Because the opinion itself is a bit cryptic, for more detail I offer readers the two briefs that were filed.
There were two fact patterns for his personal return convictions.
For the year 2004, his business operations were through his tax return preparation S corporation. The filed a false S corporation return reporting a $745 loss. He then filed his personal return, Form 1040, reporting a $1 gain on Schedule C but apparently omitting the amount from the S Corporation. He had thus overreported the income solely by reference to the S Corporation's return K-1. He claimed that there was no perjury with respect to his Form 1040. He complained that the Government had not prosecuted him for the false return he actually filed for the year -- the S Corporation but, rather, improperly prosecuted him for the "literally true" return that he did file which, based on my math, overreported his income for 2004 if the S Corporation return set what he was supposed to report on his personal return.
Of course, any falsity on the personal return can be prosecuted as tax perjury. Overreported income, if false, can be prosecuted. And, of course, here, Williams did not report the S Corporation loss but reported $1 of Schedule C income when a Schedule C business did not even exist.
And, the Court did not look favorably his argument about tax perjury only being involved with the S Corporation return and handily dispatched it as follow:
In 2004, Williams reported that Imperial experienced a loss of $745 on the company's corporate tax return. He reported one dollar of income on his personal income return, using Form 1040. According to Williams, because Imperial's tax return showed that "the corporation did not report any income, [he] did not have an affirmative duty to report a positive income figure on his individual Form 1040 return." This argument is untenable. "Section 7206 is a perjury statute that criminalizes lying on any document filed with the IRS." Tarwater, 308 F.3d at 504 (emphasis added). If an individual lies on a corporate tax return, he cannot copy that false information onto a personal tax return and claim it as "literal truth." Rather, the tax return would contain information known to be untrue. Williams correctly points out that the government did not charge him with preparing false returns on behalf of the corporation, but because Imperial's income flows through to Williams, evidence of corporate earnings is relevant to determining Williams's personal income.
At trial, an IRS agent testified that he found unreported income for Williams for the 2004 tax year, explaining that he found a number of deposits made into Imperial's bank account in 2004 totaling over $21,000. The jury was shown a summary schedule of these deposits, and the agent testified that these deposits were income from tax-preparation services. The agent further testified that Williams was the only individual who was involved with Imperial, or who obtained any financial benefit from Imperial. Finally, the agent testified that Imperial's corporate tax return for 2004 did not explain the one dollar reported by Williams on his personal tax return, despite the fact that Williams claimed that the one dollar was earned in connection with Imperial. This testimony provided a sufficient basis from which the jury—or any rational trier of fact—could have found beyond a reasonable doubt that Williams knew that his tax return for 2004 was not true and correct as to every material matter.2006 and 2008 Returns
Williams seems to have been studying the criminal tax law after 2004. Essentially, Williams' argument was a variation of the argument for 2004 -- that there was no falsehood on the return he filed -- Forms 1040EZ for each year. Of course, the Form 1040EZ is an inappropriate return if the taxpayer had, as he had here, income from sources other than allowed on the Form 1040EZ, such as S Corporation return. So, his use of the Form 1040EZ was inappropriate to start with. And, the Court noted that he reporting he actually made was inconsistent with the Form 1040EZ instructions and, further, omitted income that the jurat on the Form 1040EZ required him to report. That jurat, unique to the Form 1040EZ, was:
"Under penalties of perjury, I declare that I have examined this return and, to the best of my knowledge and belief, it is true, correct, and accurately lists all amounts and sources of income I received during the tax year."So, he was alerted that that his reporting was amiss and that was enough.
Although the parties briefed a key Form 1040EZ tax perjury case, United States v. Reynolds, 919 F.2d 435 (7th Cir. 1990), the Court in Williams does not mention Reynolds. I would like to discuss Reynolds briefly because Williams may have been inspired by Reynolds when he started improperly using the Form 1040EZ.