IRS Tax Evasion – Willfulness Defense

U.S. taxpayers who fail to file tax returns or pay taxes due, face a felony for willful evasion of tax (IRC Sec. 7201). U.S. taxpayers, particularly international investors who are classified as U.S. taxpayers, under either the “Substantial Presence Test” or “Green Card Test”, often defend their tax non-compliance by stating that they were “unaware of the law”.

Under U.S. tax law, “ignorance of the law is no excuse” (in Latin: ignorantia juris non excusat). The legal principal is that a person who is unaware of a law may not escape liability for violating that law because they were unaware of its content.

U.S. Model Penal Code Section 2.02(9) states that knowledge that an activity is unlawful is not an element of an offense unless the statute creating the offense specifically makes it one.

For federal tax evasion, willfulness is required. This legal position was enshrined in Cheek v. U.S., (1991) 498 U.S. 192, which stated that in a federal criminal tax case, a taxpayer’s “good faith” belief that he was not required to file tax returns would negate the ‘intent element’ of the crime of tax evasion (however, the defendant Cheek was held to not have a “good faith belief” and was convicted by the jury; i.e., the final arbiter of the evidence) and served a year and a day in jail.

On the issue of intent, the jury may consider “willful blindness”; i.e. the defendant willfully, knowingly and intentionally concealed the truth from himself, so that the defendant “intentionally” committed a tax crime.

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