Tax Avoidance
If you run a business, chances are you'll want to save money on taxes. After all, you reason, I earned the money; why shouldn't I get to keep it? It's understandable that you'll try to reduce the amount of taxes you pay. However, how you go about this determines whether it is legal income tax avoidance or illegal income tax evasion. However, to ensure that you are not prosecuted for illegal business practices, you will want to say within the boundaries of tax avoidance.
Tax Avoidance
Tax avoidance is the legal practice of working within the tax code to reduce the amount of tax that you have to pay. The Supreme Court, in the case Gregory v. Helvering in 1935, upheld the right of every American to use legal means to reduce their tax burden. Some ways of avoiding tax include:
- Creating a separate legal entity. Your property is donated to this legal entity, usually a company, trust, or foundation. Money is then made within this legal entity rather than owned by the owner. Personal taxes on property and income are avoided by placing the assets under a separate entity.
- Moving to a tax haven. To do this, you'd actually have to give up your US citizenship, as the United States taxes worldwide income rather than merely income made within the United States. Obviously, this is a bit of a drastic measure.
Reliable accountants and business attorneys will be able to identify more legal ways to avoid paying heavy taxes. It can be financially beneficial to contact one.
Contact Us
It can be difficult to tell what counts as tax avoidance and what is considered tax evasion. If you have any questions about taxes, contact Texas LLC formation experts today by calling 512-472-2431.
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