eli5: Are tax evasion and avoidance the same thing, and if not, what’s the difference?

Question

eli5: Are tax evasion and avoidance the same thing, and if not, what’s the difference?

In: Economics

Answer 1

Evasion is not paying taxes that you legally owe. It is a crime. Avoidance is legally using the tax rules for your benefit. It is not a crime. An example of evasion would be I claim higher expenses in my business than I actually paid and faking up some paperwork so that it looked like my profits were less than they really were.

An example of avoidance would be to wait to take money out of a retirement account (that I have to pay taxes on when I withdraw from it) until after I have quit working so that I am in a lower tax bracket and pay less taxes on the money I took out of the retirement account.