Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Tax avoidance is the practice of ensuring that you are not paying more taxes than the minimum required under the law. If there are affirmative actions that you can do, legally, to reduce your tax burden, then you are still paying your "fair share" even though you've engaged in tax avoidance.
Tax evasion means that you legally owe tax and choose not to pay it.
The media tends to blend the two terms to suit whatever article they are writing, but there is an enormous difference between the two terms.
Generally speaking, I agree. However, tax avoidance may include interpreting i.e. perhaps 'twisting' tax laws in one's favor (not necessarily as they were intended). Various tax shelters fall into this category, a few of which are, in fact, illegal. Bottom line, it's possible for tax avoidance to (ultimately) be fraudulent as well depending upon the specific scenario.
Generally speaking, I agree. However, tax avoidance may include interpreting i.e. perhaps 'twisting' tax laws in one's favor (not necessarily as they were intended). Various tax shelters fall into this category, a few of which are, in fact, illegal. Bottom line, it's possible for tax avoidance to (ultimately) be fraudulent as well depending upon the specific scenario.
Got an example of this fraudulent tax avoidance? There is no requirement that one follows the "intent" of a tax law versus the actual law.
In tax, it if is legal, it is perfectly OK to do. One isn't under any moral obligation to pay more than what the law actually requires.
Generally speaking, I agree. However, tax avoidance may include interpreting i.e. perhaps 'twisting' tax laws in one's favor (not necessarily as they were intended). Various tax shelters fall into this category, a few of which are, in fact, illegal. Bottom line, it's possible for tax avoidance to (ultimately) be fraudulent as well depending upon the specific scenario.
You're just describing people who tried to engage in tax avoidance, which is legal, but accidentally engaged in tax evasion, which is not legal.
By definition, there can't be fraudulent tax avoidance, because then it just becomes tax evasion. Accidental tax evasion exists, but it's still subject to all the same fines and punishments as on-purpose tax evasion. Courts tend to be a little gentler on those who engage in accidental evasion vs those who do it on purpose, but it will still be a punishment nonetheless.
This could be seen in the tax shelters like you mention- the tax advisors who knew they were bad had the book thrown at them, but the clients who bought them while relying on their CPA's recommendation that they were fully legal were typically just charged the tax, interest, and penalties, but did not get jail time.
You're just describing people who tried to engage in tax avoidance, which is legal, but accidentally engaged in tax evasion, which is not legal.
By definition, there can't be fraudulent tax avoidance, because then it just becomes tax evasion. Accidental tax evasion exists, but it's still subject to all the same fines and punishments as on-purpose tax evasion. Courts tend to be a little gentler on those who engage in accidental evasion vs those who do it on purpose, but it will still be a punishment nonetheless.
This could be seen in the tax shelters like you mention- the tax advisors who knew they were bad had the book thrown at them, but the clients who bought them while relying on their CPA's recommendation that they were fully legal were typically just charged the tax, interest, and penalties, but did not get jail time.
That's not the way it works. If there was an issue with a position with the statute as written it would be resolved at the exam, at worst the appeals, stage of proceedings.
The tax shelters that lose in court will lose on a judicial doctrine (e.g. business purpose, substance over form, step transaction). It will satisfy the law as it is written, but will run afoul of one of these other tests.
Got an example of this fraudulent tax avoidance? There is no requirement that one follows the "intent" of a tax law versus the actual law.
In tax, it if is legal, it is perfectly OK to do. One isn't under any moral obligation to pay more than what the law actually requires.
Tax shelters fall under the category of tax avoidance; if you're a 'TaxPhd', you should know this, yes? That said, are you seriously stating all tax shelters (given specific circumstances/scenarios) are black/white in their legality? It doesn't take rocket science to know there is sometimes 'creativity' in the interpretation of a law in one's favor or siezing advantage of any loophole one can. It's the sign of an excellent tax team who will cover all the bases (and then some); that said, some do walk a fine line (with or without willful misrepresentation). Key being, it's not a matter of determining if it is tax avoidance or tax evasion; it's the ability to prove the latter which is at issue (and my point).
Quote:
Originally Posted by NYCresident2014
This could be seen in the tax shelters like you mention- the tax advisors who knew they were bad had the book thrown at them, but the clients who bought them while relying on their CPA's recommendation that they were fully legal were typically just charged the tax, interest, and penalties, but did not get jail time.
Point being, it's not so 'black or white' i.e. 'bad' or 'fully legal'. I'm primarily speaking to corporate tax/loopholes and teams of accountants/attorneys wherein there are many grey areas.
Willful misrepresentation is difficult to prove (unless an individual is doing something ridiculously stupid i.e. obtaining a social security number for his cat, lol). Without it, one can't be found guilty of tax evasion; that's the significant point relative to the thread.
Tax shelters fall under the category of tax avoidance; if you're a 'TaxPhd', you should know this, yes? That said, are you seriously stating all tax shelters (given specific circumstances/scenarios) are black/white in their legality? It doesn't take rocket science to know there is sometimes 'creativity' in the interpretation of a law in one's favor or siezing advantage of any loophole one can. It's the sign of an excellent tax team who will cover all the bases (and then some); that said, some do walk a fine line (with or without willful misrepresentation). Key being, it's not a matter of determining if it is tax avoidance or tax evasion; it's the ability to prove the latter which is at issue (and my point).
Point being, it's not so 'black or white' i.e. 'bad' or 'fully legal'. I'm primarily speaking to corporate tax/loopholes and teams of accountants/attorneys wherein there are many grey areas.
Willful misrepresentation is difficult to prove (unless an individual is doing something ridiculously stupid i.e. obtaining a social security number for his cat, lol). Without it, one can't be found guilty of tax evasion; that's the significant point relative to the thread.
That said, tax avoidance is a deliberate decision to take a position for tax purposes that satisfies the letter of the law, tax evasion does not.
Tax shelters fall under the category of tax avoidance; if you're a 'TaxPhd', you should know this, yes?
What part of my post would lead you conclude that I don’t know that?
Quote:
That said, are you seriously stating all tax shelters (given specific circumstances/scenarios) are black/white in their legality?
I never said nor suggested any such thing. You’re just making stuff up.
Quote:
It doesn't take rocket science to know there is sometimes 'creativity' in the interpretation of a law in one's favor or siezing advantage of any loophole one can. It's the sign of an excellent tax team who will cover all the bases (and then some); that said, some do walk a fine line (with or without willful misrepresentation). Key being, it's not a matter of determining if it is tax avoidance or tax evasion; it's the ability to prove the latter which is at issue (and my point).
Something is either illegal, or it isn’t. If it isn’t illegal, it’s OK to do it.
Why don’t you tell us about these tax shelters you keep talking about. You know, the ones that are legal, but are nevertheless wrong in some way. . .
Quote:
Point being, it's not so 'black or white' i.e. 'bad' or 'fully legal'. I'm primarily speaking to corporate tax/loopholes and teams of accountants/attorneys wherein there are many grey areas.
No, it is black or white. If it is legal, it is allowed. In the “grey area” but still legal? It’s allowed.
That said, tax avoidance is a deliberate decision to take a position for tax purposes that satisfies the letter of the law, tax evasion does not.
Without willful misrepresentation, it becomes tax avoidance and/or negligence regardless. Point being, 'deliberate decision' to take one position or the other is meaningless.
Why don’t you tell us about these tax shelters you keep talking about. You know, the ones that are legal, but are nevertheless wrong in some way. . .
No, it is black or white. If it is legal, it is allowed. In the “grey area” but still legal? It’s allowed.
Not 'wrong in some way' - but fraudulent (refer to my previous post #71). Have you never heard of the term, 'abusive tax shelters'? Or 'loopholes', for that matter? If tax/financial law were that 'black and white', everyone could be a TaxPhd. :-)
Last edited by CorporateCowboy; 09-23-2020 at 11:25 PM..
Not 'wrong in some way' - but fraudulent (refer to my previous post #71).
A fraudulent tax tax shelter would be illegal. You know, it’s the whole fraud thing. . . We’re talking about that which is legal. Huge difference.
Quote:
Have you never heard of the term, 'abusive tax shelters'? Or 'loopholes', for that matter?
Of course. They’re terms used all the time by the media and others that are uneducated in the subject. Why don’t you give us some examples of these “abusive tax shelters” and “loopholes.” I’ll wait while you do your research. . .
Quote:
If tax/financial law were that 'black and white', everyone could be a TaxPhd. :-)
Does tying to insult me make your own shortcomings easier to bear? If so, do whatever you need to do in order to feel good about yourself. It won’t bother me at all.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
