The mere failure to pay one’s estimated taxes (or estimated taxes) is not a crime. The failure to pay must be willful. The offense of willfully failing to pay tax has three elements: (1) the taxpayer was required by law to pay tax; (2) that tax liability was not timely paid; and (3) his failure to pay was willful. The willful element requires that the taxpayer had the ability to pay, but he intentionally and deliberately refrained from doing so. Spies v. United States, 317 U.S. 492, 499 (1943). But the government is not required to prove that the taxpayer had sufficient funds to pay the taxes when due. U.S. v. Easterday, 564 F.3d 1004 (9th Cir. 2009), cert. denied, 130 S. Ct. 490, 175 L. Ed. 2d 376 (2009).
Crucially, however, the taxpayer is not needed to lack the ability to pay his tax liability simply because he has insufficient liquid assets on the due date. Therefore, a taxpayer cannot avoid criminal liability for failing to pay his tax by pointing to his zero balance bank account.
Initially, this does not seem fair. However, the courts reason that injustice would result if one could escape criminal liability by simply having insufficient funds to pay his taxes. All the taxpayer would need to do is spend his money as fast as he earns it. See U.S. v. Tucker, 686 F.2d 233, 250 (5th Cir.1982)( “[A] financial ability to pay the tax when it comes due is not a prerequisite to criminal liability under § 7203. Otherwise, a recalcitrant taxpayer could simply dissipate his liquid assets at or near the time when his taxes come due and thereby evade criminal liability”).
The practical implication of this that the court will consider the lifestyle and expenses the taxpayer made before months (or years) prior to the tax liability due date. A court may likely be less understanding if the taxpayer decided to pay for luxury expenses rather than his tax bill. Similarly, the judge or jury may be more sympathetic if he paid for large, unexpected medical expenses.
I forgot to pay my taxes or estimated tax. Is this a crime? was last modified: March 18th, 2016 by Tax