By Rick Yandle, Esq., CPA — federal criminal & civil tax defense
Most people assume that once a sentencing judge fixes the restitution number and sets a payment schedule, the financial side of a criminal tax case is settled. Pay on the schedule, keep your nose clean, move on. For federal tax crimes, that assumption is wrong in a way that can quietly wreck a defendant's finances a second time — because the IRS has its own, separate authority to collect the very same money on very different terms.
Two collectors, one debt
Here is the structure that trips people up. When someone is convicted of a tax-related crime, the sentencing court can order restitution and set a schedule of payments calibrated to what the defendant can realistically pay — often a percentage of monthly income, the kind of sustainable arrangement a court builds to actually succeed over time.
Separately, the Internal Revenue Code lets the IRS treat that criminal restitution as if it were a tax. Under 26 U.S.C. Section 6201(a)(4)(A), the IRS can make a "restitution-based assessment" of the restitution amount and then pursue it through the civil collection machinery — liens, levies, the full toolkit. Two tracks, one underlying debt: the criminal restitution order on one side, and the IRS's civil assessment of the same figure on the other.
The two do not run on the same terms. And that is the whole problem.
What Daugerdas decided
The point came to a head in Daugerdas v. Commissioner, No. 25-1055 (7th Cir. Mar. 30, 2026). Paul Daugerdas, a tax-shelter lawyer, was convicted and ordered to pay restitution measured in the hundreds of millions, with the sentencing court setting a payment schedule tied to a percentage of his gross monthly income. The IRS then made its own restitution-based assessment of the same amount under Section 6201(a)(4)(A) and moved to collect civilly.
Daugerdas argued, in essence, that the IRS could not run its own collection outside the schedule the criminal court had set. The Seventh Circuit disagreed. It held that Section 6201(a)(4)(A) authorizes the IRS to assess and collect restitution ordered for tax-related crimes, and — this is the part that matters for planning — that the IRS is not bound by the payment schedule the sentencing court established. The manageable, income-based schedule governs the criminal restitution obligation; it does not cap what the IRS may separately pursue through civil collection. The court affirmed the judgment for the Commissioner.
Why this matters even if you will never owe $371 million
Daugerdas involved eye-watering numbers, but the principle scales all the way down to ordinary cases. A defendant can be dutifully making every court-ordered restitution payment on schedule and still face IRS liens and levies pursuing the same liability through the civil track. The criminal restitution order and the IRS's restitution-based assessment are two debts for the same underlying loss, so the government cannot collect it twice — payments on one side are credited against the other. But that anti-double-collection rule does not tie the IRS to the sentencing court's installment schedule; it can bring its own collection tools to bear on the unpaid balance, on its own and often harsher timetable.
There is a further, downstream danger worth naming — and this is practitioner analysis, not something Daugerdas itself decided. Aggressive IRS civil collection can drain the very resources a defendant needs to stay current on the criminal restitution schedule. Miss those court-ordered payments and you risk a default on the restitution order itself, with all the supervised-release and enforcement consequences that can follow a criminal judgment. In other words, the second collector can put the first obligation at risk.
The practical takeaway
If you or your client is heading into sentencing on a tax charge, or is already paying court-ordered restitution, the criminal restitution schedule is only half the picture. The IRS's parallel civil collection has to be anticipated and managed — ideally before the assessment and the first levy, not after. That means coordinating the criminal restitution plan with a realistic view of the IRS's separate collection posture, and using the civil collection-defense tools (installment agreements, collection due process, and the rest) deliberately rather than reactively.
A note for referring counsel
If you handle criminal tax matters, the moment restitution enters the picture is the moment to think about the IRS's separate civil collection — the two tracks intersect in ways that can undo an otherwise sound sentencing outcome. I am glad to consult with criminal-defense counsel on coordinating a client's restitution obligation with the civil collection exposure that follows.
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