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Understanding Tax Evasion From David StewartDavid Stewart is an experienced business professional from Bowling Green, Kentucky who has a long history of paying taxes for both business and personal ventures. One of the most common concerns he comes across from young entrepreneurs is tax evasion. Check out this reference guide to learn more!
Taxes are a levied amount of money, typically segmented into certain percentages, which are paid to the federal & state government to raise revenue for various programs, necessities and services. Taxes are required by law to be paid and are based on the annual earnings of corporations, individuals, legal entities and trusts.
The Basics: What Are Taxes?
Tax avoidance is different than tax evasion because it is a legal act for one to use their tax regime to their own advantage to decrease the total tax that is payable my mediums that are within the law.
What's Tax Avoidance?
According to David Stewart, tax evasion is when a taxpayer, whether it's an individual or corporation, evades the payment of a tax. This action is illegal and punishable in a court of law with some consequences resulting in hefty fines and imprisonment.
What's Tax Evasion?
Tax evasion can sometimes unintentionally occur but it doesn’t make the offense less punishable. It can happen when tips, cash gifts, barter income, side jobs and other revenue isn't reported as annual income to the federal government.
When Can It Happen?
When taxes are evaded, the United States loses a significant amount of tax revenue that could help fund various governmental processes. It's estimated that 18 to 19% of total reportable income is not properly reported to the IRS. Just from the years 2001 to 2010, an estimated $3.44 trillion in revenue was lost.
The Numbers
When it comes to receiving income, no matter the source - tips, gifts, side jobs – it should always be reported to the Internal Revenue Service to avoid legal consequences. Consult with a tax preparer or consultant every year to review your annual income and for proper tax filing.
Financial Tips
