Every year there is some celebrity or company big wig who finds themselves in the media spotlight. The problem is that they are not be showcased on every media outlet for their outstanding performance or charitable donations, they are being charged with tax evasion. As a Nevada certified public accountant, I think it is important to talk about the difference between “tax evasion” and “tax avoidance.” Although you may think the two are the same, the consequences are very different.
What is Tax Evasion?
Tax evasion is making a conscious effort to avoid paying taxes, usually by illegal means. Some of the most common schemes used to avoid taxes are not claiming illegal income, moving your money or business to another country, and false billing schemes. For more information about what the most common schemes used for tax evasion are, visit the Internal Revenue Service’s Website.
There are huge consequences to those individuals who are caught evading taxes, these consequences range anywhere from fines and loss of assets to jail time. In fact, if you look at history, some of the nation’s most famous athletes, actors and mob bosses have been fined or received jail time for refusing to or taking illegal actions to evade taxes.
What is Tax Avoidance?
Whereas tax evasion is illegal, tax avoidance is something a certified public accountant becomes very good at. We pride ourselves in our knowledge of the tax codes. Working with a CPA will insure that you are claiming all of the deductions and credits that are available. The government has established a list of ways to lower your amount of taxable income, but you need to make sure you are following the rules.
Attempts at Not Paying Taxes
There are groups and individuals who refuse to pay taxes. These individuals are not hiding their income or using illegal schemes, they simply refuse to pay taxes. Usually, the basis for their argument is that taxes are not constitutional, and therefore the requirement of taxes is not something they have to abide by. I am not here to say whether these individuals are right or wrong, it is a free country and they have their freedom of choice and speech. However, be aware that if you do not pay taxes you will have to deal with the IRS and are most likely you are going to have to go to court.
Advice from a Nevada Certified Public Accountant
If you end up talking taxes with someone around the water cooler and they start telling you about ways not to pay taxes, you should be weary. Remember there are ways to limit the amount of taxes you have to pay, but if someone tells you something that sounds too good to be true, it probably is. The best advice that I can give you is to contact a certified public accountant if you legally want to save the most on your taxes.