Tax Avoidance vs. Tax Evasion: One Saves You Money, the Other Costs Your Freedom!

What’s the difference between tax avoidance and tax evasion? Tax avoidance is taking legitimate actions to reduce your tax bill, such as funding an IRA or appropriately claiming a tax credit. Tax evasion is willful noncompliance with the tax law. This includes actions such as falsifying tax records, inflating expenses and hiding income, which can lead to fines, penalties and prosecution. In one new case, an attorney was sentenced to 21 months in federal prison and ordered to pay restitution of $794,540. The IRS Criminal Investigation Unit found that he shielded income by depositing it into trust accounts reserved for clients. He then used the funds for gambling and to pay personal expenses.