8. Tax evasion versus tax avoidance
Money management and tax planning
Money management includes effective tax planning. Your financial plan should include ways to lower your tax liability so you have more money to
spend, invest, or donate. The key to effective tax planning is to reduce your taxable income, rather than your gross income, through all appropriate
and legally available opportunities.
The act of reducing taxes in ways that are legal and compatible with the intent of Congress is called
Tax evasion or tax avoidance?
Ayesha is preparing her tax return for the year and is looking at ways to save on her tax bill. Ayesha worked a full-time teaching job and tutored on
the side. Ayesha earned $500 from tutoring in December, but in order to avoid paying taxes on that income this year, she collected the $500 in
January. Is this tax evasion or tax avoidance?
Tax avoidance
Tax evasion
