Tax Avoidance

It’s important to note the difference between tax evasion and tax avoidance.  Tax avoidance is the legal but strategic maneuvering of one’s affairs in an attempt to pay little to no taxes.

Tax evasion on the other hand, is the illegal means in which an individual attempts to disregard his or her tax liability.  As evidenced above, evasion schemes such as underreporting and failing to file, are all illegal tactics employed to circumvent the tax laws.

For example, when an individual makes charitable donations, it is counted as a tax deduction, hence lowering one’s tax liability.

The Internal Revenue Service (IRS) often makes these tax deduction provisions but it can also be grounds for abuse as many taxpayers use this to commit the crime of tax avoidance.

Other tax avoidance examples include contributing to employer sponsored retirement plans or moving their assets to a “tax haven”, such as a country with no income tax.

Yet, a person could still commit tax evasion if that person reported more charitable donations than that person actually paid.

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