Business Law

614 Words3 Pages
MEMO TO: Professor Michael E. Rychel FROM: Harmanpreet Kaur DATE: March 26 2014 SUBJECT: Difference between tax evasion, tax avoidance, and tax fraud? The times when taxes were first imposed on American Citizens, from that day people have been trying to find different ways to escape from taxes. While some taxpayers continue to find legal ways to avoid taxes on the other hand some choose to evade taxes, or not to pay at all. Three ways to avoid taxes are tax evasion, tax avoidance, and tax fraud. The distinguishes are: Tax Evasion It is an illegal practice where a person, organization, or corporation intentionally avoids paying their tax liability. However, typically tax evasion schemes involves an individual or…show more content…
Even the use of loopholes which named because they provide legal means to legislative intent is not punishable by law. An example of Tax Avoidance is: Big Four accounting firms Ernst & Young agreed to pay Federal prosecutors $123 million to settle criminal tax avoidance charge stemming from $2 billion in unpaid taxes from about 200 wealthy individuals advised by For Ernst & Young senior patterns between 1999 and 2004. Tax Fraud It occurs when an individual or business entity willfully and intentionally falsifies information on a tax return in order to limit the amount of tax liability. Tax fraud essentially entails cheating on a tax returns in an attempt to avoid paying the entire tax obligation. There are many ways to do tax fraud, some of them are, including deliberately under reporting or omitting income, making false accounting entries, taking deductions that the taxpayers is not entitled to, claiming personal expenses as business expenses, or hiding assets. Tax fraud cheats the Government out of millions of dollars each year. It is illegal and punishable by fines, penalties, interest, or prison time. However, it is important to note that tax fraud is generally requires willful and intentional activity for the purpose of lowering a tax liability, not mistakes, or accidental misreporting. An example of Tax Fraud is: On September 2012 in Oklahoma City,

More about Business Law

Open Document