Tax Evasion
It's only natural that, as a business owner, you'd want to save money by paying less in taxes. One of the hallmarks of American society is capitalism, which informs our government and our way of life. The Supreme Court stated as far back as 1935 that "the legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted," (Gregory v. Helvering). In layman's terms, it's a fundamental American right to pursue lower taxes through legal means. This process is called tax avoidance."
The opposite of this legal tax reduction is tax evasion, the practice of illegally avoiding taxes. In a very real sense, it is a form of stealing from the government, avoiding paying for the necessary processes of society. The difference between the taxes paid and the taxes owed the government is called the "tax gap," and in 2007, the IRS reported it was $345 billion, almost 15% of the government's revenue that year.
The main form of tax evasion is lying about where money you make comes from or concealing income. Failing to report income, legal or illegal, is considered tax evasion. This means that income made from drug trafficking must be reported, although the act is illegal. For this reason, the government has prosecuted several criminals over the years on the basis of income tax evasion.
Tax evasion can have heavy penalties, including $100,000 fines and up to five years in prison. The courts often consider whether the act was deliberate when they impose fines and prison terms.
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It can be difficult to tell what counts as tax avoidance and what counts as tax evasion. If you have any questions about taxes, contact Texas LLC today by calling 512-472-2431.
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