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Tax provision the subject of Supreme Court case

We’ve long discussed on this blog the power the IRS has in imposing criminal penalties. For example, Tax Code Section 7212(a) imposes penalties upon individuals who obstruct, impede or even endeavor to obstruct or impede “the due administration” of the Internal Revenue Code.”

This particular clause is now the subject for a U.S. Supreme Court case. The concerns pertain to the broad use of the clause and the way federal prosecutors interpret it.

One authority concerning this section refers to it as “the one-man conspiracy statute.” As all other conspiracy statutes require at least two people for such a crime to take place, this was meant as a disparagement.

The possible overreach of Section 7212

Tax authorities use Section 7212 in a large number of contexts. Federal prosecutors often choose to use Section 7212 when they are unable to prove tax evasion or fraudulent conduct on the part of taxpayers. And authorities use it to get around applicable statute of limitations issues.

Due to Section 7212, there may be dangers of bringing in irrelevant evidence into the case if the original charge was tax evasion or making of false statements. And because the section gives prosecutors such power, the Supreme Court is now looking at what would be the appropriate limits for use of 7212.

In the Supreme Court case, there are allegations that a taxpayer failed to file tax returns during a period of several years. While not filing a tax return is generally a misdemeanor rather than a felony, it became a felony in this instance through an interpretation of Section 7712.

We don’t know what the ultimate outcome of this case will be. However, the IRS does not have unlimited authority. Also, court challenges to the tax code and the authority of tax officials will continue. It is important for Michigan taxpayers to understand that they have options when it comes to criminal tax charges. It is useful to have on your side an experienced tax attorney who can help you understand your rights.

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