What’s the Difference Between Tax Avoidance and Tax Evasion?

While it may be tempting to neglect your yearly tax burden, you will face very severe consequences if you choose to do so. California tax payers who avoid or evade paying taxes will be subject to harsh financial penalties and may also be faced with serious criminal charges if the IRS finds evidence of willful tax evasion. MoneyCrashers.com explains the difference between avoidance and evasion and what you can do to avoid serious consequences from being levied.   

People who’ve neglected to file their tax paperwork by the April 15 deadline are considered to be avoiding their tax burden. In this case, the IRS will calculate how much is owed based on the information they have at their disposal. Once the total is calculated, you’ll receive a document stating how much you owe and when payment is due. The longer you don’t pay, the more late fees and other penalties will accrue.

Conversely, tax evasion is considered a federal offense that involves serious criminal charges. Evasion is different from avoidance in the sense that a person is deliberately neglecting to file their taxes by taking specific steps to do so. For instance, some people will request to be paid “under the table” to prevent the need for filing taxes, or they may attempt to hide their earnings in some way. Even if you’re faced with a lesser charge of willful failure to pay taxes, you can still receive up to a year in prison.

If you’re unable to pay taxes you can request an extension, which will give you an additional 120 days to file. You can also contact the IRS directly and explain your financial situation, which may provide you more options than if you simply fail to file taxes. Asking for an offer in compromise is another possibility, which entails offering the IRS as much as you can afford to pay and hoping that the rest of your tax burden will be written off. If you plan on asking for an offer in compromise, it’s best to have the assistance of a knowledgeable attorney to navigate this complex process.

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