Michael C. Hennenberg

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Tax avoidance vs. evasion

It is not uncommon to hear advertisements in Cleveland of services aimed at helping people to pay less in tax. At the same time, you also likely have heard multiple stories of others facing hefty fines or even jail time for tax evasion. These seemingly conflicting scenarios can often lead to confusion. You certainly do not want to have to pay more tax if it is not necessary, yet you aldo do not want to run afoul of the law. Many who share your same confusion have come to us here at the offices of Michael C. Hennenberg asking how to know if a certain practice aimed at lowering or avoiding taxes is legal. 

The answer to that question comes from understanding the difference between tax avoidance and evasion. The Internal Revenue Service can certainly be viewed as the authority on this topic, and according to the federal tax code found on their website, tax avoidance is when you plan to reduce your tax liability through legitimate practices. These can include: 

  • Deducting business and investment expenses 
  • Seeking to have the value of property you own lowered (to pay less in property tax)
  • Forming a Subchapter S corporation to reduce income subject to Medicare and Social Security Taxes

Tax evasion, on the other hand, is an action aimed at evading the payment of a tax that is due. This can be done by concealing or underreporting income or misrepresenting facts related to your tax liability. This is considered fraud and can be prosecuted. Advertised tax avoidance plan promising to help you keep from paying taxes altogether should thus be viewed with a fair amount of scrutiny. 

More information on avoiding accusations of tax fraud can be found throughout our site. 

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Michael C. Hennenberg
5910 Landerbrook Drive, Suite 200
Mayfield Heights
Cleveland, OH 44124

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