What is the difference between tax avoidance and tax evasion?

Tax avoidance and tax evasion are two distinct approaches to dealing with taxes. Tax avoidance is a legal way of reducing taxes, while tax evasion is an illegal way of avoiding taxes. Tax avoidance is a legal approach of reducing taxes through legal methods such as using deductions, credits, and limitations. Examples of legal tax avoidance methods include taking advantage of deductions, credits, and allowable items such as tax-deferred retirement accounts. Taxpayers may also take advantage of differences in how different states tax their residents. Texan taxpayers, for example, may use this approach to avoid certain taxes by taking advantage of lower taxes in other states. Tax evasion is the illegal approach of avoiding or reducing taxes. This illegal practice may involve falsifying or underreporting income, claiming fraudulent deductions, failing to report income, or failing to pay taxes. Tax evasion is a serious criminal offense in Texas and can lead to substantial fines, jail time, and even loss of citizenship. Tax authorities in Texas are often vigilant when it comes to finding and prosecuting tax evasion. Ultimately, taxpayers should take great care to understand the differences between tax avoidance and tax evasion. While one is legal, the other is not, and it is important to understand and follow the law when it comes to taxes.

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What is the difference between tax avoidance and tax evasion?

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