Can you go to prison for fuel tax evasion

| by Max Soni

Thanks for visiting Spodek Law Group – a second generation law firm managed by Todd Spodek. We have over 40 years of combined experience handling federal criminal defense cases, including high-profile cases that captured national attention. Our managing partner represented Anna Delvey in the case that became a Netflix series, we handled the Ghislaine Maxwell juror misconduct matter, and we’ve defended clients facing some of the most serious federal charges imaginable.

If you’re asking whether you can go to prison for fuel tax evasion, you already know the answer – or you suspect it. Yes, absolutely, fuel tax evasion is a federal crime that sends people to prison for years. Not months. Years. In 2025, federal prosecutors are actively pursuing these cases, the IRS Criminal Investigation division maintains a 90% conviction rate, and recent sentences have ranged from 37 months to 40 years depending on the fraud amount involved.

Fuel tax schemes aren’t small-time offenses the government ignores. They’re prosecuted under 26 USC § 7201 – the federal tax evasion statute – with penalties of up to five years per count, fines up to $100,000 for individuals or $500,000 for corporations, plus mandatory restitution covering every dollar you evaded plus interest and penalties. And federal judges aren’t sympathetic when defendants claim they didn’t know better or didn’t think it was “that serious.”

What Fuel Tax Evasion Actually Looks Like

Prosecutors target specific schemes. The most common one involves dyed diesel fuel – that’s diesel dyed red by the IRS and state revenue agencies to mark it as tax-exempt for off-road agricultural or heating use only. You buy red-dyed diesel at a lower price because it’s not taxed for highway use, then you sell it or use it in on-road vehicles without paying the federal excise tax. That’s evasion. Federal agents catch this through random roadside inspections, fuel tank testing, surveillance of fuel distributors, informants.

Another major category is fraudulent fuel tax credit claims. Businesses file Form 4136 claiming refunds for federal excise taxes they supposedly paid on fuel used for off-highway purposes – farming equipment, construction machinery, heating. But they’re lying about the amount, lying about the use, sometimes inventing entire businesses that don’t exist. IRS auditors compare claimed credits against actual fuel purchases, business operations, equipment owned. They find the lies quickly.

Biofuel fraud has exploded in recent years. Companies claim they produced biodiesel or renewable fuel to generate EPA renewable fuel credits and IRS tax credits – but they vastly overstated production volumes or didn’t produce anything at all. In March 2025, a Florida company general manager was sentenced to 37 months in prison for generating over $7 million in fraudulent EPA credits and seeking over $6 million in fraudulent tax credits by lying about production volumes. Earlier in 2025, five defendants received sentences ranging from 6 to 40 years in a billion-dollar biofuel tax fraud scheme where they fraudulently claimed and collected over $300 million from the IRS for 2013 production alone.

These aren’t isolated cases – they’re part of coordinated federal enforcement involving IRS-CI, EPA Criminal Investigation Division, DOJ Tax Division, and U.S. Attorneys’ Offices nationwide. In fiscal year 2024, IRS-CI initiated over 2,667 criminal investigations, obtained 1,571 convictions with a 90% conviction rate, and identified over $9.1 billion in fraud from tax and financial crimes.

The Three Elements Prosecutors Must Prove

Under 26 USC § 7201, federal prosecutors must prove three elements beyond a reasonable doubt to convict you of tax evasion.

First – a tax deficiency. You owed more tax than you reported or paid. The government doesn’t have to prove the exact dollar amount down to the penny, they just need to show a substantial tax deficiency existed. If you claimed $500,000 in fraudulent fuel tax credits, there’s your deficiency.

Second – an affirmative act of evasion. Simply failing to pay taxes isn’t enough for a criminal conviction under Section 7201. Prosecutors must prove you took specific actions to mislead or conceal – filing false forms, creating fake invoices, lying to auditors, using shell companies, keeping two sets of books, dyeing clear diesel and selling it as taxed fuel. Omissions alone don’t satisfy this element. The government needs proof you actively did something to evade the tax.

Third – willfulness. You voluntarily and intentionally violated a known legal duty. This is what separates criminal tax evasion from civil tax mistakes. Willfulness means you knew you owed the tax, you knew what you were doing was illegal, and you did it anyway. Making an honest mistake on complex tax forms isn’t willful. Creating a multi-year scheme to fraudulently claim millions in fuel tax credits absolutely is.

Defense attorneys challenge these elements, particularly willfulness. Sometimes we can show the defendant relied on bad advice from an accountant or genuinely misunderstood complex fuel tax regulations. Sometimes we can demonstrate the government’s calculations are wrong and there’s no actual deficiency. But these defenses require experienced federal criminal defense counsel who understands both tax law and criminal procedure – not a general practice attorney who’s never handled a federal tax case.

Real Prison Sentences from 2025

Joseph Oluwafemi Kolawole Akoshile was sentenced in January 2025 to 51 months in federal prison for a $3.5 million fuel credit tax fraud scheme. He filed false tax returns over multiple years claiming fuel tax credits his business wasn’t entitled to receive. The court also ordered him to pay $3,606,990.10 in restitution and serve two years of supervised release after prison. That’s over four years in federal prison for fraudulent credit claims.

The biofuel cases resulted in even harsher sentences. In the billion-dollar Washakie renewable fuels fraud prosecuted in 2024-2025, defendants received sentences up to 40 years in federal prison. These weren’t unsophisticated criminals – they were business owners, plant operators, company executives who created elaborate schemes involving fake production records, falsified EPA and IRS filings, millions of dollars moving through multiple entities. Federal judges treated them like the serious white-collar criminals they were.

A Florida fuel company manager got 37 months for the $7 million EPA credit and tax credit fraud scheme mentioned earlier. That case involved lying to federal auditors, providing false production data, overstating volumes by enormous margins. Three years in federal prison, restitution, supervised release.

These sentences follow federal sentencing guidelines under Section 2T1.1, which calculates offense levels based on the tax loss amount using a specific Tax Table. Larger frauds mean higher offense levels, which translate to longer prison sentences. Sophisticated means – using offshore accounts, corporate shells, multiple entities – can increase your offense level by additional points. If the fraud involved income from criminal activity exceeding $10,000 in any year, that’s another 2-level increase, with a minimum offense level of 12.

Acceptance of responsibility can reduce your sentence by 2-3 levels if you plead guilty early and cooperate, but that requires admitting guilt and helping prosecutors. Many defendants in fuel tax cases don’t qualify because they lied to investigators initially, destroyed records, or continued the fraud even after being audited.

Why Federal Prosecutors Pursue Fuel Tax Cases Aggressively

Fuel tax evasion costs the federal government hundreds of millions of dollars annually. The federal excise tax on gasoline is $0.184 per gallon as of 2025, according to IRS Publication 510. When you’re moving thousands or millions of gallons of untaxed fuel, the tax loss adds up fast – and that’s money that should fund highway infrastructure, transportation projects, federal programs.

Federal enforcement has been a priority since the mid-1980s when IRS and state revenue agencies identified widespread fuel tax evasion schemes. In 1994, the government implemented the red dye program specifically to combat diesel fuel tax fraud. Moving the point of taxation earlier in the distribution chain, requiring registration of fuel distributors, creating paper trails through excise tax returns – all of these measures were designed to catch evaders.

IRS-CI agents are trained specifically in financial crimes. They build cases using bank records, fuel purchase invoices, credit card statements, business tax returns, EPA filings, interviews with co-conspirators who flip, undercover operations. By the time they execute a search warrant or show up for an interview, they already know what you did – they’re looking for you to lie so they can add obstruction charges.

EPA Criminal Investigation Division works alongside IRS-CI on biofuel fraud cases because those schemes violate both tax law and environmental regulations. DOJ Tax Division authorizes prosecutions and provides specialized prosecutors. This is coordinated federal law enforcement with vast resources, and defendants are massively outgunned unless they have experienced federal criminal defense attorneys who know how to challenge the government’s case.

The 90% conviction rate tells you everything you need to know. When IRS-CI and DOJ Tax Division decide to prosecute, they win. They don’t bring weak cases. They don’t charge defendants unless they have overwhelming evidence. And federal judges – who see tax fraud cases regularly – impose serious prison sentences because tax evasion undermines the entire system.

What You Should Do If You’re Under Investigation

If IRS-CI or EPA agents contact you, if you receive a grand jury subpoena, if your accountant tells you there’s an audit that seems criminal in nature – do not talk to investigators without a lawyer present. Do not try to explain the situation yourself. Do not provide documents or records without counsel reviewing them first.

Everything you say to federal agents can and will be used against you. They’re not trying to help you or give you a chance to clear things up – they’re building a criminal case. One of the elements prosecutors must prove is willfulness, and your statements to agents can provide that proof. If you lie to federal agents, that’s a separate federal crime under 18 USC § 1001, punishable by up to five years in prison.

At Spodek Law Group – we handle federal tax cases, including fuel tax evasion charges, and we understand what’s at stake for our clients. Todd Spodek is a second-generation criminal defense lawyer with many, many years of experience handling federal cases. We’ve represented clients in cases that others said were unwinnable, and we’ve achieved outcomes that protected our clients’ freedom and futures.

Unlike other law firms who take on every single client regardless of whether they can actually help, we focus on clients we can truly make a difference for. We evaluate your case honestly – the evidence against you, the strength of the government’s proof, potential defenses, negotiation possibilities, trial strategies. We communicate this to you in simple terms so you understand your options at every stage.

Federal fuel tax cases are serious. Prosecutors are aggressive, penalties are severe, and conviction rates are high. You need defense counsel who understands federal tax law, federal criminal procedure, sentencing guidelines, and how to challenge IRS-CI investigations. You need lawyers who know how to negotiate with DOJ Tax Division attorneys and who aren’t afraid to take your case to trial if that’s the best option.

If you’re facing a fuel tax evasion investigation or charges, contact us. We’re available 24/7, we represent clients nationwide, and our goal is to provide you the best possible legal representation at every stage of your case. The worst thing you can do is ignore this or hope it goes away – it won’t. Federal cases don’t disappear, they get worse the longer you wait.