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What's the difference between Tax Aviodance and Tax Evasion?

May 10, 2011


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Tax Avoidance is minimizing tax burden through legal means. It is possible to reduce tax liability through taking advantage of a tax credit or tax deduction. For example, taxes can be avoided by purchasing municipal bonds or opening IRA accounts.

By contrast tax evasion is the minimization of tax through illegal means. It usually includes dishonest tax reporting: underdeclaring income or overstating deductions.

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