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So, How Can I Legally Reduce my Taxes?: Avoidance vs Evasion

Avoidance vs EvasionAvoidance vs Evasion

“Taxes are the price we pay for a civilized society.” – Oliver Wendell Holmes, Jr.

It is said that Holmes, the Associate Justice of the Supreme Court, would walk into the Department of the Treasury himself, and hand in his tax return and his check to the Secretary of the Treasury.

Not all of us are so patriotic.  In fact, the Second Circuit has said:

“Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”  – Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934).

We all seek to lower our tax bill to the Internal Revenue Service and the United States Treasury.  We can do it through tax avoidance – the careful planning of our lives.  We cannot do it through tax evasion, through the deliberate misrepresenting the true state of affairs to the tax authorities to reduce their tax liability.

Avoidance strategies include maximizing deductions through careful record keeping utilizing programs like iBank or Intuit’s Quicken.  Utilizing these programs and their receipt capturing abilities may allow good tax preparers to leverage that careful recordkeeping into larger deductions which will reduce, or avoid, taxes.  Talking with a tax professional about utilizing tax credits will also assist the small business owner or entrepreneur in reducing taxes.  The Internal Revenue Service provides a nice, user-friendly center to check out what’s out there.

Evasion is straight out lying – don’t do that.

 

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