The government must establish that at the time the offense was committed the taxpayer owed more tax than he reported. However, it is not necessary to prove evasion of the full amount alleged in the indictment. It would be sufficient to show that a substantial amount of the tax was evaded, and this need not be measured in terms of gross and net income or by any particular percentage of the tax shown to be due and payable.

Carryback losses are technically no legal impediment to prosecution for years in which they eliminate a tax liability. However, the probability of conviction could be lessened where it is shown that a tax deficiency does not exist by operation of law.

Likewise, the acceptance by government agents of an agreement Form 870 (Waiver of Restrictions on Assessment and Collection of Deficiency in Tax and Acceptance of Overassessment) does not bar prosecution. However, experience has demonstrated that attempts to pursue both the criminal and the civil aspects of a case concurrently may jeopardize the successful completion of the criminal case. As a result, Policy Statement P–4–84, Balancing Civil and Criminal Aspects provides, among other things, that the consequences of civil enforcement actions on matters involved in a criminal investigation and prosecution case should be carefully weighed.

The substance of the offense under IRC §7201 is the term "attempt in any manner." The statute does not define attempt, nor does it limit or define the means or methods by which the attempt to evade or defeat any tax may be accomplished.

However, it has been judicially determined that the term " attempt" implies some affirmative action or the commission of some overt act. The actual filing of a false or fraudulent return is not a requisite for the commission of the offense, although the filing of such a return is usually the "attempt" to evade or defeat the tax. A false statement made to Treasury agents for the purpose of concealing unreported income has also been judicially determined to be an attempt to evade or defeat the tax.

The willful omission of a duty or the willful failure to perform a duty imposed by statute does not per se constitute an attempt to evade or defeat a tax. However, a willful omission or failure (such as a willful failure to make and file a return) when coupled with affirmative acts or conduct from which an attempt may be inferred would constitute an attempt. In the case of Spies v. United States, the Supreme Court provided illustrations of acts or conduct which may infer "the attempt to evade or defeat any tax," such as:

Attempt does not mean that one whose efforts are unsuccessful cannot commit the crime of willful attempt. The crime is complete when the attempt is made and nothing is added to its criminality by success or consummation, as would be the case with respect to attempted murder. It has been held that attempts cover both successful and unsuccessful endeavors or efforts. As the courts have stated, the real character of the offense lies, not in the failure to file a return or in the filing of a false return, but rather in the attempt to evade any tax.

It is well settled that a separate offense may be committed with respect to each year. Therefore, an attempt for one year is a separate offense from an attempt for a different year.

There may also be more than one violation in one year resulting from the same acts such as the willful attempt to evade the payment of tax and the willful attempt to evade tax. Likewise, there may be a willful attempt to evade tax and a willful failure to file a return for the same year.

In an attempt to evade or defeat the payment of any tax, the mere failure or willful failure to pay any tax does not constitute an attempt to evade or defeat the payment of any tax. The comments set out above with respect to attempts also apply to this offense. The attempt implies some affirmative action or the commission of some overt act. Examples of such action or conduct relating to the attempted evasion of the payment of tax include:

The attempt in any manner to evade or defeat any tax must be willful. Willfulness is defined as the voluntary, intentional violation of a known legal duty. Mere understatement of income and the filing of an incorrect return does not in itself constitute willful attempted tax evasion. Absent an admission or confession, willfulness is rarely subject to direct proof and generally must be inferred from the circumstances in the case. Willfulness may be inferred from any conduct, the likely effect of which, would be to mislead or conceal, such as that exemplified in Spies.

Courts have held that disbursement of available funds to creditors other than the government, or to corporate stockholders is not in itself an attempt to evade or defeat the payment of taxes.

This definition of willfulness applies to all Title 26 offenses where willfulness is an element, unless stated otherwise.

Willful failure to truthfully account for and pay over any tax is considered to be an inseparable dual obligation. Failure to pay, even though an accounting is made in the return filed, leaves the duty as a whole unfulfilled.

However, considerable difficulty has been encountered in determining the person charged with the duty of collecting, accounting for and paying over taxes, especially in cases involving small corporations where the precise duties of the officers are not clearly defined or rigidly carried out. For example, in one case, it was determined that although the president of the corporation was the dominating force in the management of the firm, the fact that there were other officers who signed some returns and engaged in financial activities on behalf of the corporation made it doubtful whether the president was the officer under a duty to perform the required acts, resulting in a dismissal of the indictment. Another case held that the term " person" includes a chief executive officer of a corporation who possesses the authority to determine how corporate funds should be expended. Accordingly, it is imperative to ascertain the various activities and responsibilities of all officers of a corporation before recommending prosecution against any one of them as the "person" defined in IRC §7343.

Willfulness under IRC §7202 is the same as for all Title 26 offenses, i.e., voluntary, intentional violation of known legal duty. Evil motive or bad purpose is not needed to establish willfulness. For example, a successful prosecution under this section was based upon the following facts: The taxpayer filed timely employment tax returns but habitually failed to pay the amount of tax shown to be due thereon. He willingly signed agreements for partial payments, made the first payment, and then ignored further requests for payments. When his bank accounts were levied upon, he closed the accounts and made arrangements with his customers to receive future payments in cash. All his assets were then transferred to the names of others. His only defense was that he used the money withheld from his employees to meet current operating expenses. An analysis of his bank accounts and records of personal expenditures showed that, contrary to his contentions, a profit was realized from the business in all years and funds were available to pay the taxes shown on the returns.

The statute of limitations for IRC §7202 violations is 6 years. Note, however two Federal district courts have concluded the limitations period to be 3 years. The position of the Department of Justice, Tax Division, is that the statute of limitations is 6 years, as provided in IRC §6531(4).

The general requirements for making a return are set forth in IRC §6012 to §6046. Persons liable under IRC §7203 include those described in IRC §7343 as follows:

In corporate cases, the person responsible for filing corporate returns may be any of several officials, and is a question of fact to be determined by competent evidence as to who has the duty. This evidence may be proof of signing past Federal returns or any state returns, or it may be in the corporate bylaws or minutes of directors' meetings.

The general requirement or duty to keep records is provided for in IRC §6001. However, the types of records kept by various individuals are not alike, and neither the statute nor the regulations define minimum standards for specific transactions or for types of businesses. For example, showing that a return was prepared from third-party records (banks, brokers, employers) may obviate the necessity for a taxpayer to keep records.

The government must establish that a return was due within the time provided by law or regulations and that there was a failure to file such return within such time. The time within which a return must be filed has been held to be the date set out in the IRC or under regulations prescribed by the Secretary, plus the last date covered by any extension of time granted by the Secretary or the Secretary's delegate. The date when a return is due under the IRC or regulations varies, depending upon the type of tax involved or the type of return required to be filed. Thus, individual income tax returns, self-employment tax returns, and partnership returns made on the basis of the calendar year shall be filed on or before the 15th day of April following the close of the calendar year; or, if made on a fiscal year basis, the return shall be filed on the 15th day of the 4th month following the close of the fiscal year. (IRC §6072(a)) Corporate returns for calendar years are due on the 15th day of March; or, if on a fiscal year basis, returns are due on the 15th day of the 3rd month following the close of the fiscal year (IRC §6072(b)). IRC §6075 relates to the time for filing estate and gift tax returns, and IRC §6071 and the regulations promulgated thereunder to the time for filing excise tax returns and other forms of returns required under the particular type of tax involved.

In addition to showing that a return was due, the government must establish that the person did not file a required return on the due date. Usually, this is accomplished by proving that the defendant did not file a return in the area of his/her legal residence or principal place of business or IRS Campus.

Willfulness means a voluntary, intentional, violation of a known legal duty.

The government must establish willfulness in the failure to file a return. However, as distinguished from willfulness in a tax evasion case, the government need not prove a tax evasion motive. Willfulness means voluntary, purposeful, deliberate, and intentional, as distinguished from accidental, inadvertent, or negligent conduct.

The statutory period of limitation for willful failure to file returns, IRC §7203 (other than information returns), or to pay tax is 6 years. A 3-year statute of limitations applies to willful failure to file information returns such as partnership returns, and to willful failure to keep records or supply information. The statutory period of limitation for willful failure to file a Form 8300 is 3 years.

A 3-year statute of limitations applies (IRC §6531), and the offense is a misdemeanor.

In a case which involves furnishing false or fraudulent information, the offense is committed and the period of limitations begins to run the date the document is filed. There are no known cases stating whether willful failure to supply information to an employer is a continuing offense for purposes of determining when the period of limitations begins to run. The safe practice is to assume it is not a continuing offense, and that the offense is committed and the statute begins to run on the date the duty of the employee to supply information arises, which he/she willfully failed to do. However, if all other facts indicate that prosecution should be recommended for this offense, the continuing offense theory may be employed.

A case involving the furnishing false or fraudulent information about interest or dividends, the offense is committed and the period of limitations begins to run the date the document is filed.