How Tax Avoidance Differs from Tax Evasion
Copyright (c) 2012 Lindsey Fontana
Both tax avoidance and tax evasion are types of tax noncompliance. Tax avoidance is perfectly legal, while tax evasion is a felony. All taxpayers have the right to take the legal steps to minimize their tax liabilities as much as possible, as long as it is done in a lawful manner.
With Tax Day quickly approaching, make sure you know the difference between tax avoidance and evasion in order to stay out of any legal ramifications.
Tax Avoidance: Tax avoidance is a legal form of tax planning with the objective to eliminate or reduce taxes as much as possible. Individuals and organizations plan their finances taking advantage of all legal opportunities, including deductions and charitable gifts, in order to minimize the amount of taxes owed. Tax avoidance involves using methods that are approved by the IRS. Tax avoidance strategies can become very complicated and often require the insight of a professional tax attorney to prepare an effective, legal tax avoidance plan.
Tax Evasion: According to the United Sates Government, in 2007 the government lost $345 billion due to tax evasion. Tax evasion, the most common form of tax crime, is the willful and intentional efforts by individuals, companies, and organizations to avoid paying taxes by illegal means. Tax evasion typically involves misrepresenting income to the IRS by underreporting income, inflating deductions, or hiding money in offshore accounts. Tax evasion is a serious crime and is punishable by a substantial monetary fine, imprisonment, or both.
The IRS has thousands of special agents trained to detect tax evasion and other tax crimes. A tax audit is conducted by the IRS when unusual activity is suspected. Red flag activity that often indicates tax evasion includes:
- Claiming a large number of deductions in proportion to income
- Declaring a small income in relation to a large number of assets
Anyone who is under investigation for tax evasion has the legal rights to meet with the IRS and be heard. When dealing with any tax crime investigation, it is imperative to hire a professional criminal tax attorney to navigate the process, advocate your rights, and minimize your criminal penalties. .
It is always advised to speak with a tax attorney in order to fully understand the difference between tax avoidance and tax evasion, and to be sure your tax practices are completely legal. This will help you as an individual or as a corporation avoid any legal pitfalls with the IRS. A professional tax attorney will also provide consulting and guidance to individuals and companies that have tax related questions or are dealing with tax issues.
About the Author
TaxLawFirm.net has Certified Tax Law Specialists and tax attorneys specializing in IRS tax problems who represent clients throughout Southern California. Each tax lawyer at http://www.TaxLawFirm.net helps to level the playing field when it comes to tax issues. If you need help with complex financial issues, contact William D. Hartsock, Esq. today.
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