tax avoidance

We want to make sure you’re on the right side of the law when it comes to filing your taxes, so in this article, we explain what tax avoidance and tax evasion are, what the difference is between the two, and a few ways you can minimize your taxes legally. What Is Tax Avoidance? Tax avoidance is structuring your business transactions so you can lower your tax bill. Tax avoidable is legal and wise. A common example of tax avoidance includes maximizing your retirement contributions, such as IRAs and 401(k)s. What Is Tax Evasion? On the other hand, tax evasion is attempting to deceive the IRS in an effort to lower your tax bill. Tax evasion is illegal. Common examples of tax evasion are failing to report all or some of your income, concealing business assets, or pretending personal purchases were made for business purposes. The Difference Between Tax Avoidance and Evasion The primary difference between tax avoidance and evasion is the intent. The intent behind tax avoidance is to only pay what taxes you legally need to pay and not a penny more. The intent behind tax evasion is to commit fraud.   How To Minimize Taxes Legally There are three ways to minimize how much you pay in taxes: Reduce your taxable income – Claiming deductions can lower your taxable income. You can also hire contractors instead of employees, donate to charity, create a retirement account, and more. Maximize tax deductions and credits – Credits reduce your tax bill dollar-for-dollar while deductions reduce your tax bill by a percentage according to your tax bracket.  Time income and deductions appropriately – You may change tax brackets from tax year to tax year, so timing your income and deductions accordingly can help you save money.  What if You Make a Mistake? Mistakes happen. That’s why we offer corrections filing for 1099, 1098, W‑2, and Affordable Care Act forms.  The best course of action is to correct the mistake as soon as possible. If you make a mistake …

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