As is the case with most people in Dallas, the thought of having to pay taxes is not something that thrills you. Thus, when you hear people espouse strategies that might help you avoid having to pay taxes, you may naturally be intrigued. However, the last thing that you want is to have to face criminal charges for tax evasion. Many have come to us here at Bickel PLLC in such a situation questioning how ideas marketed to them as perfectly legitimate strategies could have landed them in hot water with federal authorities. If you have the same question, then it is important that you understand the distinction between tax avoidance and tax evasion.
Per the Internal Revenue Service, tax avoidance means looking for ways to reduce your overall tax liability. This is perfectly legal, and can even be something that tax authorities assist you with by allowing you to take advantage of deductions and credits. Other tax avoidance strategies that you can employ on your own include:
- Putting money into a tax-deferred retirement savings account
- Deducting personal business expenses
- Holding on to investments longer to avoid capital gains taxes
Tax evasion, on the other hand, is you attempting to avoid paying taxes at all. This is illegal and could leave you facing criminal penalties. Some of the more common forms of tax evasion include underreporting income, claiming illegitimate dependants or expenses on your tax return, or intentionally underpaying your taxes.
The question then becomes how to determine if the strategies suggested to you are tax avoidance or evasion. A good rule to follow may be to avoid any that imply that you do not have to pay taxes. More information on answering to charges of white-collar crime such as tax evasion can be found throughout our site.