Failing to pay taxes can lead to penalties and liens — but when taxpayers intentionally conceal income, falsify records, or hide assets, it crosses the line into criminal tax evasion under IRC §7201. Unlike the misdemeanor failure-to-file charge under §7203, tax evasion is a felony punishable by up to five years in prison and $100,000 in fines (or $500,000 for corporations). The IRS Criminal Investigation Division (CI) and the Department of Justice (DOJ) prosecute these cases aggressively, often based on years of financial records, third-party reports, and digital evidence.
📘 Official IRS References: IRC §7201 — Attempt to Evade or Defeat Tax
Elements of the Crime: Tax Evasion Under IRC §7201
Under IRC §7201, tax evasion involves any willful attempt “to evade or defeat any tax or the payment thereof.” Prosecutors must prove three elements beyond a reasonable doubt:
| Element | Definition |
|---|---|
| 1️⃣ Tax Deficiency | A real tax due and unpaid. |
| 2️⃣ Affirmative Act of Evasion | An intentional step to conceal or mislead. |
| 3️⃣ Willfulness | Knowledge and intent to violate the law. |
Tax evasion requires affirmative conduct — simple non-filing or late payment is not enough. The taxpayer must take deliberate steps to mislead the IRS.
Understanding Willfulness in Tax Evasion
“Willfulness” means the voluntary, intentional violation of a known legal duty — not mere negligence or mistake.
| Potential Behavior | Potential IRS Interpretation |
|---|---|
| Filing false or incomplete returns | Intent to deceive |
| Using offshore accounts | Concealment of assets |
| Keeping dual sets of books | Deliberate misrepresentation |
| Structuring transactions to avoid reporting | Knowledge of illegality |
| Lying to IRS agents or auditors | Conscious obstruction |
Penalties and Consequences
A conviction under IRC § 7201 is a felony offense with severe consequences:
- Imprisonment: Up to five years in federal prison.
- Fines: $100,000 for individuals and $500,000 for corporations.
How IRS Criminal Investigations Begin?
The IRS Criminal Investigation (CI) unit is the law enforcement arm of the IRS. It typically launches an evasion investigation when revenue officers detect indicators of fraud, such as hidden assets or false statements.
💡 Note: Once assigned to a Special Agent, your case is criminal in nature — not civil. Anything you say can be used in prosecution.
Why Legal Representation Matters?
Legal representation is very important. The earlier counsel intervenes, the better.
| Scenario | Attorney’s Role | Impact |
|---|---|---|
| Received IRS CI letter or Special Agent contact | Initiate representation, cease all direct communication | Prevents self-incrimination |
| Found discrepancies during audit | File voluntary disclosure | Converts case from criminal to civil |
| Suspected fraud indicators | Attorney-led risk assessment | Strategic response and protection |
| Summons or subpoena issued | Challenge scope or negotiate compliance | Protects privilege |
| DOJ Tax Division referral | Negotiate settlement or non-prosecution | Reduces or eliminates criminal exposure |
📘 Reference: Form 2848 – Power of Attorney
Need help with a similar issue? Contact our firm today for a consultation.
If you’ve underreported income, overstated deductions, or concealed assets, you may be at risk of tax evasion charges under IRC §7201.
Contact Pelham PLLC today for a confidential consultation with our federal tax defense attorneys. We represent clients nationwide in criminal tax cases, and IRS investigations — protecting your rights before it’s too late.
FAQs
Can you go to prison for tax evasion?
Yes. The maximum penalty is 5 years per count.
