Knowing the Difference between Tax Evasion and Tax Avoidance

Knowing the differences between tax avoidance and tax evasion is important. Note that if you have avoided paying taxes, it is best that you seek the assistance of an attorney to ensure that you get your tax debt settled. That being said, it is important that you understand the differences in avoidance and evasion so that you do not get yourself into legal trouble.

Tax avoidance involves legally avoiding taxes. This simply means that you are taking advantage of laws that exist to help you to reduce the amount of taxes that you are required to pay. Those who typically take advantage of this action do so legally by simply taking deductions or changing their businesses so that they incur fewer taxes. Tax avoidance is a legal action and is completely accepted by the government.

Those who practice tax evasion however, are not action within the confines of the law. Tax evasion means that you are taking illegal steps to willfully avoid paying your required taxes. This is a felony in most cases and is punishable by stiff fines and even stiffer jail sentences. It is important that you always pay the taxes that you are required to pay to avoid this legal trouble.

If you are working or you own a business that is earning revenue then you are legally bound to pay your taxes. Cheating or otherwise skipping your taxes is considered tax fraud and can get you sent to prison. If you purposely leave out certain information on your tax returns or you simply do not file a return when you are legally obligated to do so, you are committing tax evasion. There are a number of ways that could commit a violation of the tax laws. You could purposely lie about the income you have earned so that you do not have to pay taxes on that income. You could also claim deductions that you know you do not qualify for. For instance, if you were to claim a child as a dependent to get a reduction in your taxes or to claim Earned Income Credit or the Additional Child Tax Credit and you do not have a child living in your home that qualifies you for these credits and exemptions, you are lying on your tax return and committing tax fraud.

If the IRS learns that you have misrepresented your situation on your taxes, they will audit you. During this audit, if you cannot prove that you can legally claim the credits and exemptions on your return or otherwise prove that you are not committing fraud, you could be facing serious legal issues. If you are being audited for your taxes or you feel that you may be accused of tax evasion, it is best to seek the assistance of an attorney right away. An attorney can help you to prove your case. If you were not actually committing fraud, an experienced attorney can help to keep you from paying fines and can help to keep you out of jail.

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