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Financial
Jul 23, 2018

Tax Evasion Versus Tax Avoidance

Sponsored Content provided by Karen Durda - President, Enrolled Agent, Century Accounting and Tax Services, Inc.

What is the difference between tax evasion and tax avoidance?
 
One is criminal, and one is not.
 
To evade paying taxes people have used abusive schemes, transactions and scams to involve tax benefits not allowed by law. The IRS has even provided a complete list of abusive types of tax schemes in Publication 3995. To further complicate matters, they can be of either the simple or complex variety. Nonetheless, they are all illegal.
 
If it seems to good to be true, it is.
 
Examples of abusive schemes are ones that promise to reduce your debt or eliminate your taxes via tax credits and/or deductions using a fraudulent return preparer, fake charities, excessive business deductions or reduced business income to receive credits based on income or an illegal tax shelter.
 
And while double checks for e-filed returns stop claiming children for the benefit of receiving earned income tax or children under 17 credits, they get made on mailed-in returns.
 
Since 2002, the IRS established a division within the Small Business/Self-Employed Division called the Lead Development Center to assist in the investigation and conviction process of tax evaders.
 
The IRS has a list it publishes every year of the top tax evasion schemes.
 
Some of these are:

  • We can show you how you’ll never pay taxes again
  • Live in your home and deduct 100 percent of expenses on your tax return
  • Deduct the cost of your child’s education (not to be confused with the Tuition and Fees or American Opportunity Act Credit for higher education)
  • Your Tax Professional does not know of these
  • I can get you big refunds, guaranteed for a fee
  • Share or Borrow Earned Income Tax Credit Dependents
  • Put your money in a trust and never pay taxes again
  • I don’t pay taxes, why should you?
Just remember, when you get caught, not if, you are held for all taxes, penalties and fees, plus criminal action the IRS can take against you.
 
If the person preparing your return states that the return must be mailed in, be suspicious. If they do not sign the return or have self-prepared at the signature line, be suspicious. If their fees are based on the amount of refund they get for you, be suspicious.
 
If you feel you have been involuntarily involved in deceptive tax abuse, file form 14242 or call the IRS at (800) 823-0433.

Karen S. Durda, EA, President of Century Accounting and Tax Services, Inc., has been in the profession since 1984. As an Enrolled Agent credentialed by the Treasury Department, she has the rights as afforded by Congress to represent individuals and businesses before tax authorities. Since May 2012, she has also had the distinction of being a Dave Ramsey Endorsed Local Provider, assisting in budgeting and financial peace for a four-county area and parts of Myrtle Beach.As a Qualified Business expert with the New Hanover County courts, she has experience and knowledge of various scopes of professions and industries, such as medical, health services, legal, construction, retail, real estate, auto sales and service, insurance and restaurant. Continuous tax law courses throughout the year keep her up-to-date on all tax rules, regulations and law changes, as well as business trends, to better serve her clients.

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