1.A planning made to reduce the tax burden without infringement of the legislature is known as Tax Avoidance. An unlawful act, done to avoid tax payment is known as Tax Evasion.
2.Tax avoidance refers to hedging of tax, but tax evasion implies the suppression of tax.
3.Tax avoidance is immoral that tends to bend the law without causing any damage to it. Unlike tax evasion, which is illegal and objectionable both according to law and morality.
4.Tax avoidance aims at minimizing the tax burden by applying the script of law. However, tax evasion minimizes the tax liability by exercising unfair means.
5.Tax Avoidance involves taking benefit of the loopholes in the law. Conversely, Tax Evasion includes the deliberate concealment of material facts.
6.The arrangement for tax avoidance is made prior to the occurrence of tax liability. Unlike 7.Tax Evasion, where the arrangements for it, are made after the occurrence of the tax liability.
8.Tax avoidance is completely legal however Tax Evasion is a criminal activity.
The result of tax avoidance is the postponement of tax, whereas the consequence of tax evasion if the assessee is found guilty of doing so, is either imprisonment or penalty or both.
- Posts : 8
Join date : 2016-07-19
The terms "tax avoidance" and "tax evasion" are often used interchangeably, but they are very different concepts. Basically, tax avoidance is legal, while tax evasion is not.
Tax Avoidance- Tax avoidance is the legitimate minimizing of taxes, using methods approved by the IRS. Businesses avoid taxes by taking all legitimate deductions and by sheltering income from taxes by setting up employee retirement plans and other means, all legal and under the Internal Revenue Code or state tax codes.
Some examples of tax avoidance: Taking legitimate tax deductions to minimize business expenses and thus lower your business tax bill.
• Setting up a tax deferral plan such as an IRA, SEP-IRA, or 401(k) plan to delay taxes until a later date.
• Taking tax credits for spending money for legitimate purposes, like taking a Work Opportunity Tax Credit
What is Tax Evasion- Tax evasion, on the other hand, is the illegal practice of not paying taxes, by not reporting income, reporting expenses not legally allowed, or by not paying taxes owed.
Tax evasion is most commonly thought of in relation to income taxes, but tax evasion can be practiced by businesses on state sales taxes and on employment taxes. In fact, tax evasion can be practiced on all the taxes a business owes.
Tax evasion is the illegal act or practice of failing to pay taxes which are owed. In businesses, tax evasion can occur in connection with income taxes, employment taxes, sales and excise taxes, and other federal, state, and local taxes.
Examples of practices which are considered tax evasion:
It's considered tax evasion if you knowingly fail to report income. Under-reporting income (claiming less income than you actually received from a specific source
• Providing false information to the IRS about business income or expenses
• Deliberately underpaying taxes owed
• Substantially understating your taxes (by stating a tax amount on your return which is less than the amount owed for the income you reported).
Because tax evasion is considered intentional, the IRS can bring you under criminal charges and tax evasion can result in jail time as well as substantial fines and penalties
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Join date : 2016-10-05
1. Minimization of tax liability, by taking such means which do not violate the tax rules, is Tax Avoidance.Reducing tax liability by using illegal ways is known as Tax Evasion.
2. Tax avoidance is Hedging of tax but tax evasion is Concealment of tax.
3. Tax avoidance is Taking unfair advantage of the shortcomings in the tax laws but tax evasion is Deliberate manipulations in accounts resulting in fraud.
4. Tax avoidance is Legal but tax evasion is criminal.
5. Tax avoidance is To reduce tax liability by applying the script of law but tax evasion isTo reduce tax liability by exercising unfair means.
6. Tax avoidance is Deferment of tax liability but tax evasion is Penalty or imprisonment.
- Posts : 6
Join date : 2016-09-15