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Understand the difference between tax evasion and avoidance

Tax laws are complicated, and Cincinnati residents often spend the whole year preparing for the next tax season. Many business owners employ various strategies to reduce their tax bill, and while some strategies are considered legal, others may be illegal and could lead to white collar criminal charges.

Tax avoidance, generally a legal practice, is a process whereby taxes are minimized by using legal strategies. The Internal Revenue Service approves the methods used to minimize taxes. For example, certain tax deductions lead to lower business expenses and taking tax credits for expenditure on legitimate purposes are examples of legal avoidance strategies.

Though the term sounds familiar, tax evasion is illegal. It is avoiding the paying of taxes by employing illegitimate methods, such as not reporting income or reporting expenses not allowed. It could even be by not paying the taxes that were legally supposed to be paid.

Providing false information to the IRS about income and expenses is considered tax evasion as well. It can be in connection with income, business or employment taxes. Tax fraud is similar to evasion, where the end result is deceiving the IRS to reduce one's taxes. For example, paying employees in cash to avoid paying employment tax could be considered tax fraud.

Businesses and individuals can make legitimate mistakes. The law is complicated and one might end up availing the wrong strategy to reduce one's taxes. Even if someone has not broken the law intentionally, they may find themselves facing criminal charges and the possibility of severe penalties and fines. If someone is accused of committing white-collar crimes, they may want to consider consulting an experienced attorney for guidance on what their options are.

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