Monday, November 19, 2007

Tax Problem - Willful failure to file tax return can be treated as a felony under IRS 7203

United States of America, Plaintiff-Appellee v. Phil Loren Myers, Defendant-Appellant.

U.S. Court of Appeals, 5th Circuit; 06-11080, November 9, 2007.

Unpublished opinion affirming, per curiam, an unreported DC Texas decision.

[ Code Sec. 7203]

Crimes: Failure to file returns: Conviction: Evidence: Willfulness established. --
An individual's conviction on two counts of failure to file income tax returns was upheld. The evidence established the essential elements of the offense beyond a reasonable doubt and was sufficient to support the jury's determination that the individual had willfully failed to file tax returns. Although he testified that he believed that the income tax system was voluntary and that he was not required to file, the individual knew from previous experience that income derived from currency trading was taxable and took other actions to protect his property from the IRS. Further, he filed tax returns and paid taxes until he lost a dispute with the IRS over a tax shelter and threatened to take action against the IRS if it continued collection efforts.

Before: King, DeMoss and Benavides, Circuit Judges.

PER CURIAM: * Phil Loren Myers (Myers) appeals his convictions on two counts of willfully failing to file income tax returns. Myers does not dispute that he failed to file income tax returns for 2001 and 2002, when he realized substantial income from a currency trading venture, but he argues that the evidence was insufficient to prove that his failure to file was willful. Myers contends that he sincerely believed, based on his own research, that he was not required to file.

Because the issue was preserved, we review Myers's insufficiency argument to determine "whether, viewing all the evidence in the light most favorable to the verdict, a rational trier of fact could have found that the evidence establishes the essential elements of the offense beyond a reasonable doubt." United States v. Villarreal, 324 F.3d 319, 322 (5th Cir. 2003). "`[I]t is not necessary that the evidence exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt.' " United States v. Williams, 264 F.3d 561, 576 (5th Cir. 2001) (citation omitted).

The evidence showed that Myers filed income tax returns and paid taxes until he lost a dispute with the Internal Revenue Service (IRS) over a tax shelter. Although Myers testified that he believed that the income tax system was voluntary and that he was not required to file, he knew from previous experience that income derived from currency trading was taxable, and he put assets in his wife's name and took other actions designed to protect his property from the IRS. Myers also threatened to take action against the IRS if it continued collection efforts. The above evidence was sufficient to support the jury's determination that Myers willfully failed to file tax returns. See United States v. Cheek, 498 U.S. 192, 201 (1991); United States v. Shivers, 788 F.2d 1046, 1048-49 (5th Cir. 1986).

The judgment of the district court is AFFIRMED.

* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

Willful Failure to File Return, Supply Information, or Pay Tax: Willful failure to file returns

It was for the jury to decide whether the failure to file the returns was willful.

Knohl, DC, 55-1 USTC ¶9145, 126 FSupp 830.

Individuals were convicted of willful failure to file tax returns or their convictions were affirmed on appeal in the following cases.

F.L. Benus, CA-3, 62-2 USTC ¶9549, 305 F2d 821.

E.D. Burgin, CA-6, 62-1 USTC ¶9139, 297 F2d 63.

E. Barrett, CA-5, 61-2 USTC ¶9772, 296 F2d 309.

J.G. Ryan, CA-10, 63-1 USTC ¶9306, 314 F2d 306.

D.S. Fago, CA-2, 63-2 USTC ¶9576, 319 F2d 791. Cert. denied, 375 US 906.

M.F. Doelker, CA-6, 64-1 USTC ¶9236, 327 F2d 343.

C.L.O. Edwards, CA-9, 67-1 USTC ¶9356, 375 F2d 862.

R.E. Gorman, CA-7, 68-1 USTC ¶9312, 393 F2d 997.

S. MacCorkle, CA-4, 69-1 USTC ¶9365, 407 F2d 497.

L. Berkman, CA-2, 69-2 USTC ¶9696. Cert. denied, 396 US 1014.

G.E. Lazaroff, CA-2, 69-1 USTC ¶9337, 409 F2d 567. Cert. denied, 396 US 891.

D. MacLeod, CA-8, 71-1 USTC ¶9174, 436 F2d 947.

W.A. Egan, Jr., CA-2, 72-1 USTC ¶9403, 459 F2d 997. Cert. denied, 409 US 875.

H. Gurtner, CA-9, 73-1 USTC ¶9228, 474 F2d 297.

J. Brewer, CA-10, 73-2 USTC ¶9612, 486 F2d 507.

J.B. Sherman, CA-6, 74-1 USTC ¶9103, 486 F2d 1404.

O.H. Klee, CA-9, 74-1 USTC ¶9412, 494 F2d 394.

R.E. Hawk, CA-9, 74-1 USTC ¶9465, 497 F2d 365.

M.L. Cooley, CA-9, 74-2 USTC ¶9718, 501 F2d 1249.

G.R. Swanson, CA-8, 75-1 USTC ¶9191, 509 F2d 1205.

J.W. Greenlee, CA-3, 75-1 USTC ¶9488, 517 F2d 899. Cert. denied, 423 US 985.

K.R. Farris, CA-7, 75-1 USTC ¶9497, 517 F2d 227.

E.H. Moore, Jr., CA-6, 75-2 USTC ¶9548.

J.J. Duffy, Jr., CA-3, 75-2 USTC ¶9674.

P. Pandilidis, CA-6, 75-2 USTC ¶9785. Cert. denied, 424 US 933.

T.D. Oaks, CA-9, 76-1 USTC ¶9120, 527 F2d 937.

V.M. Sapere, CA-2, 76-1 USTC ¶9299, 531 F2d 63.

W.M. Gardiner, CA-9, 76-1 USTC ¶9300, 531 F2d 953.

N.L. Bianco, CA-2, 76-1 USTC ¶9351, 534 F2d 501.

M. Tecton, CA-4, 76-2 USTC ¶9479.

J.A. Pelose, CA-2, 76-2 USTC ¶9572, 538 F2d 41.

M. Dillon, CA-10, 78-1 USTC ¶9175, 566 F2d 702. Cert. denied, 98 SCt 1613.

M. Londe, DC, 78-2 USTC ¶9577, 449 FSupp 590. Aff'd, per curiam, CA-8, 78-2 USTC ¶9771, 587 F2d 18. Cert. denied, 439 US 1130.

N. Hayward, CA-8, 80-1 USTC ¶9296, 619 F2d 716.

G.A. Rickman, CA-10, 80-2 USTC ¶9788, 638 F2d 182.

J.E. Buras, CA-9, 81-1 USTC ¶9126, 633 F2d 1356.

M.P. Driscoll, CA-9, 80-2 USTC ¶9723, 612 F2d 1155.

E.L. Shields, CA-8, 81-1 USTC ¶9294, 642 F2d 230.

S.H. Merritt, CA-5, 81-1 USTC ¶9334, 639 F2d 254.

C.J. Civella, CA-8, 81-2 USTC ¶9809, 666 F2d 1122.

J.W. McCarty, CA-5, 82-1 USTC ¶9150, 665 F2d 596. Cert. denied, 456 US 991, 102 SCt 141.

D.L. Lewis, CA-7, 82-1 USTC ¶9236, 671 F2d 1025.

D.B. Wilber, CA-8, 83-1 USTC ¶9119, 696 F2d 79.

P.M. Drefke, CA-8, 83-1 USTC ¶9354, 707 F2d 978.

R.C. Kraeger, CA-2, 83-2 USTC ¶9453.

R.L. Turk, CA-9, 84-1 USTC ¶9115, 722 F2d 1439.

W.E. Richards, CA-8, 84-1 USTC ¶9130, 723 F2d 646.

S. Grumka, CA-6, 84-1 USTC ¶9273, 728 F2d 794.

F.H. Leidendeker, CA-9, 86-1 USTC ¶9154, 779 F2d 1417.

W.W. Shivers, Jr., CA-5, 86-1 USTC ¶9404.

J.R. Ferguson, CA-7, 86-1 USTC ¶9475, 793 F2d 828. Cert. denied, 11/3/86.

G.H. Upton, CA-8, 86-2 USTC ¶9694, 799 F2d 432.

L.L. Payne, CA-10, 86-2 USTC ¶9673, 800 F2d 227.

J.M. Grabinski, CA-8, 84-1 USTC ¶9201.

D. Thibodeaux, CA-7, 85-1 USTC ¶9308.

E. Witvoet, CA-7, 85-2 USTC ¶9530, 767 F2d 338.

J.Y. Sato, CA-7, 87-1 USTC ¶9226, 814 F2d 449. Cert. denied, 11/2/87.

R.D. Reed, CA-6, 87-1 USTC ¶9345, 821 F2d 322.

A.W. Kouba, CA-8, 87-2 USTC ¶9396, 822 F2d 768.

J.J. Birkenstock, CA-7, 87-2 USTC ¶9416, 823 F2d 1026.

J.C. Buckner, CA-7, 87-2 USTC ¶9591, 830 F2d 102.

C.L. Poschwatta, CA-9, 87-2 USTC ¶9565, 829 F2d 1477.

R.R. Johnson, CA-1, 90-1 USTC ¶50,066, 893 F2d 451.

D.L. Bowers, CA-4, 90-2 USTC ¶50,588, 920 F2d 220.

C.L. Bussey, Jr., CA-8, 91-2 USTC ¶50,402. Cert. denied, 5/18/92.

W. Willie, CA-10, 91-2 USTC ¶50,409.

R.W. Hicks, CA-9, 91-2 USTC ¶50,549, 947 F2d 1356.

S.W. Bentson, CA-9, 92-1 USTC ¶50,048, 947 F2d 1353.

L. Beall, CA-7, 92-2 USTC ¶50,417, 970 F2d 343.

W.P. Holden, Jr., CA-8, 92-2 USTC ¶50,321, 963 F2d 1114.

F.O. Becker, CA-7, 92-2 USTC ¶50,314, 965 F2d 383. Cert. denied, 113 SCt 1411.

T.E. Hauert, CA-7, 95-1 USTC ¶50,045, 40 F3d 197. Cert. denied, 5/1/95.

W.J. Benson, CA-7, 95-2 USTC ¶50,540, 67 F3d 641.

G.V. Dubin, CA-9 (unpublished opinion), 96-2 USTC ¶50,541. Cert. denied, 10/7/96. Rehearing denied, 1/21/97.

R.A. Valenti, CA-7, 97-2 USTC ¶50,629, 121 F3d 327.

S.J. Holland, CA-7, 98-2 USTC ¶50,898, 160 F3d 377.

M.L. Lindsay, CA-10, 99-2 USTC ¶50,648.

E.L. Kotmair, CA-4 (unpublished opinion), 2001-1 USTC ¶50,370, aff'g, per curiam, an unreported District Court decision.

E.F. Bradley, CA-6 (unpublished opinion), 2001-2 USTC ¶50,604, aff'g an unreported District Court decision.

D.G. Pflum, CA-10 (unpublished opinion), 2005-2 USTC ¶50,603, aff'g an unreported District Court decision.

G.P. Hayes, DC, 60-2 USTC ¶9783.

H.T. Fullerton, DC, 61-1 USTC ¶9145, 189 FSupp 211.

W.G. Haupt, DC, 63-1 USTC ¶9349.

J.R. Thompson, DC, 64-2 USTC ¶9500, 230 FSupp 530.

R.M. Sullivan, DC, 74-1 USTC ¶9292, 369 FSupp 568.

F.J. Ettorre, DC, 75-1 USTC ¶9420, 387 FSupp 582.

L.J. Trnka, DC, 75-2 USTC ¶9635.

J.N. Anderson, DC Conn., 86-2 USTC ¶9551, 637 FSupp 1106.

W.L. Parkinson, DC Ill., 87-1 USTC ¶9370.

G.M. House, DC Mich., 87-2 USTC ¶9561.

J.R. Crocker, DC Del., 92-1 USTC ¶50,008, 753 FSupp 1209.

J.F. O'Connor, DC Va., 2001-2 USTC ¶50,634.

The taxpayer's conviction on two counts of failure to file an income tax return was upheld. The taxpayer's contention that he did not have to file a return since he did not receive money as compensation because the checks he received could only be redeemed in federal reserve notes was found to be entirely without merit.

M.M. Wangrud, CA-9, 76-1 USTC ¶9358, 533 F2d 495. Cert. denied, 429 US 818.

A taxpayer who formed a corporation in 1968 was convicted by a District Court, as the responsible corporate officer, of willful failure to file corporate income tax returns for 1968 and 1969. The conviction for 1968 was reversed and remanded for a new trial. In light of the peculiarities of filing requirements for the first year of a newly-formed corporation, the District Court failed to properly instruct the jury that the government was obligated to prove that the taxpayer had a Code-imposed duty to file a calendar year return for the corporation on or before March 15, 1969. The conviction for 1969, however, was affirmed.

M. Bourque, CA-1, 76-2 USTC ¶9617, 541 F2d 290.

Taxpayer was found not guilty of willful failure to file returns.

G. Foster, DC, 62-1 USTC ¶9399.

J.A. Drost, Jr., DC, 75-1 USTC ¶9319.

Since the taxpayer was extremely neglectful of any responsibility involving record keeping, and was shown to be the type of individual who could lose his tax returns for several years without realizing it, he was acquitted as being not criminally liable for willfully failing to file timely returns. Mere carelessness or negligence falls short of the requisite intent.

S. Berg, DC, 75-1 USTC ¶9198.

Conviction on charge of failing to file an income tax return was reversed because the Commissioner failed to establish that the taxpayer received sufficient income to require filing a return.

J. Brewer, CA-10, 73-2 USTC ¶9612, 486 F2d 507.

A conviction for willful failure to file returns could not be overturned due to the IRS's failure to inform the taxpayer of specific criminal penalties for failure to file returns. Such notification is not required of the IRS under the Privacy Act. It is sufficient that IRS booklets notify taxpayers that failure to submit information may lead to intervention by the Justice Department.

D.H. Bell, CA-8, 84-1 USTC ¶9508, 734 F2d 1315.

Where the taxpayer was allegedly observed by government agents cashing in a racetrack ticket for the true owner and signing a Form 1099 in exchange for a commission, his conviction for tax evasion was reversed where the government failed to prove a tax deficiency against the true owner. Since the true owner was not permitted to continue his testimony by the court, there was a serious question that the "true owner" had, in fact, won the bet in question.

L. Petti, CA-3, 71-2 USTC ¶9653, 448 F2d 1257.

A case was remanded for a determination as to whether the taxpayer was able to pay the tax due and whether he believed that it was due.

W.T. Pinner, CA-5, 77-2 USTC ¶9706, 561 F2d 1203.


R.A. Aitken, CA-1, 85-1 USTC ¶9209, 755 F2d 188.

A return on which all zeroes were inserted in the spaces reserved for entering exemptions, income, tax, and tax withheld was a return and prosecution for willful failure to file returns was improper.

R.M. Long, CA-9, 80-2 USTC ¶9480, 618 F2d 74.

Returns filed that did not state the amount of income and that claimed the Fifth Amendment privilege against self-incrimination were not returns. R.M. Long, above, distinguished.

S.C. Muir, 41 TCM 1245, Dec. 37,821(M), TC Memo. 1981-171.

P.E. Horvath, Jr., CA-8, 84-1 USTC ¶9482.

A taxpayer, who attempted to avoid taxation by donating his wages to a church he established and using the income for his personal expenses, was found guilty of three counts of tax evasion. The taxpayer earned and spent his wages in his individual capacity and the imposition of tax did not violate the free exercise clause of the first amendment.

S.R. Washington, DC Pa., 88-1 USTC ¶9276.

An instruction concerning the individual's activities as a tax protestor as evidence of the willfulness element was not improper.

C.L. Eargle, Jr., CA-5, 91-1 USTC ¶50,046, 921 F2d 56. Cert. denied, 10/7/91.

Willfulness may be negated by a good-faith misunderstanding of the law or a good-faith belief that there is no violation regardless of whether the claim is objectively unreasonable.

J.L. Cheek, SCt, 91-1 USTC ¶50,012, 11 SCt 604.

The Seventh Circuit, on remand, reversed and remanded the unreported DC Ill. decision.

J.L. Cheek, CA-7, 91-1 USTC ¶50,232, 931 F2d 1206.

A pilot's contention that the trial court erred in not instructing the jury on the advice of counsel defense was not valid because the court's instructions treated the issues fairly and accurately. Moreover, the court's instructions as to willfulness encompassed any defense claiming a good faith belief of lawful conduct. Thus, the taxpayer's conviction and sentencing for tax evasion and failure to file returns on retrial were upheld, consistent with the U.S. Supreme Court's opinion in J.L. Cheek, SCt, 91-1 USTC ¶50,012.

J.L. Cheek, CA-7, 93-2 USTC ¶50,473, 3 F3d 1057. Cert. denied, 2/22/94.


J.C. Dunkel, SCt, 91-1 USTC ¶50,021, 111 SCt 747.

See also ¶41,318.169.

A jury instruction properly articulated the subjective standard.

G.W. Barnett, CA-5, 91-2 USTC ¶50,519.

No denial of the due process right to a fair trial occurred where an individual was able to submit to the jury the substance of his good-faith theory that he was not required to file a return, even though the contents of a book describing a successful civil case history of avoiding taxes were not admitted into evidence.

D.G. Fingado, CA-10, 91-2 USTC ¶50,528, 934 F2d 1163.

A conviction for willful failure to file tax returns was vacated and remanded because the trial court erroneously excluded evidence offered by the taxpayer to negate the element of willfulness.

R.G. Gaumer, CA-6, 92-2 USTC ¶50,444, 972 F2d 723.

An insurance agent who knew that he had a responsibility to timely file and to pay federal income taxes and who voluntarily and intentionally failed to file and pay those taxes was found to have willfully attempted to evade or defeat his tax liability. Therefore, the agent's tax liability was not dischargeable in bankruptcy. The Bankruptcy Court erred in applying the criminal definition of "willfully attempted to evade" to a civil bankruptcy discharge case under 11 U.S.C. §523(a)(1)(C). The civil definition --referring to a voluntary, intentional or conscious attempt to avoid or to fail to pay taxes --was the appropriate standard to apply.

E.W. Toti, CA-6, 94-1 USTC ¶50,235, 24 F3d 806. Cert. denied, 115 SCt 482.

The public protection provision of the Paperwork Reduction Act (PRA), which negates any penalty for failure to provide information solicited in an information collection request that does not bear a control number, did not shield the taxpayers from being criminally convicted on charges of failing to file their tax returns, despite the lack of Office of Management and Budget control numbers on the federal tax regulations and instructions to which the taxpayers would have referred had they filed tax returns.

D.W. Dawes, CA-10, 92-2 USTC ¶50,493, 951 F2d 1189.

A cement contractor's criminal conviction for tax evasion did not violate the Paperwork Reduction Act of 1980. Failure to display an expiration date on Form 1040 was not a violation of the Act. Regulations and instruction books promulgated by the IRS were not required to display control numbers because they were not within the scope of the Act.

R.A. Salberg, CA-7, 92-2 USTC ¶50,490, 969 F2d 379.

An individual's conviction for willful failure to file income tax returns was upheld. The trial court did not abuse its discretion in excluding evidence that the individual had suffered a stroke and could not complete his returns because the stroke occurred after the crimes had been completed.

G.D. Strong, CA-4 (unpublished opinion), 97-2 USTC ¶50,923, aff'g, per curiam, an unreported District Court decision.

A tax accountant and his wife were liable for willfully failing to file their tax returns. The accountant's contention that his failure to file was innocently inadvertent, rather than willful, because of his neurological disorder that caused him to sleep for all but four hours each day was rejected. There was sufficient proof that his disorder had not prevented him from achieving other professional and personal accomplishments and expert medical testimony indicated that his condition did not keep him from filing his taxes.

M.T. McCaffrey, CA-7, 99-2 USTC ¶50,634, 181 F3d 854.

The record supported an individual's convictions for willful failure to file his income tax returns for five years. His knowledge of his legal duty to file returns was proved by his admission that he had filed federal tax returns in prior years. His efforts to dissociate himself from his property and income by using his wife's bank account to maintain his anonymity proved intent.

E.A. McNeally, CA-8 (unpublished opinion), 2005-1 USTC ¶50,429, aff'g, per curiam, an unreported DC Neb. decision.

There was sufficient evidence to prove that an individual willfully failed to file tax returns and pay taxes. The individual signed and filed income tax returns in prior years. Moreover, she attended meetings with the IRS at which she was told that the law required her to file a tax return and that she could pay the tax owed and file a refund suit. Further, the individual failed to consult a tax professional about her position that her income was not taxable and that she did not have to file a return.

T.D. Rose, DC Pa., 2006-1 USTC ¶50,222.

Alvin S. Brown, Esq.
Tax attorney
703 425-1400

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