The federal tax code is a complex set of rules and regulations that must be strictly adhered to, and to willfully and intentionally violate the tax code by underreporting income, filing a false income tax return, or failing to file a tax return at all, is to commit the federal crime of income tax fraud.

Tax fraud is aggressively investigated in the United States and allegations of tax fraud and tax evasion are prosecuted harshly by the federal government.

If you are found guilty of tax fraud, you could face criminal penalties amounting to up to five years in federal prison, plus hefty fines and other life-altering consequences, possibly including job loss and a loss of credibility.

For more information about federal tax laws, or to find out how best to defend yourself against tax fraud or tax evasion, contact our Orange County criminal defense attorneys at Seyb Law Group today.


According to reports, tax code violations are most commonly committed by service workers who are paid in cash and self-employed taxpayers running cash-based businesses, who may either intentionally or unintentionally underreport their cash income, although violations of this kind can be committed by virtually any taxpayer – individual or corporate.

That being said, not all violations of the tax code constitute the crime of tax fraud, and any time you are facing allegations of tax fraud or tax evasion, it is imperative that you have a clear understanding of federal tax fraud law and how it applies to your case.

Our criminal defense attorneys at Seyb Law Group have more than 60 years of combined criminal defense experience, and we are intimately familiar with the federal criminal justice system and the various ways in which federal criminal cases differ from state cases.

For years, the Internal Revenue Service (IRS) concentrated on investigating and prosecuting tax code violations perpetrated by corporate taxpayers, leaving individual taxpayers well enough alone, but the IRS is now focusing its efforts on identifying individual tax fraud and recouping taxes and penalties for the federal government.

And while the IRS does not pursue tax fraud cases for a great many people, the punishment for those who are caught and prosecuted is harsh.

Consult our lawyers as soon as possible for a free evaluation of your federal tax fraud case.


Income tax fraud, also known as tax evasion, is defined as the willful attempt to evade tax law or defraud the IRS by intentionally failing to file an income tax return, evading taxes, making false or fraudulent claims, preparing and filing a false tax return, intentionally failing to report all income received, or willfully failing to pay all taxes due.

When investigating allegations of tax fraud, tax auditors will look for common signs of fraudulent tax-related activity, which may include the following:

  • Falsifying documents
  • Overstating exemptions and deductions
  • Concealing or transferring income
  • Using a false Social Security number
  • Claiming an exemption for a nonexistent dependent
  • Falsifying personal expenses as business expenses
  • Understating income
  • Not keeping records
  • Concealing assets

One of the most important elements of the crime of tax fraud is intention, and only if the prosecutor in your case can prove intention, can you be convicted of federal tax fraud.

For example, to be found guilty of filing a fraudulent tax return, you must have knowingly and willfully lied on your taxes or other tax-related documents, either by intentionally leaving certain income off your tax return or by altering your income forms to reflect false information.

Federal Income Tax Fraud 26 U.S.C. § 7201, § 7203 and § 7206(1)

There are a number of federal statutes that make it a crime to willfully evade or attempt to evade tax law or otherwise defraud the IRS.

The federal law that prohibits income tax fraud and tax evasion is 26 U.S.C. § 7201 – attempt to evade or defeat tax, which states the following:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony […]

Other federal tax offenses are governed by 26 USC § 7203 – failure to file a tax return, which states the following:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor […]

Also, 26 USC § 7206(1) – false income tax return, which states the following:

Any person 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 […]

For the vast majority of tax returns, the statute of limitations for the IRS to pursue allegations of tax fraud is three years from the time the return is filed, assuming there is no “substantial understatement of income.”

When there is a substantial understatement of income – generally 25% of the taxable income reported on the tax return – the IRS instead has six years to challenge the return, except in cases where: the taxpayer filed a false return, failed to file a return, or willfully attempted to unlawfully evade paying taxes.

If any of these exceptions apply, the IRS has an unlimited amount of time to audit the taxpayer and charge penalties and interest.


Because the tax system relies on taxpayers’ “voluntary compliance,” violations of the tax code are not uncommon, and the IRS attempts to discourage such violations by seeking prison time for convicted offenders and assessing considerable fines, penalties, and civil taxes for tax fraud crimes.

Under federal law, any taxpayer that willfully evades or attempts to evade tax law or defraud the IRS is subject to both civil and criminal penalties, and the nature of the tax fraud will determine the resulting penalty. The following are some examples of specific types of tax fraud and the criminal penalties that may result from a conviction:

  • Attempting to evade taxes (26 USC § 7201) – A felony offense punishable by imprisonment in federal prison for up to five years and/or a fine of up to $250,000 (for individuals) or $500,000 (for corporations)
  • Failing to file a return, supply information or pay taxes at the time required by law (26 USC § 7203)– A misdemeanor offense punishable by imprisonment in federal prison for up to one year and/or a fine of up to $100,000 (for individuals) or $200,000 (for corporations)
  • Making false or fraudulent claims (26 USC § 7206(1)) – A felony offense punishable by imprisonment in federal prison for up to three years and/or a fine of up to $250,000 (for individuals) or $500,000 (for corporations)


When tax fraud or tax evasion is suspected, the IRS will conduct an audit to investigate the circumstances of the suspected fraud and determine whether to pursue prosecution in criminal court.

And if the IRS investigation turns up any red flags that signal illegal tax fraud or tax evasion, you could end up facing criminal charges in federal court.

Allegations of illegal tax fraud and tax evasion are investigated by the IRS Criminal Investigation division – the agency’s law enforcement branch, which is also responsible for investigating money laundering, Bank Secrecy Act violations and other tax crimes – and are prosecuted by the Tax Division of the Department of Justice.

According to the IRS, the agency prosecutes roughly 75% of the tax fraud cases they investigate.

Whatever the reason for your tax fraud charges, your first course of action upon being arrested for or charged with this federal offense should be to contact a skilled tax fraud defense attorney with extensive experience in federal court.

You should never attempt to address allegations of tax fraud without a knowledgeable defense attorney on your side, nor should you answer the IRS’ questions about any potential tax issues without consulting an attorney.

Far too often, individuals under investigation for tax fraud accidentally make incriminating statements that only end up hurting their case later on.

It is important to remember that any time you are facing criminal charges, no matter what the charges are for, you are legally considered innocent until proven guilty, no matter what the IRS tells you to try to get you to talk.

In tax fraud cases, the prosecution can only convict you of the crime if they can prove beyond a reasonable doubt that you were aware of your wrongdoing and intentionally misreported your taxes or attempted to evade taxes.

Best Defense Strategies in Federal Tax Fraud Cases

Tax evasion is widespread in the United States and the federal government has taken steps to crack down on willful violations of the tax code, by prosecuting such crimes to the fullest extent of the law.

However, in some cases, what may appear to be tax fraud or tax evasion is simply negligence, a careless error or other unintentional conduct, in which case criminal prosecution is not the answer.

Whatever the circumstances of your tax fraud case, it is imperative that you tell your defense attorney the truth so he or she can mount the right defense to successfully fight the allegations against you.

Some possible defenses your attorney may present on your behalf include the following:

  • Misunderstanding – If your attorney can prove that you honestly believed that you were not evading or hiding your taxable income because of some misunderstanding of the tax code, you cannot lawfully be found guilty of tax fraud.
  • Entrapment – If a representative of the government compelled or coerced you to commit a tax fraud crime that you would otherwise not have committed, your attorney may be able to get the charges dropped.
  • Statute of limitations – If the statute of limitations for tax fraud has run out, the IRS cannot file tax evasion charges, even if they have sufficient evidence that you committed the crime.
  • Insufficient evidence – If the prosecution cannot prove the elements of tax fraud beyond a reasonable doubt, you cannot lawfully be convicted of the crime.
  • Unintentional conduct – If you did not intend to evade paying taxes and did not have a clear understanding of the possible consequences of your wrongdoing, you would not be criminally liable under federal tax fraud law.


Tax fraud charges are typically brought after a lengthy investigation by the IRS and the financial records and other documents involved in a tax fraud case can be complicated and confusing.

It is imperative that you have a trial-tested attorney on your side who has experience defending federal tax fraud cases, so you can avoid the personal and professional consequences of a criminal conviction.

All fraud crimes carry a social stigma that can last for the foreseeable future, even after you have served your prison sentence and satisfied the other requirements of your criminal punishment.

A tax fraud conviction could also cause you to lose your job, your professional licensing and the trust and respect of your friends, colleagues and even your family members.

If you are under investigation for tax fraud, your entire future is on the line, and an experienced defense attorney will be invaluable in proving your innocence and protecting your rights and your freedom.

You have too much to lose in a dispute with the IRS, and a tax professional will prove to be a tremendous asset in your criminal case.


To defraud or attempt to defraud the IRS is a federal offense and if you are found guilty of tax fraud, you will face harsh criminal penalties, including imprisonment in federal prison, significant fines and restitution, among other penalties.

And even after you have satisfied the terms of your punishment, you will still have a permanent criminal record, which can adversely affect virtually every aspect of your life for years to come.

If you or someone you know is under investigation for federal tax fraud, do not hesitate to contact our knowledgeable criminal defense attorneys for legal help.

With our legal team at Seyb Law Group on your side, you can significantly improve your chances of a favorable outcome in your criminal case.

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