What is the difference between tax evasion and tax avoidance?

Tax evasion and tax avoidance are two often-confused concepts that are related to international tax law in Maryland. Tax evasion is the illegal act of failing to pay taxes owed to the government. Tax avoidance, on the other hand, is the legal process of reducing tax liabilities through legal means, such as making use of deductions, credits, and other tax-advantaged investments. Tax evasion is a serious crime and is punishable by law. In Maryland, someone found guilty of tax evasion could face fines, prison time, and costs associated with the investigation. Tax avoidance, however, is perfectly legal. It is simply a way to legally reduce one’s tax liability in an effort to save money. Because it is illegal, tax evasion should never be considered an option when it comes to international tax law in Maryland. Tax avoidance, however, can be an effective way to reduce one’s taxes without committing a crime. Individuals who are trying to reduce their tax liability should speak to a knowledgeable accountant or lawyer about their options.

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What is the difference between tax evasion and tax avoidance?

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