26 U.S.C. § 7206(1) — "tax perjury" — punishes willfully signing under penalty of perjury a tax return the signer does not believe is true and correct. Maximum penalty: 3 years imprisonment, $100,000 fine ($500,000 corporate). Unlike § 7201 evasion, the government does not need to prove a tax deficiency — only a material false statement.
Section 7206(1) is the IRS's workhorse charge — easier to prove than § 7201 evasion because no tax loss must be shown. A return that omits income, overstates deductions, or claims credits the taxpayer is not entitled to can produce a tax-perjury conviction even when the bottom-line tax due is correct.
The Statute
26 U.S.C. § 7206(1) makes it a felony for any person who:
"Willfully makes and subscribes any return, statement, or other document, which contains or is verified by a written declaration that it is made under the penalties of perjury, and which he does not believe to be true and correct as to every material matter."
Key features:
- Applies to any IRS document signed under penalty of perjury — Form 1040, 1120, employment returns, gift returns, FBAR, etc.;
- No tax deficiency required;
- 3-year statute of limitations under 26 U.S.C. § 6531(5);
- Each return is a separate offense (multi-year cases produce multi-count indictments).
The Four Elements
The government must prove:
- The defendant signed the return or document;
- Under penalty of perjury;
- A material falsity — meaning a statement that has the natural tendency to influence or affect the IRS in any way;
- Willfully — the defendant knew the statement was false and signed it anyway.
Materiality is liberal — a false statement that influences the audit, examination, or determination of any tax liability is material, even if it does not change the bottom-line tax due.
Common Charging Patterns
Omitted Income
Failure to report cash receipts, contractor income, or rental income. Common in service businesses and gig-economy returns.
Inflated Deductions
Personal expenses claimed as business; charitable contributions exceeding actual amounts; mileage logs created post-hoc.
False Credits
Earned Income Tax Credit, child tax credit, and education credits claimed without satisfying eligibility.
Sham Entities and Loss Generators
Pass-through losses generated by sham businesses with no genuine economic activity.
Trust Fund Diversion
S corporation owners paying personal expenses through the corporation and not adjusting K-1 income.
Willfulness Defense
Same standard as § 7201 — voluntary, intentional violation of a known legal duty (Cheek v. United States). Common defenses:
- Reliance on accountant or tax preparer — taxpayer provided complete information and signed in reliance on the preparer's work;
- Good-faith misunderstanding — taxpayer believed the deduction was legitimate or that income was not reportable;
- Mental health or cognitive issues affecting capacity to understand;
- Negligence rather than willfulness — sloppy bookkeeping, careless review, but no knowing falsity.
Reliance defense requires a complete and honest disclosure to the preparer — selective disclosure to the CPA does not establish reliance.
Penalties and Guidelines
- 3 years per count;
- $100,000 fine ($500,000 corporate);
- Costs of prosecution;
- USSG § 2T1.1 governs sentencing — same tax-loss tables as § 7201;
- Restitution typically ordered — though it must be tied to a specific tax loss.
Multi-count indictments (3-5 years of false returns) are common — but Guidelines treat related offenses as grouped for tax loss purposes, so additional counts do not always linearly increase exposure.
Strategic Considerations
Section 7206(1) is sometimes a plea-bargaining destination from a § 7201 indictment — defendant pleads to the easier-to-prove perjury charge in exchange for the harder-to-prove evasion charge being dropped. This works because the maximum sentence is shorter (3 vs. 5 years per count) and the elements are easier to admit.
Defense considerations:
- Cooperation pre-indictment can result in declination;
- Voluntary amendment of the false return is not a defense — but timing affects intent analysis;
- Conviction triggers automatic CPA license revocation (for CPAs) and bar discipline (for attorneys).
What to Do If You Are Under Investigation or Charged
- Do not speak with IRS Criminal Investigation (CI) agents without an attorney — even informally. Special agents are not auditors; they investigate crimes.
- Do not destroy or alter records — destruction can become obstruction under 18 U.S.C. § 1519 with a 20-year maximum.
- Locate and preserve all bank records, returns, ledgers, emails, and accountant correspondence.
- Discontinue the conduct — but do not amend returns or take corrective action without counsel; both can be used against you.
- Engage federal tax defense counsel immediately — call L and L Law Group at (214) 466-1398, available 24/7.
Frequently Asked Questions
Is § 7206(1) easier to prove than tax evasion?
Yes — the government does not need to prove a tax deficiency, only a material false statement. This is why § 7206(1) is the IRS's most common substantive tax charge.
What is "material" under § 7206(1)?
A statement is material if it has the natural tendency to influence or affect IRS decisions. The bar is low — even false statements that do not change tax due can be material.
Can I be charged if my CPA prepared the false return?
Yes — you signed it under penalty of perjury. The reliance defense is available but requires showing you provided complete and accurate information to the preparer.
What is the statute of limitations for § 7206(1)?
3 years from the date the return was filed, under 26 U.S.C. § 6531(5).
Can multiple false returns be charged separately?
Yes — each year is a separate count. Sentencing Guidelines group related counts for tax loss calculation, so the practical effect is less than a count-by-count multiplication.
Speak With a Frisco Criminal Defense Attorney
If you or a loved one is facing federal tax crimes charges in Frisco, Collin County, or anywhere in the Dallas-Fort Worth metroplex, the time to act is now. L and L Law Group attorneys are available 24 hours a day, 7 days a week. Call (214) 466-1398 for a free, confidential consultation, or submit your case online and a licensed attorney will contact you directly.
This article is general information, not legal advice. Texas and federal criminal law are complex and fact-specific — please consult a licensed attorney about your particular situation. Past results do not guarantee future outcomes.