Tax Evasion and Tax Avoidance

What is tax evasion?

Tax evasion is the use of illegal means to avoid paying your
taxes. Tax evasion occurs when the taxpayer either evades
assessment or evades payment.
Tax evasion is the use of illegal methods of concealing
income or information from tax authority.

Tax evasion can result in fines, penalties and/or prison time.

 Examples of Tax Evasion

1. Paying the nanny under the table

Paying someone who works for you in cash doesn’t constitute
tax evasion
2. Ignoring overseas income
This often affects people who work or own rental properties
outside of the country,
3. Banking on bit coin
Using bit coin won’t get you through any secret loopholes

4. Not reporting income from an all-cash business or illegal

activities
Some of the most common tax evasion cases involve people
running cash businesses who pocket money from the cash
register without reporting the income
 What is tax avoidance?
Tax avoidance is the use of legal methods of reducing
taxable income or tax owed. Claiming allowed tax deductions
and tax credits are common tactics, as is investing in tax-
advantaged accounts .

Is the legal usage of the tax regime in a single territory to

one's own advantage to reduce the amount of tax that is
payable by means that are within the law.
 Examples of Tax Avoidance

1.Federal and state tax regulations provide for deductions

2.Credits and adjustments to your income that will lower your
tax burden
3.Increase Retirement Savings
4.Maximize Work Deductions
5.Health Savings Account
6. Use Home Equity
Differences
END
 GROUP 4
NAME ID NO.

1. ADISIE TILAHUN 5055/20

2. MULUNESH TAMER 5031/20
3. YEWAGNESH DESSALEGN 5040/20
4. WOINISHET SHUMET 5074/20