Tax avoidance versus tax evasion: One is lauded. The other will land you in jail.

Okay, so you want to pay less tax. Who the heck doesn’t?!?! There are things you SHOULD do and things you SHOULDN’T do.

On the “should” side: Collect the right amount of taxes. Keep honest books. Report all income. Pay your taxes.

On the “shouldn’t” side: Run two books. Report only some income. Don’t pay your taxes.

However, just because you SHOULD pay your taxes, doesn’t mean that you can’t try to pay less… as long as your tax minimization is legal. And that is ultimately the difference between tax avoidance and tax evasion.

Tax avoidance is completely legal and it’s something that every single tax payer can choose to do. (Of course, the IRS doesn’t make it easy because their tax code is so unwieldy and complex that even IRS people don’t always understand it). It’s basically making lifestyle and (legal) tax-reporting choices that will minimize the amount of tax that you have owing on the correct amount of income.

Tax evasion is illegal. This is where you make lifestyle and tax-reporting choices that paint a false picture of your income and expenses in order to minimize the amount of tax you have owning.

Want to know more about the difference between tax avoidance and tax evasion? You can read this article at KenyanTykoon.

Jessica Routier, IAC-EZ