Willful failure to file is NOT the crime you think it is!

In this post, I am going to point out a major flaw in most people’s understanding of the tax code.

Willful failure to file according to Google and legal help sites:

One of the biggest fears of not filing is that the IRS will hunt you down and throw you in prison. A quick search of the words “willful failure to file” will bring up many pages with legal information telling you the same. I just did this in google and this is the page that comes up:

I have contacted them to correct their misinformation, so in case they do, I will print the full content of their page here:

According to 26 USCS § 7203 , failure to file tax return is a Federal crime or offense for anyone, who willfully fail to file a federal income tax return when that person is required to do so by the Internal Revenue laws or regulations.

A person can be found guilty of failure to file tax return offense only if all of the following facts are proved beyond a reasonable doubt:

First: That the person was required by law or regulation to make a return of income for the taxable year charged;

Second: That the person failed to make a return at the time required by law; and

Third: That the person’s failure to make the return was willful.

A person is required to make a federal income tax return for any tax year in which that person’s gross income in excess of a specific amount set by law, which changes from annually.

Willful failure to file in law:

They are absolutely correct, and here is the full text of the law below. By the first sentence, you will be convinced that you could go to jail for willful failure to file so you can ignore the rest, but I put §7203 here for completeness:

Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting “felony” for “misdemeanor” and “5 years” for “1 year”.

Willful failure to file only applies to corporations:

The first two words seemingly sound like they mean any person, which would make this law apply to anyone, including yourself. But what is found in 140 codes away? Section §7343 states:

The term “person” as used in this chapter includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

Both codes 7203 and 7343 are in chapter 75, which means that the definition in §7343 applies to §7203. The truth is that while they say “any person” can go to jail for willfully refusing to file, only officers and employees of corporations who are responsible for the filing of that corporation. Is that you?

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