Failing to Pay Taxes / Failing to File Tax Returns - Felony Crimes

There are two certainties in life: death and taxes. Very few enjoy the process of filing tax returns and paying their taxes. But, it’s an obligation we cannot avoid. IF you do avoid it, though, you could receive the attention of the IRS or face criminal charges. If you are being contacted by the IRS, we got a guy to contact to assist in dealing with them. If it’s the latter, though, you could face either gross misdemeanor or felony Minnesota criminal charges for failing to file tax returns and/or failing to pay taxes. Truth be told, though, county attorneys usually charge it as a felony and make the defendant prove why their non-filing or non-paying should be gross misdemeanors – seems backwards, but alas, it’s the reality.

To begin with, let’s look at the statutory language for the gross misdemeanor and felony criminal charges of failing to file tax returns and failing to pay taxes. 

  • Gross Misdemeanor Failing to File Tax Returns or Failing to Pay Taxes – It is illegal for any person to knowingly, rather than accidentally, inadvertently, or negligently, fail to file tax returns or pay taxes when required by Minnesota’s tax laws.
  • Felony Failing to to File Tax Returns or Failing to Pay Taxes – It is illegal for any person to willfully attempt in any manner to evade or defeat a tax by failing to file a tax return or failing to pay taxes when required.

The distinction comes down to the defendant’s intent. The felony-level offense requires that the defendant “willfully attempt … to evade or defeat” the tax obligation, whereas the gross misdemeanor requires that the defendant “knowingly” failed to file or pay. Not only is the level of intent different between ‘knowingly’ versus ‘willful’, but the felony offense also requires that the willful misconduct be for the explicit purpose of evading or defeating the tax.

So what, exactly, does this mean in the real world? What makes the non-filing and/or non-paying rise to the felony level? Surprisingly, there is very little Minnesota appellate case law on this critical distinction. A 2014 Minnesota Court of Appeals decision held that the requirements for the felony level offense require that the defendant have the, “specific intent to purposefully evade the obligation now and in the future.” So, simply being late or untimely in paying or filing is insufficient for a felony violation.

The federal crime has nearly identical statutory language to Minnesota’s. One federal case outlined the following non-exclusive list of circumstances that would make it a felony failing to file tax returns or failing to pay taxes: “keeping a double set of books, making false entries of alterations, or false invoices or documents, destruction of books or records, concealment of assets or covering up sources of income, handling of one’s affairs to avoid making the records usual in transactions of the kind, and any conduct, the likely effect of which would be to mislead or to conceal.”

The type of misconduct that amounts to a felony tax crime usually involves some form of affirmative acts to evade their tax obligations, compared to passive neglect. This is consistent with Minnesota case law where defendants are convicted of felony tax crimes for true affirmative acts of evasion, for instance falsely claiming to be a resident of a different state to evade Minnesota taxes.

As noted at the outset, the felony crime for failing to file tax returns or failing to pay taxes is often the primary charge, even when the misconduct does not involve affirmative acts to permanently evade tax obligations. It is critical to get a knowledgeable and experienced Minnesota tax crimes attorney to fight your case. We have successfully avoided felony convictions for tax crime clients, including proving the State’s overcharging to a skeptical judge. Contact us immediately to get us started on building your defense to Minnesota failing to file tax returns or failing to pay taxes crimes.