What are False Statements: 18 U.S.C. 1001 Tax Implications

What are False Statements 

When it comes to tax crimes, most often US taxpayers will associate the phrase ‘tax evasion’ as the only type of tax crime a person can commit. And while tax evasion is a relatively common tax crime that gets a lot of media attention, there are several other types of tax crimes (or tax-related crimes) that a taxpayer can commit as well. One common type of crime that a person may commit that can impact taxes is making false statements. In general, making false statements in the world of tax leads to tax fraud investigations and prosecution. Let’s take a look at 18 USC 1001:

*For reference, title 18 refers to the criminal code of the USC.

18 U.S.C. 1001

• • • (a)Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully—

      • • (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;

        • (2) makes any materially false, fictitious, or fraudulent statement or representation; or

        • (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. If the matter relates to an offense under chapter 109A, 109B, 110, or 117, or section 1591, then the term of imprisonment imposed under this section shall be not more than 8 years.

    • (b) Subsection (a) does not apply to a party to a judicial proceeding, or that party’s counsel, for statements, representations, writings or documents submitted by such party or counsel to a judge or magistrate in that proceeding.

    • (c) With respect to any matter within the jurisdiction of the legislative branch, subsection (a) shall apply only to—

      • • (1) administrative matters, including a claim for payment, a matter related to the procurement of property or services, personnel or employment practices, or support services, or a document required by law, rule, or regulation to be submitted to the Congress or any office or officer within the legislative branch; or

        • (2) any investigation or review, conducted pursuant to the authority of any committee, subcommittee, commission or office of the Congress, consistent with applicable rules of the House or Senate.

Summarizing Section 18 U.S.C. 1001

This is an important code section because it provides that when a person makes a false statement with the intent to trick or deceive or otherwise make a materially false or fraudulent statement, it may result in imprisonment of up to five years — and even more so if it involves international or domestic terrorism.

Criminal Tax Manual Chapter 24

Chapter 4 of the criminal tax manual provides great insight into the crime of false statements and how it can impact tax matters. As provided specifically from the criminal tax manual:

Elements to 18 USC 1001

• • • United States v. Abrahem, 678 F.3d 370, 373 (5th Cir. 2012) (A violation of 18 U.S.C. § 1001 requires proof of five elements:

      • (1) a statement, that is

      • (2) false, (and material,

      • (4) made with the requisite specific intent, and

      • (5) within the purview of government agency – 5 – jurisdiction);

        • United States v. Siemaszko, 612 F.3d 450, 462 (6th Cir. 2010); United States v. Shafer, 199 F.3d 826, 828 (6th Cir. 1999) (quoting United States v. Lutz, 154 F.3d 581, 587 (6th Cir. 1998) (citing United States v. Steele, 933 F.2d 1313, 1318-19 (6th Cir. 1991) (en banc)); United States v. Manning, 526 F.3d 611, 613 n.1 (10th Cir. 2008) (citing United States v. Kingston, 971 F.2d 481, 486 (10th Cir. 1992)); United States v. Atalig, 502 F.3d 1063, 1066-67 (9th Cir. 2007) (citing United States v. Camper, 384 F.3d 1073, 1075 (9th Cir. 2004)); United States v. Hatch, 434 F.3d 1, 4 (1st Cir. 2006) (citing United States v. McGauley, 279 F.3d 62, 69 (1st Cir. 2002)); United States v. Pickett, 353 F.3d 62, 66-67 (D.C. Cir. 2004); United States v. Ballistrea, 101 F.3d 827, 834-35 (2d Cir. 1996); United States v. Ranum, 96 F.3d 1020, 1028 (7th Cir. 1996); United States v. David, 83 F.3d 638, 640 (4th Cir. 1996); United States v. Barr, 963 F.2d 641, 645 (3d Cir. 1992); United States v. Lawson, 809 F.2d 1514, 1517 (11th Cir. 1987); United States v. Baker, 626 F.2d 512, 514 (5th Cir. 1980); United States v. Gilbertson, 588 F.2d 584, 589 (8th Cir. 1978).

IRS Audit or Investigtion

• • • “In the criminal tax context, the statute is normally used in connection with false documents or statements submitted to an Internal Revenue agent during the course of an audit or investigation. See, e.g., United States v. Fern, 696 F.2d 1269, 1273-74 (11th Cir. 1983). Section 1001 is generally not used in the case of a false statement on a return because, if the return is signed under the penalties of perjury, as most are, Section 7206(1) of the Internal Revenue Code is considered a more appropriate charge. Because Section 1001 is normally used in criminal tax cases involving a defendant’s use of false statements or documents, the following discussion of the elements of the offense will focus on false statements or documents, rather than on concealment.”

Forged Endorsement of Tax Refund

• • • “A forged endorsement on a tax refund check has been held to be a false statement within the ambit of Section 1001. Gilbert v. United States, 359 F.2d 285 (9th Cir. 1966). In Gilbert, the defendant, an accountant, endorsed checks with the taxpayer’s name and – 7 – his own name, and then deposited the checks into his own trust account. The court acknowledged that the defendant “made no pretense that the payees had themselves executed the endorsements,” but held nevertheless that his endorsements constituted unlawful misrepresentations. Gilbert, 359 F.2d at 286-87.”

What Does Willfulness Mean?

• • • “Prosecutors should act consistently with the Solicitor General’s concession and submit Section 1001 jury instructions equivalent to the following: The word “willfully” means that the defendant committed the act voluntarily and purposely, and with knowledge that his conduct was, in a general sense, unlawful. That is, the defendant must have acted with a bad purpose to disobey or disregard the law. The government need not prove that the defendant was aware of the specific provision of the law that he is charged with violating or any other specific provision.”

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.