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January 23, 2008

Making False Statements to IRS is a Crime

Former NFL player Dana Stubblefield pleaded guilty to lying to an IRS agent. AP report dated Jan. 18, 2008. Under a plea agreement he may spend up to 6 months in the federal penitentiary. He lied about using steroids.

We generally think of persons getting into criminal difficulties with IRS when they affirmatively make false statements in writings that were signed subject to stated penalties of perjury (maybe appearing back in the instructions). Indeed, Code Sec. 7206 imposes such a rule. However, there are other federal statutes that can turn an oral statement made to a revenue agent in the course of an audit into a trip to the penitentiary.

Code Sec. 7201 is the general “attempt to evade or avoid” section, which can apply to such oral misstatements. U.S. v. Beacon Brass Co, (1952, S Ct) 42 AFTR 654 , 344 US 43 . More threateningly, 18 USCS 1001 can apply. This is the general statute making it a crime to make false statements to federal agents.

Brogan v. U.S., 118 S. Ct. 105 (1998) ruled that a taxpayer that falsely says “no” when asked if he engaged in tax evasion can be criminally liable. Apparently this means that the correct answer is to plead the Fifth Amendment in that case, and otherwise say nothing.

The presence of these statutes, and the way they have been historically applied, makes it very difficult for IRS to carry off the model of being a customer service agency. Taxpayers need to remember that they can be liable for criminal prosecution for even casual conversations with IRS agents in the course of their duties, without any written penalties of perjury statement being violated.