Are tax evasion and tax avoidance the same thing?

Few people wish to run into trouble with the Internal Revenue Service. Not paying taxes represents one way to run afoul of the tax collection agency. One day, a Texas resident might discover a letter from the IRS requesting payment. Panic may set in when the taxpayer wonders if he or she is now in legal trouble. The answer varies from case to case. That said, tax evasion charges might be far worse than audits challenging tax avoidance.

Avoiding vs. evading taxes

Tax avoidance refers to following the U.S. tax code’s rules for reducing tax debt. For example, an independent contractor might work from an apartment, pay $1,000 per month in rent, and choose to claim a “home office” deduction. Doing so reflects a legal way to avoid paying taxes, provided the figures presented to the IRS are accurate. Someone who lies about the deduction, such as claiming to pay $1,500 per month in rent when the figure is $1,100 and overstating the square footage, would likely engage in tax evasion through false deductions.

Any attempts to hide income, falsify information on a tax return, or taking part in anything illegal or involving misrepresentation may be guilty of tax evasion. Tax evasion could result in criminal charges, and guilty verdicts may result in fines and jail time.

Owing the IRA money

Persons that owe the IRS back taxes may explore options for a payment plan or an offer in compromise. Persons legitimately struggling to pay their debt could find the IRS to be flexible.

Someone who dodges taxes and went years without filing any returns could end up in serious trouble. Taking steps to come into compliance might help matters.

Anyone accused of violations of IRS tax law, including evasion, failure to file a return, and the like, might need to speak to an attorney. An attorney could represent the taxpayer to the IRS and in federal court.