26 U.S.C. § 7206 – Fraud and false statements

26 U.S.C. § 7206 – Fraud and false statements

26 U.S.C. § 7206 is a section of the Internal Revenue Code that makes it a felony to make false statements on tax returns or other documents submitted to the IRS. This law is an important tool used by federal prosecutors to charge people who intentionally try to evade taxes by lying on their tax returns.

The law has two main parts:

1. It’s illegal to willfully make a false statement on a tax return or other document signed under penalty of perjury.
2. It’s illegal to willfully help someone else make a false statement on a tax return or document submitted to the IRS.

A conviction under this law can result in up to 3 years in prison and substantial fines – so it’s not something to take lightly!

What is considered a false statement?

There are a few common ways people can make false statements that violate §7206:

• Underreporting income
• Overstating deductions or credits
• Claiming exemptions or dependents that don’t qualify
• Lying about the source of income
• Providing false information about assets/liabilities on an IRS financial form

Basically any intentional lie or misrepresentation made to the IRS in order to reduce taxes owed can potentially be charged under §7206. Even small amounts can trigger charges.

What documents does this law apply to?

While tax returns are the most common documents involved, §7206 applies to any document signed under penalty of perjury and submitted to the IRS. This includes:

• Tax returns
• IRS financial statements like Form 433-A or 433-B
• Documents signed during an IRS audit
• Responses to IRS notices

So any written statement made to the IRS under oath can lead to charges if found to be willfully false.

What are the penalties?

A conviction under §7206 can lead to:

• Up to 3 years in prison
• Substantial fines up to $100,000
• Probation and community service

In addition, the IRS will seek to recover the unpaid taxes plus interest and penalties. So false statements can end up being very costly.

What are some key court decisions on §7206?

There have been many court cases that have helped define exactly what conduct violates §7206. Some key precedents include:

• United States v. Bishop – Held that a willful blindness to the truth can meet the “willfulness” standard under §7206. So deliberately avoiding learning facts can show intent to violate the law.[1]
• United States v. Marashi – Ruled that a conviction under §7206 does not require the government to prove an actual tax deficiency resulted from the false statements.[2]
• United States v. Clifton – Upheld convictions of tax preparers who included false deductions and credits on client returns. Preparers can be charged under §7206 even if clients knew of falsity.[3]

These cases and others help define the scope of prohibited conduct under §7206.

What are some potential defenses?

While §7206 charges should always be taken very seriously, some potential defenses include:

• Lack of willfulness – The false statements must be willful or deliberate, not accidental mistakes.
• Reliance on a tax professional – Reasonable good faith reliance on a tax advisor may negate willfulness.
• No false statement – Argue that any alleged misstatements were not actually false.
• No material difference – The falsehood must be materially relevant to tax liability to support charges.

An experienced tax attorney can evaluate the evidence and advise on the best defense strategies.

Takeaways on §7206

Here are some key points to remember about §7206:

• Applies to any willfully false statement made under penalty of perjury to the IRS
• Most often charged relating to false items on tax returns
• Can be applied to lies on financial forms and other IRS documents too
• Doesn’t require the IRS to prove an actual tax deficiency
• Penalties include steep fines and years in prison
• An experienced tax defense attorney can help fight the charges

Bottom line – be truthful in all statements made to the IRS, or you could find yourself facing criminal charges under §7206!

References

1. United States v. Bishop
2. United States v. Marashi
3. United States v. Clifton
4. Tax Evasion and Tax Fraud Lawyer
5. Can You be Prosecuted for Perjury or False Statements in Your Tax Returns?
6. Tax Fraud & Tax Evasion Attorney in Orange County
7. New Jersey tax preparer arrested for fraudulently seeking over 124 million dollars in COVID-19 employment tax credits
8. What if I need legal representation to help with my tax problem but can’t afford it?
9. Criminal Tax Case Procedures

The additional search results provide more context on §7206 charges, potential defenses, and the role a tax attorney can play in fighting the charges. Key points include:
Hiring an experienced tax defense lawyer early on is critical to build the strongest case (References 4, 5, 6)
The IRS and DOJ aggressively pursue §7206 charges even for small amounts (References 7, 9)
Proving lack of willfulness or good faith reliance on a tax advisor are two potential defenses (References 5, 9)
The final decision to prosecute lies with the DOJ Tax Division (Reference 9)
An attorney can advise on the best defense strategies based on the specific facts (References 4, 5, 6)