What is the difference between tax avoidance and tax evasion?

Tax avoidance is legal and involves reducing a person’s or business’s tax liability by taking advantage of existing laws and deductions. It is taking advantage of methods or loopholes in the tax code that are designed to reduce a person’s tax liability. Tax avoidance is a legal way to minimize taxes, such as using deductions, exemptions, and other available credits. Tax evasion on the other hand is the illegal attempt to reduce a person’s or business’s tax liability. It involves fraudulently failing to pay taxes or honestly reporting income or profits. Examples of tax evasion could include not reporting a portion of income, claiming false deductions, or failing to file tax returns. In Hawaii, tax evasion is a criminal offence and can result in hefty fines, penalties, and even jail time. In summary, the main difference between tax avoidance and evasion is that avoidance is completely legal and can be used to minimize taxes, while evasion is illegal and individuals or businesses that are found guilty of it may be subject to penalties.

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What is the difference between tax avoidance and tax evasion?

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