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Tax Evasion vs Tax Avoidance

  • Avoidance is legal: CPAs like DSJ can help legally lower your taxes
  • Evasion is illegal: How can I prevent accidental tax evasion?
  • Trump and taxes: was it avoidance or evasion? Why?

Avoidance and evasion are two different methods that yield a similar outcome: less taxes. The major difference—tax avoidance is legal and tax evasion is illegal.

Avoidance means minimizing one’s tax liability through entirely legal means. This could be achieved through qualified deductions, deferral plans, or tax credits. These are totally legal strategies that a tax preparer could help implement in your return. A popular example of this is the Irish Double and Dutch Sandwich duo; while Irish Law is working to delegalize the use of this system, it remains entirely legal, making it one of the biggest tax avoidance schemes used internationally.

A clever accountant like ours at DSJCPA might also discover loopholes in the tax code; these, when used scrupulously, are legal as well, but require a highly competent and accurate tax professional to interpret tax law and prevent a loophole from turning into a tax evasion.

Whereas avoidance is a method of lowering taxes (we all have to pay some sort of tax at the end of the day), evasion is the use of any illegal means to outright avoid and not pay taxes. Under-reporting income, failure to withhold, failure to report cash—these are all common examples of tax evasion. Often, taxpayers don’t even realize they’re evading simply because they’re unsure of what to include in a return. Again, a knowledgeable tax preparer who is familiar with tax laws can help you determine what to report to avoid an accidental evasion.

The difference between the two methods has come under political spotlight after President Trump’s tax information from early years in office were leaked. Trump claims that his incredibly low tax payments of $750 to the federal government are the pure result of savvy tax preparation: real estate tax breaks, charitable gifts, and large businesses loss deductions. Whether Trump’s scheme is a brilliantly structured series of avoidances remains in the details of his returns that we do not yet have.

Looking for a savvy tax professional to help you navigate your tax return? Our accountants are highly qualified with a proven track record of accuracy and success. Call us at 516-541-6549, email us, or visit our website to view a full list of our services.


Devin McQuillan
Associate, Creative Solutions

516-541-6549 | Email

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