By Rick Yandle, Esq., CPA — federal criminal & civil tax defense
Owing the IRS more than you can pay is not, by itself, a crime. Willfully refusing to pay can be a misdemeanor — but taking affirmative steps to hide money or assets from an IRS officer who is trying to collect is the felony, Section 7201 evasion, and it carries up to five years. A recent Mississippi guilty plea marks that line almost exactly.
The case
According to the Justice Department, Eric Brian Rosenberg pleaded guilty in August 2026 to one count of tax evasion for evading the payment of more than $2 million in federal income taxes. What makes the case a teaching tool is what he did after he learned an IRS revenue officer was working to collect.
From 2016 to 2020, Rosenberg engaged in what the government calls "check churning" — repeatedly pulling most of the funds out of his checking account by buying cashier's checks, holding them, and redepositing only what he needed, so the account never showed collectible cash. He then formed a company, opened a bank account in the company's name, and moved money through that nominee account while continuing to churn checks. All the while, from 2016 through 2021, he spent more than $1 million gambling at casinos. He is scheduled to be sentenced on December 16, 2026, and faces up to five years in prison. IRS Criminal Investigation worked the case.
Two kinds of evasion
Section 7201 of the Internal Revenue Code — the felony evasion statute — reaches evasion in two distinct forms, and most people only picture the first. Evasion of assessment is cheating on the front end: underreporting income or inflating deductions so the tax is never correctly determined. Evasion of payment is cheating on the back end: the tax is due and owing, and the taxpayer takes affirmative steps to keep the government from collecting it. DOJ describes Rosenberg's case as the second kind — the reported conduct aimed at hiding money from collection after the tax was already owed, not at hiding the liability itself.
That distinction matters because the back-end form is where otherwise ordinary collection cases can turn criminal. An unpaid balance, standing alone, is a civil collection matter. A willful failure to pay can rise to a misdemeanor under Section 7203. And taking an affirmative step to defeat collection — the extra element — is what makes it the Section 7201 felony.
The affirmative act is the whole ballgame
Here is the line the Supreme Court drew more than eighty years ago, and it still governs. In Spies v. United States, 317 U.S. 492, 498-99 (1943), the Court held that willfully failing to pay a tax, standing alone, is only a misdemeanor (today, 26 U.S.C. Section 7203). To make it the Section 7201 felony, the government must prove an additional affirmative act — some willful commission designed to evade or defeat the tax or its payment, not a mere omission.
The Court gave examples that read like a checklist of what Rosenberg is described as doing: "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." Churning cashier's checks so an account never holds collectible funds, and routing money through a nominee company, are textbook affirmative acts — though the statute requires an affirmative act of evasion, not concealment specifically; even an otherwise lawful act can qualify if it is undertaken with intent to evade. Courts describe the elements as a tax due and owing, willfulness, and an affirmative act constituting evasion or attempted evasion (see Sansone v. United States, 380 U.S. 343, 351 (1965)). That affirmative act is what separates Section 7201 felony evasion from mere nonpayment.
Why the gambling matters
The million dollars in casino spending is not a separate charge — but it is the kind of fact the government leans on. Spending on that scale can undercut a claim of inability to pay and support an inference of willfulness when it sits alongside the alleged concealment. It does not, by itself, prove Rosenberg could have paid the entire balance at any one moment, and because he pleaded guilty, no jury ever weighed it. Still, the pattern recurs across evasion-of-payment cases: a lifestyle that contradicts a plea of poverty is exactly what prosecutors point to. Concealment paired with conspicuous spending is a hard combination to explain.
The line for taxpayers who genuinely can't pay
None of this should frighten an honest taxpayer who is simply behind. Falling behind is not the same as evading, and the system has lawful channels built for taxpayers who cannot pay — installment agreements, currently-not-collectible status when the numbers truly do not work, and, after a qualifying lien or levy notice, a collection due process hearing to make your record. (On making that record, see "When Silence Costs You the Case"; on collection that can outlive even a criminal case, see "When Restitution Isn't the End of It.") The safe move when a revenue officer calls is to engage — disclose, negotiate, document — not to make the money disappear. What pushes a collection matter toward the Section 7201 felony is an affirmative act taken to defeat collection, not the size of the unpaid balance.
A note for referring counsel
If a client's collection matter starts to involve nominee entities, cashier's-check churning, or assets quietly moving ahead of a revenue officer, the exposure may be shifting from civil collection toward criminal — and IRS Criminal Investigation, not just the collection function, may be the audience. That is the moment to bring in criminal-tax counsel, before the conduct itself becomes the case. I am glad to consult with counsel on where a collection matter sits on that line.
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