in the world"; today I am proposing the fourth great lie: "I am a government agent and I am here to help you."  I can't begin to tell you how often taxpayers fall hook, line, and sinker for this lie.

When I worked for the IRS, my first few cases with the IRS/Criminal Investigation Division (IRS/CID) were quick and easy because the taxpayers and their advisors did not fully understand they had the right to remain silent even after I read them their Fifth Amendment rights!  It was like stealing candy from a baby.  Most Special Agents get sick of this type of work and transfer to narcotics, money laundering, or political corruption where they can use their skills and talents against the real criminals.

The best-kept secret when dealing with the IRS/CID is to know that its agents are under tremendous pressure to produce as many easy criminal cases as possible.  Every year the IRS/CID likes to boast they initiate 3,000-4,000 investigations and have a 90% successful prosecution rate; to get these high numbers their agents must pursue many easy-to-work perjury cases.

Conclusion:  It is much more difficult to work a criminal case if the taxpayer declines to answer questions and declines to provide the records necessary for a successful criminal investigation.  You have every right to take this position.  Use it!

Overview of IRS Criminal Investigations

  FY 2005 FY 2004 FY 2003
Investigations Initiated 4269 3917 4001
Prosecution Recommendations 2859 3037 2541
Information/Indictments 2406 2489 2128
Total Convictions 2151 2008 1824
Total Sentenced* 2095 1777 1768
Percent to Prison 83% 84% 84%

*Sentence includes confinement to federal prison, halfway house, home detention, or some combination thereof. A fiscal year runs from October 1 through September 30.