What are the Differences Between Tax Evasion and Tax Avoidance?

Tax Evasion and Tax Avoidance Lawyer In Philadelphia, PA Anybody who has been paying attention to American politics is aware that President Trump is constantly being criticized about his failure to make his tax returns public – and that both before the election and in the last few weeks, a couple of pages of his returns from previous years have been leaked to the press. On the occasion of both revelations, the official statement regarding the amount of taxes paid has been the same: that Mr. Trump had “a responsibility to his company, his family and his employees to pay no more tax than legally required.” Regardless of your politics, this statement is exactly true: everybody has a tax obligation, but nobody needs to pay more than what the law requires. Though people who fell that he should have paid more in taxes, what Trump’s tax returns reveal is what is known as “tax avoidance” rather than “tax evasion” – one is legal while the other can put you in a position of needing a defense attorney. The attorneys at Erik B. Jensen & Associates are happy to provide you with this quick explanation of the differences between tax avoidance and tax evasion, and to provide you with experienced legal advice if you have been accused of the latter.

Paying taxes in the United States is something that we are required to do, yet the government leaves it up to us to provide them with the information upon which our debt is determined. Providing incorrect information is either a mistake or a fraud, while providing correct information but manipulating it in such a way that it mean that your tax burden is lower than expected is not. The difference between the two is the difference between tax evasion and tax avoidance.

Let’s look at what President Trump has done first: Tax Avoidance. Tax Avoidance is the artful and knowledgeable filing and reporting of income and write-offs in a way that maximizes deductions and takes advantage of tax laws. It is generally the product of an extremely talented financial advisor or accountant that results in a taxpayer being able to provide the lowest amount of taxes allowed by the law. Though some may argue that it is unpatriotic to use the laws in a way that leads to paying less than what other taxpayers are submitting, tax avoidance is not a tax crime, and is something that a lot of high-income earners do.

By contrast, tax evasion is – simply said – a crime. Tax evasion is not paying the taxes that you owe to the government as a citizen of the United States, and when you are found guilty of tax evasion, the penalties range from having to pay fines to having to serve jail time. The difference between the two penalties lies in whether it was your intent to cheat the government or whether it was an oversight or error.

If you have been accused of tax evasion, you need to work with an attorney who understands the difference between the two and who can provide you with a solid and competent defense. Contact the attorneys at Erik B. Jensen to learn about the service we can provide.