What is the difference between tax evasion and tax avoidance?

Tax evasion and tax avoidance are two different types of tax strategies. Tax evasion is an illegal activity wherein an individual or entity willfully fails to pay the full amount of taxes due. This can include activities such as hiding income, underreporting income, or falsely classifying expenses to reduce the tax bill. Tax avoidance, on the other hand, is a legal strategy used to reduce the amount of taxes owed. This can include using legal deductions and credits, such as deductions for charitable giving, or taking advantage of various tax credits. Tax avoidance is often accomplished by structuring income and investments in a way that reduces the amount of taxes paid. In general, tax evasion is illegal and can lead to harsh penalties, including fines and even imprisonment. Tax avoidance, however, is legal and allows individuals and entities to minimize their tax burden without breaking the law. It is important, however, to understand all the applicable laws and regulations in order to ensure you are taking full advantage of all the legal tax benefits available.

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What is the difference between tax evasion and tax avoidance?

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