Tax avoidance and tax evasion

Tax avoidance and tax evasion. Techniques used by many people to reduce their tax liability.

In the 1993 movie, The Firm, Avery asks Mitch, in another room riffling through Firm files, “Hey… you’re about to take the bar exam. Here’s a multiple choice… the difference between tax avoidance and tax evasion is…

a) whatever the IRS says,

b) a smart lawyer,

c) 10 years in prison,

d) all of the above.”

What’s the difference?

Microsoft’s first synonym choice for avoidance is evasion. Their first choice for evasion is avoidance. For avoid, their choice is keep away from.

Tax avoidance is the legitimate use of all legal tax deductions under the US Tax Code or state and local tax codes.

Tax evasion is the illegal use of the above or simply not paying owed taxes.

Just check the US Tax Code. Sure. Depending on the source, the Code is anywhere from 2,500 pages long to…who knows. President George W. Bush came in with “The tax code is a complicated mess. You realize, it’s a million pages long.”

Bottom line?

1. Are you aware of and do you understand the far-reaching implications of all legal tax deductions?
2. Are you willing to make the judgment call as to what is “toeing the line” vs. “crossing the line”?
3. Do you really want to try explaining your interpretation of the Tax Code to the IRS?
4. What’s your answer to Avery’s question? I choose, ”a) whatever the IRS says” because I know how they think.

What should a tax filer do?

Take advantage of every legal opportunity available. Don’t try going it alone. It’s complicated, but there’s still time to make some adjustments.

We can do this together. Melanie@radcliffcpa.com My other contact info is below.