What is Tax Evasion?
Tax evasion is an illegal activity in which a person or entity intentionally avoids paying a true tax liability. Those caught avoiding taxes are generally subject to criminal charges and substantial penalties. To willfully fail to pay taxes is a federal offense under the Internal Revenue Service (IRS) tax code.
We can also say that Tax evasion is the illegal skirting of taxes by individuals, corporations, and trusts. It often entails taxpayers intentionally misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as announcing less income, profits or gains than the amounts actually earned, or overstating deductions.
In contrast, tax avoidance is the legal use of tax laws to lessen one's tax burden. Both tax evasion and avoidance can be viewed as forms of tax nonfulfillment, as they describe a range of activities that intend to destabilize a state's tax system, although such an arrangement of tax avoidance is not indisputable, given that avoidance is lawful, within self-creating systems.
What is Tax Avoidance?
Tax avoidance is the use of legal methods to alter an individual's financial situation to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This exercise differs from tax evasion which uses illegal methods, such as underreporting income, to avoid paying taxes.
We can also say that Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to lessen the amount of tax that is payable by means that are within the law.
What is Tax Planning?
Tax planning is the analysis of a financial state or plan from a tax perspective. The determination of tax planning is to safeguard tax efficiency. Through tax planning, all elements of the financial plan work together in the most tax-efficient manner possible. Tax planning is a serious part of a financial plan. The reduction of tax liability and maximizing the ability to contribute to retirement plans are vital for success.
What is Tax Management?
Every assessee liable to pay tax needs to manage his/her taxes. Tax management relates to the management of finances for payment of tax, evaluating the advance tax liability to pay tax in time. Tax management has nothing to do with planning to save tax it is just linked with the operational aspect of payment of tax i.e. while managing his taxes a person confirms that he/she is making timely payment of taxes without running out of the money and he is obeying with all the provisions of the law.