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Tax avoidance vs Tax evasion

Tax avoidance vs Tax evasion. Tax avoidance. is the legal utilization of the tax law to one's own advantage to reduce the amount of tax that is payable by means that are within the law Hiring a Tax Accountant is a strategy that many people use to reduce the expense of

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Tax avoidance vs Tax evasion

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  1. Tax avoidancevs Tax evasion

  2. Tax avoidance • is the legal utilization of the tax law to one's own advantage • to reduce the amount of tax that is payable by means that are within the law • Hiring a Tax Accountant is a strategy that many people use to reduce the expense of • personal income taxes and • business income taxes

  3. Tax Evasion • is the general term for efforts to not pay taxes by illegal means. • dishonest tax reporting • declaring less income, profits or gains than actually earned • or overstating deductions • Investigated and prosecuted by the IRS • guilty party subject to fines and/or imprisonment He received the maximum three year sentence after refusing to pay millions in taxes. Now he has to pay fines, legal fees and spend time behind bars

  4. Federal Withholdings each Pay-Period • Gov’t requires working individual to declare their withholding allowances on their W-4 form – fill this out on first day of work • Goal is to avoid tax evasion and tax avoidance, so the federal tax is taken out each pay-period according to: • Gross Income Amount • Marital Status • Number of Dependents

  5. Tax Day: April 15thTax returns are due to the government declaring all income earned the year before • Gov’t calculates all income and taxes paid throughout the year and…. • Any tax amount that the individual over-paid during the year is “given back” to them after the submit their tax return • Any tax amount that the individual under-paid duping the year is “billed” to them after the submit their tax return

  6. Withholdings – • The more allowances you take out each pay-period, the more $$ you will get back once you file your taxes on April 15th • a big tax return from the go's • If you take out the least amount of allowances each pay-period, the less $$ you will get back once you file your taxes on April 15th • Likely you could even owe the gov’t tax $$

  7. VIDEOS • Wesley Snipes: • http://www.msnbc.msn.com/id/21134540/vp/16109103#16109103 • Aaron Carter: • http://www.msnbc.msn.com/id/21134540/vp/16109103#34015448 • Tax Evasion: • http://www.youtube.com/watch?v=rLpUxiJblNI

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