Tax evasion is illegal, while tax avoidance is legal. Understanding this difference could save you from severe penalties or even jail time!
Tax evasion includes underreporting income or overstating deductions. Even "forgetting" to report cash income is considered tax evasion.
Tax avoidance involves legal methods to reduce your tax bill. Quick tip: Maximize your retirement contributions to lower your taxable income legally.
Tax evasion can result in fines up to $250,000 and 5 years in prison.
Legal tax avoidance includes taking all possible deductions and credits. Consider working with a tax professional to identify all potential tax-saving opportunities.
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