Statute of Limitations in Criminal Tax Cases
How much time (i.e., statute of limitations) does the government have to bring charges against an individual for criminal tax violations?
Statutes of limitations are written laws passed by a legislative body to restrict the maximum time after an event that legal proceedings may be initiated.
The law that governs statute of limitations relating to criminal tax offenses is § 6531, which provides:
“No person shall be prosecuted, tried, or punished for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within 3 years next after the commission of the offense, except that the period of limitations shall be 6 years –
(1) for offenses involving the defrauding or attempting to defraud the United States or any agency thereof, whether by conspiracy or not, and in any manner;
(2) for the offense of willfully attempting in any manner to evade or defeat any tax or the payment thereof;
(3) for the offense of willfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation under, or in connection with any matter arising under, the internal revenue laws, of a false or fraudulent return, affidavit, claim, or document (whether or not such falsity or fraud is with the knowledge or consent of the person authorized or required to present such return, affidavit, claim, or document);
(4) for the offense of willfully failing to pay any tax, or make any return (other than a return required under authority of part III of subchapter A of chapter 61) at the time or times required by law or regulations;
(5) for offenses described in sections 7206(1) and 7207 (relating to false statements and fraudulent documents);
(6) for the offense described in section 7212(a) (relating to intimidation of officers and employees of the United States);
(7) for offenses described in section 7214(a) committed by officers and employees of the United States; and
(8) for offenses arising under section 371 of Title 18 of the United States Code, where the object of the conspiracy is to attempt in any manner to evade or defeat any tax or the payment thereof.”
Usually, the statute of limitations begins when the crime ends. However, the crime does not always end with the filing of a false tax return. The end may come when an amended return is filed, at the time of the statutory due date of the return, or when the last affirmative act is taken.
Filing a False Tax Return
In filing false tax return cases, the statute of limitations usually starts on the day the false tax return is filed. However, in the event the false return is filed early, the statute of limitations starts on the statutory due date of the return. If the false tax return is filed after the statutory due date, with or without the filing of an extension, the statute of limitations begins on the day the false return was filed.
For example: If a false Form 1040 was filed on March 6, 2013, the statute of limitations will start on April 15, 2013. If a false Form 1040 was properly extended and subsequently filed on August 23, 2013, the statute of limitations will start on August 23, 2013.
The statutory due date for filing depends on the type of return/tax-some returns may have rules that only relate to that specific return. However, generally, the statutory due date or late filing date, whichever is later, determines the commencement of the statute of limitations.
A tax return is timely filed if it is received on or before the due date of the return. If the return is filed after the statutory due date, the IRS stamps the return with the date received and that date becomes the filing date for statute of limitations purposes.
Section 7502(a) allows for timely filing to be made by U.S. Postal Service:
“(1) If any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be (emphasis supplied).
(2) Mailing requirements
This subsection shall apply only if –
(A) the postmark date falls within the prescribed period or on or before the prescribed date – (emphasis supplied)
(i) for the filing (including any extension granted for such filing) of the return, claim, statement, or other document, or
(ii) for making the payment (including any extension granted for making such payment), and
(B) the return, claim, statement, or other document, or payment was, within the time prescribed in subparagraph (A), deposited in the mail in the United States in an envelope or other appropriate wrapper, postage prepaid, properly addressed to the agency, officer, or office with which the return, claim, statement, or other document is required to be filed, or to which such payment is required to be made (emphasis supplied).”
In cases where the return is received by the IRS after the statutory filing date, but the envelope has the proper U.S.P.S. markings for timely filing, the IRS will retain a copy of the envelope as proof thereof.
Failure to File
If an individual does not file a Form 1040, the statute of limitations begins on the date the tax return was due, i.e., April 15. If an individual files an extension for a Form 1040 and, subsequently, does not file a tax return, the statute of limitations begins on October 15, the date to which an extension to file was granted.
It should be noted that the filing of Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, does not extend the time to pay the tax due. Form 4868 requires an individual to estimate their tax liability and include it on the form. An automatic extension can be obtained without paying the tax due, but the individual will incur interest and penalties on any unpaid taxes.
The statute of limitations for tax evasion begins on the statutory due date of the tax return or the date when the last act in furtherance thereof takes place, whichever is the later of the two. This is true whether or not a return is filed.
For example: if a false tax return was filed on April 6, 2012 and on June 21, 2013 the individual makes a false statement to IRS agents relating to their April 6, 2012 tax return. In this situation, June 21, 2013, the date of the last act in furtherance of the scheme to evade taxes, is the beginning date of six year statute of limitations.
The statute of limitations on tax conspiracy cases is six years and begins on the date of the last act proven to be in furtherance thereof.
Once the government proves an individual entered in to the conspiracy, that individual is considered a participant until the conspiracy objective is reached. An exception to that is when an individual can prove they withdrew from the conspiracy more than six years prior to the indictment. In such cases, the individual has the burden to prove their withdrawal was prior.
The start of the statute of limitations for Form 941, which is timely filed for each quarter of a calendar year, is April 15 of the following year. However, the statute of limitations for any Form 941 that is not filed is the due date of that return ( i.e., generally one month after the end of each quarter-unless otherwise directed by the IRS).
Tolling of Statute of Limitations
To toll is to suspend or interrupt.
Section 6531 provides:
“The time during which the person committing any of the various offenses arising under the internal revenue laws is out the United States or is a fugitive from justice within the meaning of Section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for the commencement of such proceedings.”
It has been determined that the statute of limitations will be tolled, i.e., suspended, during the period of time an individual is outside the United States and therefore unable to be served with a criminal summons/warrant.
Under 18 U.S.C. § 3290, fugitives from justice, it is directed:
“No statute of limitations shall extend to any person fleeing from justice.”
There is considerable discussion on the meaning of “fugitive from justice,” with one view holding that the government must prove an intent to escape arrest/prosecution, while another holds that merely being absent from a jurisdiction makes an individual a fugitive from justice. In any event, if an individual is found to be a fugitive from justice, the statute of limitations will be tolled during the entirety of their fugitive status.
Complaint to Extend Statute of Limitations
Section 6531 provides for extension of the statute of limitations for nine months through the filing a complaint.
“…Where a complaint is instituted before a commissioner of the United States within the period above limited, the time shall be extended until the date which is 9 months after the date of the making of the complaint before the commissioner of the United States.”
This extension is not a means through which the government can obtain additional time to prepare their case against an individual. In fact, the complaint must show probable cause that a tax crime was committed. The complaint was designed to allow the government additional time to present their case to a grand jury for indictment, in the case where the grand jury schedule will not allow presentation thereof prior to the expiration of the statute of limitations.
Suspension of Statute During Summons Enforcement Pendency
Section 7609(e)(1) provides for suspension of the statute of limitations during periods of certain types of summons enforcement proceedings:
“If any person takes any action as provided in subsection (b) and such person is the person with respect to whose liability the summons is issued (or is the agent, nominee, or other person acting under the direction or control of such person), then the running of any period of limitations…under Section 6531 (relating to criminal prosecutions) with respect to such person shall be suspended for the period during which a proceeding, and appeals therein, with respect to the enforcement of such summons is pending.”
This section may be used in situations where a motion to quash a summons is being litigated.
Suspension of Statute During Request for Foreign Evidence
Title 18, United States Code, Section 3292, provides for the suspension of limitations during the period the government requests and then receives evidence from foreign governments.
(1) Upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country.
(2) The court shall rule upon such application not later than thirty days after the filing of the application.
(b) Except as provided in subsection (c) of this section, a period of suspension under this section shall begin on the date on which the official request is made and end on the date on which the foreign court or authority takes final action on the request.
(c) The total of all periods of suspension under this section with respect to an offense-
(1) shall not exceed three years; and
(2) shall not extend a period within which a criminal case must be initiated for more than six months if all foreign authorities take final action before such period would expire without regard to this section.
(d) As used in this section, the term “official request” means a letter rogatory, a request under a treaty or convention, or any other request for evidence made by a court of the United States or an authority of the United States having criminal law enforcement responsibility, to a court or other authority of a foreign country.”
In order for the court to approve such a suspension, the government must show through testimony, documents, and the like, it is probable that evidence of the offense can be found in a foreign country.
The maximum period of suspension of limitations under this section is three years, beginning from the date the government requests the evidence from the foreign country. The period of suspension ends when the foreign country takes “final action,” i.e., satisfies the U.S. government’s request. If the U.S. government is not satisfied with the foreign country’s response, it can file an additional request for suspension, as long as the additional time falls within the three year maximum, which commenced from the original request to the foreign country.