Yes. Under Revenue and Taxation Code section 19705, willfully signing a return under penalty of perjury that you do not believe is true and correct as to every material matter is a felony in itself, whether or not any additional tax turns out to be owed. An honest mistake, or an audit that simply reaches a different number, is not the same thing: the statute turns on what you believed about a material matter when you signed.

Five kinds of conduct under section 19705

Revenue and Taxation Code section 19705(a) makes each of the following a felony:

  1. Signing a return you do not believe. Willfully making and subscribing (signing) a return, statement, or other document that contains or is verified by a written declaration that it is made under penalty of perjury, which the person does not believe to be true and correct as to every material matter.
  2. Helping prepare a false return. Willfully aiding or assisting in, or procuring, counseling, or advising, the preparation or presentation of a return, affidavit, claim, or other document under the Personal Income Tax Law or the Corporation Tax Law that is fraudulent or false as to any material matter, whether or not the person required to present it knew of or consented to the falsity. The Franchise Tax Board’s Criminal Investigation Bureau describes preparer investigations in which a preparer “aided, assisted, or advised their client in the preparation of state income tax returns that are fraudulent or false as to any material matter” (FTB Criminal Investigation Bureau).
  3. False bonds, permits, or entries. Simulating, or falsely or fraudulently executing or signing, a bond, permit, entry, or other document required by those laws or their regulations, or procuring, advising, aiding in, or conniving at that.
  4. Hiding property from collection. Removing, depositing, or concealing taxable goods or commodities, or property subject to levy, or being concerned in doing so, with intent to evade or defeat the assessment or collection of a tax, addition to tax, penalty, or interest.
  5. Concealment during a settlement. In connection with a Franchise Tax Board settlement, closing agreement, or compromise, or an offer of one, willfully concealing a taxpayer’s property from a state officer or employee, or receiving, withholding, destroying, mutilating, or falsifying a book, document, or record, or making a false statement, about the taxpayer’s estate or financial condition.

The punishment

A conviction under any prong is punishable by a fine of up to $50,000 ($200,000 for a corporation), imprisonment under Penal Code section 1170(h), or both, together with the costs of investigation and prosecution. Because section 19705 does not set its own term, section 1170(h)(1) supplies a county jail term of 16 months, two years, or three years, and under section 1170(h)(5) the court must suspend a concluding portion of that term as mandatory supervision unless it finds, in the interest of justice, that doing so is not appropriate. The term is served in state prison instead if the defendant has a prior or current conviction for a serious or violent felony (or a qualifying prior from another jurisdiction), must register as a sex offender, or receives an aggravated white collar crime enhancement under Penal Code section 186.11 (section 1170(h)(3)). Section 1170(h)(4) keeps other dispositions available, including probation. Under section 19705(c), a person’s name signed to a filed return, including one filed electronically, is prima facie evidence that the person actually signed it.

Other statutes that can reach a false return

Section 19705 is not the only possible charge. Revenue and Taxation Code section 19706 also punishes making, signing, or verifying a false or fraudulent return or statement, or supplying false or fraudulent information, when it is done willfully and with intent to evade the tax; that section allows county jail of up to one year or state prison, a fine of up to $20,000, or both. Section 19701 reaches false filings, with or without intent to evade, only as part of a pattern lasting two years or more with at least $15,000 in estimated delinquent liability. A single false return needs no pattern or dollar amount to be charged under section 19705.

An audit adjustment is not the same thing

For the first prong, the prosecution must show that you willfully signed a return you did not believe was true and correct as to a material matter. An audit that disallows a deduction, reclassifies income, or arrives at a different figure does not, by itself, show that belief. What you knew when you signed, what you told your preparer, and what records you had are central to that question.

Federal law

Federal tax crimes are a separate matter; 26 U.S.C. section 7201, for example, punishes a willful attempt to evade or defeat federal tax as a felony carrying up to five years in prison.

What matters in your case

  • Whether the disputed item is a judgment call (a valuation, a classification, an estimate) or a fact you knew was false.
  • Whether you relied on a preparer, and what information you gave that preparer.
  • Whether you reviewed the return before signing it.
  • What records show what you knew at the time you signed.

If you signed a California tax return that the state now says was false, or you are a preparer facing that allegation, the Law Offices of David S. Chesley’s white collar crime defense team can go over the return and the disputed items with you. Call (800) 755-5174 to discuss your case.