Almost anyone who has ever signed a tax return—even the most forthcoming among us—has at least wondered what kinds of misrepresentations land taxpayers in hot water. Fudging tax documents is called “tax perjury”: It occurs when taxpayers intentionally file fraudulent documents or help others do the same. It’s a crime under federal law.
Tax perjury can be one of two distinct crimes: the act itself and aiding or assisting in it. Someone commits the crime by filing or assisting in the filing of a tax return without believing that every “material” representation in it is accurate.
Submitting Fraudulent Tax Documents
To establish that someone has committed tax perjury the government must prove that the defendant
- signed a false document, whether a tax return or any other paper submitted to the IRS
- stated that he or she signed it under penalty of perjury
- didn’t believe that every “material” matter in it was true and correct, and
- intended to violate the law.
A misrepresentation is “material” if it is capable of frustrating the IRS’s ability to verify that the citizen has paid enough taxes. Whether the information at hand is material doesn’t depend on the amount of money involved.
Examples of material misrepresentations include wrongly identifying an income source and misstating or omitting any figure that affects the amount of tax due. Supplying correct but incomplete information is enough to violate the law.
The law requires not only that any misrepresentation be material, but also that it be intentional. A taxpayer won’t be liable for making an honest mistake, even if it alters the amount of tax owed. When a third party tax preparer such as an accountant is involved, the taxpayer isn’t responsible for any errors or misstatements as long as he or she provided the preparer with complete and accurate information and didn’t intend to deceive the government.
Aiding or Assisting
The crime of aiding or assisting in the preparation of a fraudulent tax return requires that
- the defendant helped someone prepare a tax return or other document submitted to the IRS
- the document contained at least one material misrepresentation, and
- the defendant intended to aid the attempt to mislead the government.
The aiding and assisting statute applies not only to people directly responsible for preparing a false document, but also to anyone who helps or encourages the attempt to mislead the IRS. For example, a lawyer or advisor who suggests a method to avoid proper tax payment is liable.
Whether the deception is significant enough to violate the law depends on the above definition of “materiality.”
Tax Perjury Penalties
Tax perjury itself and the act of aiding or assisting it are felonies. In both instances the defendant is subject to a maximum fine of $100,000. If the defendant is a corporation, the maximum is $500,000. The defendant is also subject to a prison sentence of up to three years. The sentence depends on a variety of factors, not least of which is the amount of money the defendant attempted to illegally retain or obtain. Other factors that will affect the punishment include whether:
- the fraud was part of a scheme that created a considerable portion of the defendant’s income
- the defendant was in the business of preparing tax returns, and
- the defendant attempted to conceal the fraud with sophisticated methods.
Getting Legal Assistance
If you are charged with a tax crime, or are simply being investigated for one, contact an experienced criminal defense attorney immediately. Look for someone who regularly handles federal tax cases. Only an experienced attorney will be able to assess the strength of the case against you, explore any possible defenses, and represent your best interests during each step of the way.