A tax bill could put an undue burden on residents of Texas, leaving some to wonder how they may reduce their tax bills. Federal law defines legal ways to reduce their obligations. Such tax avoidance steps do not involve anything illegal since the law provides for them. However, engaging in tax evasion is illegal and could result in criminal charges.
Tax avoidance explained
The term tax avoidance seems like a pejorative, but taking advantage of laws to reduce tax payments does not involve doing anything improper. For example, many people work from home, opening doors to taking a home office deduction. Similarly, some people who use their cars for business purposes may also take deductions.
Of course, anyone claiming such deductions must be honest. Overstating how much office space one uses or moving personal mileage into a business use tabulation are fraudulent behaviors. The IRS could ask filers to support avoidance techniques, such as business and charitable deductions. Those who cannot provide proof may face civil penalties or, in some instances, criminal charges.
Legal troubles and tax concerns
Filing a false tax return filled with dubious deductions and underreported income might result in consequences. Persons who attempt to cheat the IRS out of hundreds of thousands of dollars.
Refusing to file a return could also result in legal issues. Those who neither file nor pay taxes due might face an IRS investigation. Sometimes, it may involve an audit or a warning that the IRS will file a return on behalf of a non-filer. While the taxpayer might not face criminal charges, the person should expect interest and penalties.
Some may address IRS inquiries with detailed responses to audits. Even if the IRS’ response proves unfavorable, options exist for an appeal.