KPMG Spark Blog
Tax Evasion or Tax Avoidance?
In the world of finances, tax evasion and tax avoidance are two terms that often get confused and yet have completely different meanings.
Tax Evasion
Simply put, the term tax evasion means not paying the taxes that you owe. Penalties for this type of infraction can range anywhere from fines to jail time depending on intent. Intentionally foregoing the payment of your taxes will most likely result in hefty punishment.
Don’t believe us? Go read about actor Wesley Snipes' recent 3 year stint in prison after opting out of paying his taxes.
Important things to remember when trying to “Avoid” Tax Evasion
- Declare your independent contractor’s income
- Don’t inflate business expenses
- Report income earned in other countries
- Don’t declare personal expenses as business expenses
Tax Avoidance
Tax avoidance on the other hand, is when you arrange your income in a manner that legally allows you to pay the lowest amount of taxes. And yes, this is legal. In fact, there’s an entire industry built around this concept—it’s called tax consultancy—something we love helping clients with here at Bookly.
Speaking on the constitutionality of the matter, Judge Learned Hand said:
Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
In most cases, tax avoidance is more applicable to higher income earners. There are less ways for low income individuals to avoid payment of taxes. This fact has been at the helm of much political debate—something we’ll leave to the pundits.
Methods of Tax Avoidance
- Deferring income (401k)
- Getting income through Capital Gains
- Using the primary residence capital gain exclusion to its full effect
Subscribe
Sign up for our newsletter
How Outsourced Bookkeeping Can Amplify Your In-House Accounting Team
Outsourced bookkeeping services, such as KPMG Spark’s, offer a cost-effective solution for outsourcing traditional data entry and reporting, freeing up critical bandwidth so that your in-house bookkeeper can do more with your financial data. Join us as we discuss how outsourced bookkeeping can amplify your in-house accounting team.
Introduction to the KPMG Spark Bookkeeping Team
At KPMG Spark we provide an online bookkeeping service using automation technology all while providing you with a bookkeeper that works with you to make sure your books are in order. Join us as we take a look at what we do, how we do it, and how we can help you have more time for your business.
How 40 Dreams Catering Made an Offer on a Million-Dollar Building With Confidence
Owner and founder Adrienne Fudge used KPMG Spark to get clarity on her finances, save money, and eventually– make a huge business decision with ease.
If You Have a Business, You Need Artificial Intelligence
Artificial intelligence can help virtually any business step up its game to improve productivity and efficiency. Let's take a closer look at what artificial intelligence is and how it can help your business.
Outsourced Bookkeeping vs. In-House Bookkeeping: Everything You Need to Know
While most companies aspire to outsource their bookkeeping, many instead opt for a DIY option. Managed accounting is a viable alternative that offers more support and features than DIY software, but is just a fraction of the cost of a full-time bookkeeper. Join us as we take a look at the pros and cons of online bookkeeping software vs. outsourced bookkeeping with managed accounting.
4 Critical Metrics For Making Better Business Decisions
As a business owner, you probably don’t have a lot of time to spend analyzing your financial data. By taking a few minutes each month to track just four important metrics, you can understand where your business is performing well and quickly spot areas of concern. Let’s look more closely at these four financial indicators that are critical for most companies.
The Hidden Costs of Doing Your Own Bookkeeping
You may view doing your company’s bookkeeping as a point of pride, or simply as a way to save money. But there are many costs associated with “do-it-yourself” bookkeeping that business owners often overlook. Join us to see how outsourcing your bookkeeping can help you and your business.
4 Benefits of Choosing KPMG Spark for Your Bookkeeping
Entrepreneurs often start out trying to do their own bookkeeping but quickly realize they need a bookkeeping solution that not only makes it easy, but also one that addresses their evolving business needs — such as managing cash flow as their business grows. Let's take a closer look at how KPMG Spark can help your business.
Managing Cash Flow in 2021
The insight provided by an updated, thorough examination of upcoming cash flows can help business owners make more informed decisions and best leverage the cash they’re generating. Let’s look more closely at some leading practices for generating a cash-flow projection and how it can help your business.