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Tax Avoidance Versus Tax Evasion

There is nothing illegal about trying to pay as little in taxes as you can. The government itself writes the tax code with innumerable deductions and ways to avoid paying taxes in order to encourage certain behavior (such as charitable giving) or to give tax breaks to various groups for various reasons, from the working poor to the super-rich. An entire industry and profession is well-established and heavily marketed to helping you make the most of the tax code advantages that apply to you, with the promise that they will help you pay the least amount of taxes you have to pay.

The main way to lower your taxes is to lower your taxable income, which is the amount you are taxed on. Some commonly-used tax shelters and other ways to lower your taxable income include the following:

  • taking advantage of all allowable deductions
  • taking loans and lines of credit against assets which would be taxed if converted to cash
  • offshore accounts
  • funding retirement accounts, pension plans, 401(k) plans, IRAs and other investments with lower tax exposure or deferred taxation
  • making charitable contributions
  • investing in real estate
  • purchasing municipal bonds
  • pre-tax contributions to employer-sponsored insurance plans

You probably engage in some of these activities yourself, while others sound like things you only read about. So what is the difference between tax avoidance (legal) and tax evasion (illegal)? Tax evasion means you are purposefully trying to pay less taxes than you owe. How does the government decide you are trying to evade taxes that you owe? That is precisely the question. If you are taking advantage of all available deductions and other practices in the complicated and complex tax code, it is possible to unknowingly make a technical violation of the statute, and it can be difficult for a jury to decide whether you were being aggressive or deceitful.

If you are being charged with tax evasion, it is important to seek legal counsel from attorneys with experience handling white collar criminal defense and taxation matters. In Houston, contact McLemore, Reddell, Ardoin & Story, P.L.L.C. for a free consultation