A lot of people may not know this, but any Baltimore bankruptcy lawyer would know the difference between tax evasion and tax avoidance. These two terms, as similar as they may sound, are actually very different from each other. But for a business owner such as yourself, the question would be: should you educate yourself on the difference between the two? Well, being that you have your own business, with taxes to file and accounts and monetary inventories to record, you definitely should. This way, you would be able to keep your business from being forcibly shut down and keep yourself from being hunted down by the IRS.
What is tax evasion?
Tax evasion is the process of deliberately avoiding one’s taxes through deceptive tactics and methodologies. It is seen as an offense in the eyes of the law and therefore considered as an illegal act. If you are caught practicing any of the following methods, you would be looking at a good 5 years in prison.
- Providing false business income reports and statements to the IRS.
- Consciously paying the wrong amount of taxes owed.
- Stating a tax amount on your return that’s less than what you initially reported
What is tax avoidance?
Initially, one would think that tax avoidance is a complete evasion of one’s taxes but it’s not the case. Unlike tax evasion, tax avoidance is considered a legal act! Yes, any business owner is able to practice this freely without having to worry about the state or federal government knocking on your front door. One would still have to pay their taxes, but with tax avoidance, a person has the ability to legally lower their taxes.
It is also notable to understand that these procedures are in accordance with the tax code, a series of tax laws developed by federal, state, and local government entities to ensure that taxes are filed properly to the IRS. Of course, not all businessmen would have the time to look into it and see what you can do to “avoid” taxes. In this case, one can check with their local Baltimore bankruptcy lawyer to see how their taxes can be avoided.
Here are some ways on how one can lower their taxes:
- Increasing your retirement savings through an employer-employee based plan.
- Utilizing non-reimbursable expenses that are considered important for your business to operate such as travel expenses and subscriptions to organizations
- Attaining home loans like mortgages and home equity loans and using the interest rate from these loans to be deducted from your annual tax rates.
There’s no doubt that tax avoidance is the only way to go. Of course, you can always go for tax evasion if you don’t mind going to jail for 5 years or more. But if you’re a responsible citizen, you would already know the importance of paying your taxes. And while it is true that taxes can be…taxing, there are different legal ways in which you are able to lower your taxes.
Tax avoidance is an ideal strategy to put more money in your pocket without cheating the system. But if you’re unsure on how you can safely practice this strategy, give us a call and let Richard Hackerman help you out!
We have the extensive experience and knowledge on tax laws and tax avoidance strategies to ensure that you are able to legally reduce your taxes. For inquiries, don’t hesitate to give us a call! We’ll set an appointment so we can discuss how you can practice tax avoidance in a safe and controlled manner. You can also send us a direct message by heading to our GET DIRECTIONS page and fill out the form provided for you down below.
Richard Hackerman: Your Baltimore bankruptcy lawyer and tax specialist of choice.