What is the difference between tax evasion and tax avoidance?

Tax evasion and tax avoidance refer to strategies used to reduce one’s taxes by utilizing loopholes in the tax system. Tax evasion is a criminal offense, meaning it is illegal to use strategies or methods to prevent paying taxes. Tax avoidance, on the other hand, is not considered a criminal offense. Tax evasion involves deliberately falsifying information or omitting income to pay less taxes than one actually owes. In New Mexico, tax evasion is considered a white collar crime that could lead to hefty fines or criminal charges. For instance, if an individual or business deliberately underreports their income or uses a false Social Security number, they could be subject to fines or jail time. Tax avoidance is the use of legal strategies to reduce taxes. This would include taking advantage of tax credits, tax deductions, and other strategies within the law to reduce taxes owed. Tax avoidance is not illegal, although it may be considered unethical by some. In New Mexico, tax avoidance is not a criminal offense, but it could still lead to a civil suit or penalties if it is found to be false or misleading. The key difference between tax evasion and tax avoidance is that tax evasion is illegal, and it can lead to criminal charges, while tax avoidance is legal and can help individuals and businesses minimize their tax liability.

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What is the difference between tax evasion and tax avoidance?

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