Can your tax client (or you) go to jail?

EXECUTIVE SUMMARY

* Even though criminal prosecution for tax law violations is unlikely, when they do occur, the consequences can be serious.

* Tax crimes include tax evasion, failure to pay tax due and filing a false or fraudulent return, all of which require proof of willfulness.

* A taxpayer acquitted of criminal charges, or who otherwise resolves a criminal investigation, can still face civil tax fraud penalties.

**********

Although most taxpayers will never face criminal charges, tax advisers should be familiar with the kinds of conduct that could generate prosecution. Part I of this two-part article describes the requirements and consequences of some common tax crimes under the Internal Revenue Code.

For the average client, the possibility of facing criminal sanctions because of tax law violations is a daunting prospect. In many cases, criminal prosecution, meaning legal action that could result in jail or other punishment, is unlikely. This is because many provisions under which a taxpayer could be prosecuted require proof that the violation was "willful," which is often difficult to show. When criminal prosecutions do occur, however, the consequences can be serious. In fiscal-year (FY) 2005, for example, 804 taxpayers were sentenced for tax crimes, and 79% of these cases resulted in time in prison, a halfway house, home confinement or some combination thereof. The average sentence length was 28 months. (1) Besides taxpayers, return preparers also are subject to prosecution; 118 were sentenced in FY 2005 and faced an average term of 18 months. (2) When the return preparer is a CPA, a conviction will also affect his or her license. (3)

Part I of this two-part article describes the more notable criminal provisions in the Internal Revenue Code (Code), including the prohibited conduct and its consequences. Part II, in the May 2006 issue, will discuss Federal criminal procedure and sentencing rules. In addition, it will examine steps CPAs can take both to help clients and to protect themselves against possible criminal investigation and prosecution.

Criminal and Civil Actions in General

Federal laws provide both criminal and civil consequences for taxpayers and tax preparers who violate the Code. Both types of sanctions may apply to the same case. According to the Internal Revenue Manual (IRM), civil action taken by the IRS to collect taxes usually follows the conclusion of criminal proceedings. At least in part, this is done because pursuing both investigations concurrently may jeopardize the success of the criminal prosecution. (4)

A taxpayer acquitted of criminal charges at trial can still face civil tax fraud penalties. (5) Likewise, a taxpayer who resolves a criminal investigation by entering a guilty plea to some or all of the charges can be subject to civil sanctions even if, in the plea agreement, the IRS promised to not prosecute the matter further. (6) Courts have consistently recognized a distinction between civil sanctions considered remedial in nature, and criminal penalties designed to punish and prohibit tax fraud. Thus constitutional protections, like the right of an indigent defendant to an attorney, do not apply in civil cases. (7)

The potential for overlap created under Federal law extends beyond the possible application of both civil and criminal sanctions to the same conduct. In many cases, the Code's criminal provisions overlap; for example, a taxpayer who files a false return, punishable under Sec. 7206(1), might also be charged with evasion (Sec. 7201). (8) For that reason, indictments of tax defendants often include multiple crimes. Further, some of the offenses listed in the general criminal provisions in Title 18 of the United States Code (U.S.C.) may be applicable too. For example, a false return also might generate a charge under Section 1001 of Title 18, which makes it a crime to make a false statement or submit false documents to a government official; see Exhibit 1 on p. 218 for some Title 18 offenses that can apply in tax cases.

The IRM contains rules generally prohibiting successive prosecutions for the same conduct. (9) Under the Federal Sentencing Guidelines, convictions of multiple counts in some cases may be treated as a single offense for sentencing purposes, when the crimes essentially represent the same wrongful conduct with the same ultimate harm. (10)

Crimes under the Code

Offenses defined as criminal under the Code may be limited or widespread in application. For example, Sec. 7202 criminalizes the willful failure to collect or pay tax. It targets employers that withhold Federal income and FICA taxes from employee wages. By comparison, Sec. 7203 is much broader. Among other things, it punishes the willful failure to supply any information required under the tax laws. The crimes discussed below, and summarized in Exhibit 2 on p. 219, are some of the more frequently used Code provisions,

Tax Evasion--Sec. 7201

Evasion is probably one of the more infamous crimes, being the charge that resulted in the conviction of Al Capone. (11) It involves a willful attempt to evade or defeat any tax imposed under the Code. To evade taxes is a felony, meaning punishable by more than one year in prison, under Sec. 7201. The Sentencing Guidelines, to be discussed in detail in Part II in the May 2006 issue, include rules for calculating the tax loss in an evasion case, as that loss affects the severity of the punishment the guidelines would impose. For example, if an individual taxpayer underreported gross income, the loss is presumed to be 28% of the unreported amount plus 100% of any false credits claimed, unless a more accurate determination Can be made. (12)

There are three elements the government must prove to convict a person of tax evasion under Sec. 7201. First, it must show a tax deficiency existed. Second, it must prove an affirmative act of tax evasion, and, finally, that the defendant acted willfully.

Tax deficiency: Some courts require proof that the evasion or attempted evasion involved substantially more tax than was shown on a return, (13) although this is not universal. (14) There is no test for determining substantiality. Rather, all the surrounding circumstances are considered. In some cases, courts have found relatively small amounts to be "substantial." (15) For example, in a 1987 case, the Seventh Circuit upheld an evasion conviction based on $3,358 in unpaid taxes. (16)

The tax due for criminal prosecution purposes may be less than what is considered outstanding for civil collection. There can be several reasons for this. For example, to simplify a prosecution, the IRS may choose to exclude controversial tax adjustments. (17) Also, nonfraudulent adjustments are considered only for civil tax purposes. (18) In addition, there may be some issues for which the government has enough evidence to proceed in a civil setting but not criminally. (19) The amount of proof required for a Criminal conviction, when the standard is "beyond a reasonable doubt," is greater than that necessary to obtain a civil judgment.

One way to show that additional tax was due is by proving that a taxpayer had income beyond that reported. Both legal and illegal sources of funds are considered in determining whether someone owes more tax than reported. For example, a client who receives and fails to report money made through illegal kickbacks could be prosecuted for evading taxes. (20)

Act of evasion: The IRS must show that a taxpayer committed an affirmative act of tax evasion or attempted evasion. This requires proof of some positive action on the part of the taxpayer. (21) This means the IRS must show some sort of conduct designed to mislead or conceal. (22) A failure to act, such as a failure to file a return, is insufficient. (23) On the other hand, filling a false return would be an affirmative act of evasion, as would destroying records or putting assets in the name of others. (24)

Willfulness: The last element the IRS must prove to convict a taxpayer of tax evasion is to show that he or she acted "willfully." Here, the government must show the taxpayer knew he or she owed more tax for the year than was reported on the return. (25) It also must show that the taxpayer acted voluntarily and intentionally in violating the known legal duty. (26) A good faith misunderstanding of the law can negate willfulness. However, the Supreme Court has refused to allow as a defense a taxpayer's sincere but mistaken belief that the tax laws are unconstitutional. It held the taxpayer's claims demonstrated thorough knowledge of the relevant tax law and a deliberate (although incorrect) judgment as to their constitutionality. (27)

To convict, it is not necessary for the prosecution to demonstrate a taxpayer acted with a bad purpose or evil motive, although proof of those things has been held to establish willfulness. (28) Negligence, even when gross, is not enough. (29) Sometimes defendants' admissions, combined with other acts, show that they acted willfully, but willfulness also can be inferred from a taxpayer's conduct (for example, proof of consistently underreported large amounts of income (30) or a double set of books sufficient to establish willfulness (31)).

SOL: The statute of limitations (SOL) for evasion is six years. It begins to run with the last affirmative act constituting an attempt to evade or defeat the payment of taxes. (32) For example, if a taxpayer files a false return for 2002 on April 15, 2003, the period within which prosecution must begin would start at that time. However, if on May 1, 2004, the taxpayer makes a false statement to the IRS agents investigating the matter, the SOL would run for six years from that date.

Failure to File or Pay--Sec. 7203

A taxpayer who is required to file a tax return and who willfully fails to do so, or who willfully fails to pay a tax due, is also subject to criminal prosecution. Unlike tax evasion, the IRS does not have to show an affirmative attempt to defeat the collection of taxes. Under Sec. 7203, a willful failure to file a return or pay a tax by itself is sufficient to permit prosecution.

Failure to file or failure to pay is a misdemeanor. The maximum period of imprisonment is one year. A taxpayer who fails to pay estimated tax, keep records or supply information required by law can also be prosecuted under Sec. 7203.

When a taxpayer is charged with failure to file, the government must prove three elements. First, it must be prove that the taxpayer was required to file and, second, that the return was not timely filed (a late-filed return is not a defense to prosecution under this provision (33)). Finally, the IRS must demonstrate that the taxpayer acted willfully.

Willfulness: In general, willfulness in the context of failure to file is defined in the same way as for tax evasion cases--an intentional violation of a known legal duty. (34) Can a taxpayer introduce evidence that he was contemplating suicide or undergoing a divorce, to show that his acts were not the result of willfulness but instead preoccupation or distress? The answer is no, at least according to the Seventh Circuit, which has held (35) that such information had no bearing on the question of whether the taxpayer intentionally failed to file returns knowing he was obligated to file.

Required filing: To prove a return was required, the IRS has to show that a client's gross income was high enough to trigger a filing obligation. (36) It does not have to prove that tax actually was due. In determining whether a taxpayer filed a tax return, courts have held that a filing without sufficient financial information to permit the IRS to calculate the tax liability should be treated as a failure to file that can be prosecuted. (37) However, a taxpayer who failed to supply certain information may be able to raise a defense based on a good faith claim of privilege against self-incrimination, even if the claim is erroneous. (38) A taxpayer who receives an extension to file is considered to have filed, provided the return is submitted before the extension expires. (39)

Other consequences: Failure to file, in addition to another act, like hiding assets under someone else's name, might generate a prosecution for tax evasion, instead of the misdemeanor for the failure to file. For example, the Supreme Court held (40) that a taxpayer who does not submit a return, in combination with other acts like covering up sources of income or conducting business so as to avoid generating the usual kinds of records, could be convicted of evading taxes.

Failure to pay: When a taxpayer faces criminal charges for failing to pay taxes, the IRS must show first that he or she had a duty to pay, or that tax actually was due. Second, it must establish that the tax was not paid within the time required by law. The fact that delinquent taxes were ultimately remitted does not serve as a defense, if the actual payment was not timely. (41) Lastly, the IRS must show the taxpayer acted willfully. A person's inability to pay does not negate willfulness. In other words, a taxpayer is obligated to conduct his or her affairs so that funds are available to meet tax obligations. (42)

Filing a False or Fraudulent Return--Sec. 7206(1)

Under Sec. 7206(1), taxpayers who make a return, statement or other document they sign under penalty of perjury are guilty of a felony if they do not believe the document submitted is true as to every material matter. This provision is used when a taxpayer files a false or fraudulent return, although it also can apply when a client submits some other document that was signed under penalty of perjury (e.g., a taxpayer negotiating an offer in compromise may be asked to submit certain information through forms that contain perjury declarations). An unsigned form or document cannot be charged under this provision, although under some circumstances such a filing might lead to criminal action under other Code sections. (43)

Proof: To obtain a conviction, the IRS must show that the defendant signed and filed the return or document at issue. (44) When a taxpayer's name is signed to a return, it is rebuttably presumed that he or she actually executed the signature. Second, the return or document must have contained a perjury declaration. (45) The IRS also must show the defendant did not believe the item submitted was true and correct as to every material matter. (46) This means the prosecution must prove that the submission was materially false and the defendant knew of the falsity. (47) Materiality has been defined in different ways, with some courts holding that any statement that could have influenced or affected the IRS in carrying out its functions is material. (48) Others examine whether the false item was essential for accurately calculating a client's tax liability or was necessary for determining whether tax was owed. (49) An improper deduction or a false statement as to gross income could both be material items.

Lastly, the IRS must show the taxpayer acted willfully, again meaning voluntarily and intentionally. (50) A defendant's actions may be found to be willful even when the taxpayer claimed to suffer from bipolar and attention deficit disorders. For example, in Boykoff, a taxpayer was convicted of multiple tax crimes, including filing false returns under Sec. 7206(1). On appeal, the Second Circuit rejected the taxpayer's claim that he should have been permitted to present expert psychiatric testimony regarding his mental health. The court ruled that a jury was not likely to be convinced that mental illness was responsible for a series of errors that ran only in favor of the defendant and his clients, and never benefited the government. (51)

Application to CPAs: A CPA who prepares a fraudulent return can be charged with a Sec. 7206(1) violation. For example, in Shortt Accountancy Corporation, (52) the chief operating officer of an accounting firm recommended an investment to a client based on tax benefits that had been eliminated earlier that same year by Congress. The transaction was structured to appear as if it occurred before the new legislation's effective date. Although the client's tax return was signed by an accountant from the same firm who was unaware of the illegality, the corporation's conviction for filing a fraudulent return was upheld. The court ruled that perjury related to the preparation of a tax return could be prosecuted either under Sec. 7206(1), based on the defendant's signature of the return as preparer, or based on assisting in the preparation of a false return. (Assisting a taxpayer in preparing a false return is illegal under Sec. 7206(2); see below.) In either case, the resulting conviction would be a felony.

Consequences: By statute, the maximum prison term a defendant can face because of making and subscribing a false or fraudulent return or other document under penalty of perjury is three years. A fine could also apply under Sec. 7206. The government is not required to prove a tax deficiency to prosecute under this provision. (53)

Aiding or Assisting in Filing a False Return--Sec. 7206(2)

This Code section targets persons who assist or advise in the preparation of a return or other document that is false or fraudulent as to any material matter. Sec. 7206(2) is not limited to professional preparers (e.g., the government has successfully used this section to prosecute persons who promote abusive tax shelters (54)). An individual convicted of aiding or assisting in preparing a false tax document has committed a felony, and under the statute could be fined up to $100,000, imprisoned for as long as three years or both.

Sec. 7206(2) targets defendants who aid or assist in the Preparation of a return or other document that actually was filed with the IRS. The document must be shown to have been false as to a material matter, and the defendant must have acted willfully.

Advising or assisting in the preparation: The advice or assistance contemplated by Sec. 7206(2) does not require a CPA to actually sign or prepare a return; it is sufficient if he or she at least assisted in its preparation. (55) A defendant who is not a preparer but who knowingly provides false information expecting that it will be used in connection with a tax return can also be convicted under this provision. For example, among the other accusations brought against Leona Helmsley, she was charged with assisting in filing false corporate and partnership returns for various business entities she and her husband controlled. Helmsley was convicted; the jury found the rearms showed improper deductions for personal expenses attributable to remodeling a mansion the Helmsleys owned. (56)

The taxpayer need not be complicit: The involvement or innocence of the actual taxpayer in whose name the return or document is submitted is irrelevant. For example, in Edwards, (57) a tax lawyer failed to turn over money to the IRS that he collected from clients for payment of estimated taxes. Although the clients believed their funds had been used to satisfy their tax obligations, the money apparently was spent by the lawyer on his own expenses. The lawyer was convicted of aiding in the preparation of false returns when he wrongly showed on the actual returns filed for the periods in question that the estimated taxes had been paid. The court rejected the attorney's argument that he intended to delay, not avoid, paying the tax due. It held that the deliberate falsehood was enough to support a conviction under Sec. 7206(2); proof of an intent to evade tax payment was not necessary.

Falsity as to a material matter: The IRS must show a return or document filed was false as to a material matter. Materiality generally is defined using the same tests discussed for prosecutions involved in filing a false or fraudulent return under penalty of perjury. (58) In addition, it must be established that the defendant, or the CPA or other person who assisted in preparing the document, acted willfully (i.e., voluntarily, intentionally and knowingly). (59)

Consequences: Because aiding or assisting in the preparation of false returns or other materials is a felony, a CPA convicted of this offense may face loss of license or other professional sanctions, in addition to any criminal sentence that applies to his or her actions. (60)

Conclusion

Part II, in the May 2006 issue, will discuss Federal criminal procedure and sentencing rules and how CPAs can protect themselves and their clients against possible criminal investigation and prosecution.

For more information about this article contact Ms. Hibschweiler at [e-mail].

(1) IRS, "Statistical Data-General Tax Fraud," (2006), available at www.irs.gov.

(2) IRS, "Tax Return Preparer Fraud," (February 2006), available at www.irs.gov.

(3) See, e.g., "Summaries of Regents Actions on Professional Misconduct and Discipline," available at www.op.nysed.

(4) IRM 9.5.13.2, Civil Tax and Penalty Assessments on the Criminal Tax Investigation.

(5) Helvering v. Mitchell, 303 US 391 (1938).

(6) Bickham Lincoln-Mercury Inc., 168 F3d 790 (5th Cir. 1999).

(7) Mertens, Law of Federal Income Taxation (Callaghan and Co., 2004), Section 55.3.

(8) This could occur, for example, when a false return was filed as part of a scheme to evade taxes.

(9) IRM 38.3.1.4, Dual and Successive Prosecution.

(10) U.S. Sentencing Commission, Guidelines Manual, Ch. 3, Part D, Introductory Commentary (November. 2005).

(11) The Plain Dealer (3/15/04) El. Available through www.global.factiva.com.

(12) U.S. Sentencing Commission, note 10 supra, at Section 2T1.1(c) (1), Notes.

(13) See, e.g., Leona M. Helmsley, 941 F2d 71, 84 (2d Cir. 1991), cert. denied.

(14) Compare S. Mohammad Marashi, 913 F2d 724, 735-36 (9th Cir. 1990).

(15) Amos Davenport, 824 F2d 1511 (7th Cir. 1987).

(16) Id.

(17) IRM 9.5.13.2.1, Criminal v. Civil Tax.

(18) Id.

(19) Id.

(20) H.J. Michey Sallee, 984 F2d 643 (5th Cir. 1993).

(21) Spies, 317 US 492 (1943).

(22) Id.

(23) Id.

(24) Id.

(25) Sand, Modern Federal Jury Instructions, Inst. 59-8 (Lexis Nexis, Matthew Bender 2005).

(26) See John L. Cheek, 498 US 192, 201 (1991).

(27) Id. at 205-06.

(28) Peter Pomponio, 429 US 10 (1976).

(29) William Goichman, 407 FSupp 980 (ED PA 1976), aff'd per curiam 547 F2d 778 (3d Cir. 1976).

(30) Kim, 884 F2d 189, 192 (5th Cir. 1989).

(31) Spies, 317 US 492 (1943).

(32)Donald Ferris, 807 F2d 269, 271 (1st Cir. 1986), cert. denied.

(33) William Ming, 466 F2d 1000 (7th Cir. 1972), cert. denied 409 US 915 (1972).

(34) Cecil J. Bishop, 412 US 346 (1973).

(35) Charles D. McCorkle, 511 F2d 482 (7th Cir. 1975).

(36) Sand, note 25 supra, at Inst. 59-15.

(37) Robert L. Mosel, 738 F2d 157 (6th Cir. 1984).

(38) Roy D. Garner, 424 US 648, 663, n. 18 (1976).

(39) Louis Goldstein, 502 F2d 526 (3d. Cir. 1974).

(40) Spies, note 31 supra.

(41) William Ming, note 33 supra.

(42) James Tucker, 686 F2d 230 (5th Cir. 1982).

(43) Montgomery, 203 F2d 887, 889 (5th Cir. 1953).

(44) Lavon T. Hanson, 2 F3d 942 (9th Cir. 1993).

(45) Id.

(46) Id.

(47) Sand, note 25 supra, at Inst. 59-23.

(48) Frances DiRico, 78 F3d 732 (1st Cir. 1996).

(49) See, e.g., Julius Klausner, 80 F3d 55, 60 (2d Cir. 1996); and Darrell Clifton, 127 F3d 969 (10th Cir. 1997).

(50) Kenneth H. Winchell, 129 F3d 1093 (10th Cir. 1997).

(51) Franklin Boykoff, 2d Cir., 5/21/2003.

(52) Shortt Accountancy Corp., 785 F2d 1448 (9th Cir. 1986).

(53) Alexander Marabelles, 724 F2d 1374 (9th Cir. 1984).

(54) Crooks, 804 F2d 1441 (9th Cir. 1986).

(55) Joseph T. Coveney, 995 F2d 578 (5th Cir. 1993).

(56) Leona Helmsley, note 13 supra.

(57) Charles Edwards, 375 F2d 862 (9th Cir. 1967).

(58) Sand, note 25 supra, at Inst. 59-29.

(59) Peter Pomponio, note 28 supra.

(60) See, e.g., "Summaries of Regents Actions on Professional Misconduct and Discipline," note 3 supra.

Arlene M. Hibschweiler, Esq., J.D., MBA

Lecturer

University at Buffalo

Buffalo, NY

Exhibit 1: Title 18 offenses

     Title/Section                        Description

Conspiracy                Conspiracies to defraud or to commit an
18 U.S.C. Section 371     offense against the U.S. To convict, the
                          government must show:
                          1. An agreement,
                          2. To achieve a prohibited goal,
                          3. Knowledge of and actual participation in
                             the conspiracy, and
                          4. An overt act in furtherance of the
                             agreement.

                          Maximum punishment: Fine plus up to five
                          years or both (a lesser prison term will
                          apply if the object of the conspiracy was a
                          misdemeanor).

Making false statements   This applies to the use of false statements
18 U.S.C. Section 1001    or documents in any manner in connection
                          with a matter involving a Federal department
                          or agency. For a conviction, it must be
                          proven:
                          1. The defendant made a statement,
                          2. The statement was false or fraudulent,
                          3. The defendant acted knowingly and
                             willfully,
                          4. The statement was within the jurisdiction
                             of a Federal agency, and
                          5. The statement was material.

                          Note: This section is not limited to sworn
                          statements. However, materiality must be
                          proven in order to prosecute under this
                          provision. Maximum punishment: Fine plus
                          five years or both.

False claims              This section covers making false claims
18 U.S.C. Section 287     against the Federal government, including
                          fraudulently filing for a tax refund. The
                          elements of this offense are:
                          1. The defendant made a claim against the
                             Federal government,
                          2. The claim was false or fraudulent, and
                          3. The defendant knew of the falsity or
                             fraud at the time the claim was
                             submitted.

                          Maximum punishment: Five years plus a fine.

Perjury                   A taxpayer who files a false tax return can
18 U.S.C. Section 1621    be charged under this section or Code Sec.
                          7206(1). To prove this offense, it must be
                          shown:
                          1. The defendant, under penalty of perjury,
                             signed as true a written document
                             submitted to the IRS, and
                          2. The document contained false statements,
                             and the false statements were material
                             and were made willfully,

                          Maximum punishment: Five years plus a fine
                          or both.

Mail and wire fraud       This targets the use of the U.S. Postal
18 U.S.C. Section 1341    Service, private carriers or interstate
                          wires to perpetuate a fraud. The elements of
                          this offense are:
                          1. A scheme existed to defraud or obtain
                             money or property by materially false
                             statements,
                          2. The defendant knowingly and willfully
                             participated in the scheme with knowledge
                             of the fraud and intent, and
                          3. In the course of the scheme, the
                             defendant used or caused the use of the
                             mails, interstate carriers or interstate
                             wires.

                          Maximum punishment: Up to 20 years or a fine
                          up to $250,000 or both.

Aiding and abetting       This section overlaps with Code Sec.
18 U.S.C. Section 2       7206(2), which targets those who aid in
                          preparing false tax documents. To convict,
                          the IRS must show:
                          1. A crime was committed against the U.S.,
                             and
                          2. The defendant knowingly associated
                             himself or herself with the crime and
                             participated by doing something to help
                             make the crime succeed.

Note: Some courts also impose a willfulness requirement.

Exhibit 2: Code offenses

      Title/Section                        Description

Evasion                     This felony punishes attempts to evade or
26 U.S.C. Sec. 7201         defeat the collection of tax. To obtain a
                            conviction, the IRS must show:
                            l. A tax deficiency existed,
                            2. The defendant committed an affirmative
                               act of evasion, and
                            3. Willfulness.

                            Maximum punishment: Fine or up to five
                            years or both.

Willful failure to file,    A taxpayer who willfully fails to pay tax,
supply information or pay   make a return, keep records or supply
26 U.S.C. Sec. 7203         information when required is guilty of a
                            misdemeanor under this section. The
                            government must prove:
                            1. The defendant was required to pay tax,
                               make a return, keep records or supply
                               information,
                            2. The defendant failed to complete the
                               required act on a timely basis, and
                            3. The failure was willful.

                            Maximum punishment: Fine or up to one year
                            or both (greater penalties may apply in
                            some cases).

Filing a false return or    Under this section, a taxpayer who files a
document                    document signed under penalty of perjury
26 U.S.C. Sec. 7206(1)      has committed a felony if he or she does
                            not believe the document is true as to
                            every material matter. The elements of
                            this offense are:
                            1. The defendant believes the document is
                               not true and correct as to all material
                               matters,
                            2. The defendant acted willfully, and
                            3. The document was signed and submitted
                               under penalty of perjury.

                            Maximum punishment: Up to three years or a
                            fine or both.

Assist in filing a false    This section targets persons who aid in
document                    filing a false return or other document.
26 U.S.C. Sec. 7206(2)      It is frequently used against tax
                            preparers. To obtain a conviction, the IRS
                            must show:
                            l. The defendant assisted in the
                               preparation of a document,
                            2. The document was false as to a material
                               matter, and
                            3. The defendant's acts were willful.

                            Maximum punishment: Up to three years or a
                            fine or both. This crime is a felony, and
                            thus could affect a CPA's license.