IRS OVDP- Taxpayer Willfulness – Tax Evasion

For criminal prosecution for federal tax evasion, taxpayer “willfulness” is required. In the case of Cheek v. US (1991) 498 US 192, the US Supreme Court stated that a taxpayer’s “good faith belief” that he was not required to file tax returns would negate taxpayer willfulness (i.e. taxpayer intent required for the crime of tax evasion).

Scienter is the legal term that refers to intent or knowledge of wrongdoing. The “offending party” has knowledge of the “wrongness” of an act or event prior to committing the act. So in the case of tax evasion, the taxpayer has knowledge that they are intentionally committing tax evasion which is different than a “good faith belief” that he was not required to file tax returns and/or pay taxes.

On the issue of intent (i.e. scienter/willfulness) the trier of fact (judge/jury) may consider a taxpayer’s “willful blindness” i.e. the defendant willfully, knowingly and intentionally concealed the truth from himself, so that the defendant intentionally committed a tax crime.

The IRS has not defined willfulness in the Internal Revenue Code or related Treasury Regulations. However, based on available tax information the following factors may be considered to determine whether the Taxpayer was willful and intentionally committed tax evasion:

1) Age

2) Educational Background

3) Health

4) Language Barriers

5) Mental Capacity (eg. IQ, other intelligence criteria)

6) Mental Impairment ( illness eg. Alzheimers, Substance Abuse, Depression, Physical/Emotional Trauma) at the time
of the alleged tax evasion;

7) Reliance on 3rd Party Professional or Other Advice

8)Good Faith Mistaken Belief.

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