The government requires everyone to pay taxes with very few exceptions. Your decision to ignore tax requirements can result in serious legal trouble that can impact your life for a number of years.
When you understand the difference between tax avoidance and tax evasion you may feel more confident about the decisions you make in regard to your tax duties.
Tax avoidance is legal. It involves making income adjustments, calculating deductions and listing credits in an effort to lower your taxable amount. There are a number of things you can claim to achieve this endeavor including dependents. You can also list properties you own and business expenses.
You do need to have viable proof that you qualify for the claims you make on your tax forms. A financial professional can help you organize facts and present them in a believable manner.
Contrarily, tax evasion is illegal. According to Cornell Law School, tax evasion involves deceitful practices and strategies to avoid paying taxes you owe. Some examples include inflating deductions, hiding money, concealing interest and misrepresenting or underreporting income.
The consequences of tax evasion include having to pay substantial monetary fines and possible jail time. If you are the recipient of legal trouble because of tax evasion but you have proof of a mistake, you have the right to contend the charges in court. Such a serious accusation could interfere with your reputation, your career and your financial standing.
You can avoid tax trouble when you pay close attention to your tax documents. Direct any questions to a financial expert who can help you better understand your obligations to the IRS.