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Criminal Tax: What is Willfulness?

The assessment and collection of taxes is a complex undertaking. Just perusing the IRS tax code will certainly attest to this fact. Since the government’s establishment of collecting taxes, there has always been a good majority of the tax payer populace that looks for ways to avoid paying taxes.

It is important to note that in and of itself avoiding the payment of taxes is no crime and in fact, arranging your financial affairs in such a way to minimize payment with legitimate means is completely allowed and without issue. However, a problem arises if the IRS has determined that what you are doing is tax evasion. To be precise, at certain points the difference between tax avoidance and tax evasion boils down to a very fine line separating the two, which can bring you an audit or a criminal investigation. In the end, the burden is placed on you to prove that the misstatements on your tax return were innocent, i.e. without willfulness.

Willfulness According to the IRS

Tax rules and laws are difficult for many people to comprehend; and in fact, the IRS agrees. Errors or misstatements due to confusion or honest mistakes are often assumed to be mere negligence by IRS agents. Nevertheless, these still carry consequences by way of penalties. On the other hand, you can be certain that the identifying mark between these acts versus those that constitute willful tax evasions will alert IRS tax auditors and could begin a criminal investigation. Some examples of willful acts include:

  • Money laundering
  • Bank secrecy act violations
  • Failing to report offshore accounts
  • Underreporting income
  • Improper deductions

Whether or not you meant to impose harm or whether or not you knew of the tax filing requirements is hardly ever enough to get you out of trouble. In order for the IRS to assert tax evasion, it must gather together these three elements:

  • The existence of a tax deficiency
  • An affirmative act constituting an evasion or attempted evasion of tax
  • Willfulness

For criminal purposes, willfulness is defined as a voluntary intentional violation of a known duty. Namely, you acted with knowledge that your conduct was wrong.

A common misconception when it comes to willfulness and conduct is the “I didn’t know” defense. It is more common than not that the IRS agents take the stance that it is part of your duty to seek out knowledge and information that will ensure your tax reporting is current and in accordance to tax laws. Therefore, to rely on this protection can land you in a big mess.

It behooves the IRS to try its best to distinguish between negligence and tax fraud. As you can imagine, there is a great use of time and resources for a criminal investigation to run its course. In addition, the IRS is known to make examples out of people accused of tax evasion as a deterrent effect on the rest of the population. You can expect full prosecution to occur if a taxpayer is suspect.

If you are facing civil or criminal tax evasion charges, Dallo Law Group can help you in your case. Tax laws are intricate and each case is unique in its circumstances. We can assist you in reaching a solution with the IRS with a well formulated and effective strategy. We often settle cases for far less than what the IRS had initially proposed. Reach out to us for a free consultation and determination on how to proceed.