The image of a criminal tax case is a trial. The reality, according to the Justice Department's own manual, is different. JM 6-4.310 says "the Government disposes of an overwhelming percentage of all criminal tax cases by entry of a plea of guilty."
That makes the Department's plea and sentencing policies some of the most important rules in criminal tax practice. This guide describes them as they appear in Title 6 of the Justice Manual and the IRS Criminal Investigation manual. It is general information about published policy, not advice for any case. Plea decisions are among the most consequential a person can make, and they belong with experienced counsel.
The major count policy
The central rule is the major count policy in JM 6-4.310. United States Attorneys' Offices may accept a guilty plea to the "major count" or counts without separate approval. In most cases the Department identifies the major count when it authorizes prosecution.
The Department designates the major count using these priorities:
- Felony counts have priority over misdemeanor counts.
- Tax evasion counts under IRC 7201 have priority over all other substantive tax counts.
- The count carrying the longest prison sentence is the major count.
- Between counts under the same statute, the count with the greatest financial detriment to the United States, meaning the greatest additional tax due, is the major count.
- If the financial detriment does not differ significantly, relative flagrancy decides.
The policy also addresses cases where the guideline range exceeds the maximum for a single count, where tax and non-tax counts are charged together, and where tax charges are not part of the same course of conduct.
No trading a felony for a misdemeanor
JM 6-4.310 is direct: when the major count of a tax indictment charges a felony, the United States Attorney's Office "may not accept a plea to a lesser-included offense nor substitute a misdemeanor offense for the felony offense charged." Absent unusual circumstances, the Department "will not approve the reduction of a charge from a felony to a misdemeanor merely to secure a plea."
That rule shapes negotiations. It is a reason why the charging decision, and any opportunity to be heard before it, matters so much. See how the Justice Department reviews criminal tax cases.
Pleas before charges: the full tax loss still counts
Some defendants agree to plead before being charged. JM 6-4.310 says that when that happens, the prosecutor presenting the factual basis must "include the full extent of the defendant's tax violations on all of the counts in order to demonstrate the defendant's actual criminal intent," and that "even if the defendant pleads to only a single count, the court should take into account the tax loss from all of the years when it determines the tax loss for the offense to which the defendant pleads."
The CI manual makes the same point about sentencing generally. IRM 9.6.2.5.1 explains that relevant conduct, conduct outside the offense of conviction that is part of the same or a similar pattern, can be considered in calculating the sentencing range, and that the standard of proof for relevant conduct at sentencing "is a preponderance of the evidence."
The Justice Manual also describes an expedited path. Under JM 6-4.110, the IRS may refer a case directly and simultaneously to the United States Attorney's Office and the Department for an expedited guilty plea if only legal-source income is involved and counsel says the taxpayer wishes to plead, consistent with the major count policy.
When plea discussions happen
Plea discussions can begin before charges are filed. JM 6-4.214 says the Department permits plea negotiations during pre-charge conferences in non-grand jury cases, consistent with the major count policy. In grand jury cases, the timing and process differ. See grand jury subpoenas in tax investigations.
Anything the taxpayer personally says in those discussions needs care. The same section says the government may use statements made by the taxpayer at a conference in any court proceeding, though it does not use in general court proceedings statements made by the taxpayer's attorneys. That is one of many reasons these conversations are run by counsel.
Nolo contendere and Alford pleas
Two alternative pleas are strongly disfavored.
Nolo contendere. JM 6-4.320 says prosecutors may not consent to a no contest plea in tax cases "except in the most unusual circumstances" and only with written approval from the Assistant Attorney General responsible for tax.
Alford pleas, where a defendant pleads guilty while maintaining innocence. JM 6-4.330 says the United States Attorney's Office may not consent to one except in the most unusual circumstances and only after written approval at the Assistant Attorney General level or higher.
The Department's sentencing position
JM 6-4.340 explains the Department's view of sentencing in tax cases. It quotes the introductory commentary to the federal sentencing guideline for tax offenses, U.S.S.G. 2T1.1: "because of the limited number of criminal tax prosecutions relative to the estimated incidence of such violations, deterring others from violating the tax laws is a primary consideration underlying [the] guidelines."
From that, the Manual concludes that "a sentencing recommendation advocating for a term in prison is almost always warranted in a criminal tax case," and that "a court's order of probation and a defendant's payment of civil tax liability rarely constitutes a satisfactory disposition."
The Manual allows a narrow exception. A United States Attorney may agree to probation, preferably with alternative conditions of confinement, when the defendant pleads guilty, the guideline range is 0 to 6 months with a Criminal History Category of I, and the United States Attorney personally signs a memorandum identifying unusual and exceptional circumstances. Examples include securing cooperation against a more culpable party or serious degradation in the evidence after indictment.
The sentence itself is set by the court. The Department's policy is what the prosecutor will argue.
What the probation officer sees
The CI manual tells special agents to contact the probation officer preparing the presentence report after a conviction. IRM 9.6.2.5.1 says the agent should provide the prosecution recommendation report and information on the harm to the government, applicable guideline factors, and relevant conduct. Disclosure of the special agent's report to probation officers for that purpose is authorized by IRC 6103(h)(4), subject to protections for confidential sources and ongoing investigations. The same section tells agents to stress the importance of restitution.
Costs of prosecution
Several criminal tax statutes, including sections 7201, 7203, and 7206, provide for the costs of prosecution in addition to fines and imprisonment. JM 6-4.350 says that after a conviction for the principal substantive tax offenses, "the court must order the defendant to pay the Government's costs of prosecution," and directs prosecutors to seek them.
The civil side of the plea
The Department also encourages plea agreements to address civil liability. JM 6-4.360 lists civil admissions it strongly encourages, but does not require: agreed amounts of unreported income or improper deductions for specified years, a stipulation to liability for the civil fraud penalty under IRC 6663, an agreement to file correct returns before sentencing and pay taxes, penalties, and interest at sentencing, and an agreement not to seek refunds of those amounts. Restitution is discussed in restitution after a tax conviction.
The takeaway
The plea is not a single decision. It is a set of interlocking choices about which count, which years, how much tax loss, what restitution, and what civil admissions. Each one has consequences that outlast the criminal case. None of them should be made without a lawyer who understands both the criminal and the civil side.
Prosecutors are also told to give the court the whole picture. JM 6-4.340 says the United States Attorney's Office should make a full statement of the facts at sentencing, including the amount of tax evaded for all relevant conduct, how the fraud was carried out and concealed, and the defendant's past criminal record.
Frequently asked questions
Do most criminal tax cases go to trial?
The Justice Manual says the government disposes of an overwhelming percentage of criminal tax cases by guilty plea.
What is the major count policy?
Under JM 6-4.310, prosecutors may accept a plea to the major count authorized by the Department. Felonies take priority over misdemeanors, evasion counts over other tax counts, and among similar counts, the one with the greatest tax loss.
Can a felony tax charge be pleaded down to a misdemeanor?
JM 6-4.310 says that when the major count is a felony, prosecutors may not accept a plea to a lesser-included offense or substitute a misdemeanor, and that absent unusual circumstances the Department will not approve a reduction merely to secure a plea.
Will the court consider years I did not plead to?
The Justice Manual says the factual basis for a pre-charge plea should include the full extent of the tax violations, and the IRS manual explains that relevant conduct can be considered at sentencing under a preponderance of the evidence standard.
General information only, not legal advice. Reading this page does not create an attorney-client relationship. Laws and IRS procedures change; the sources cited were reviewed on the date shown above.