IRS distinguishes between tax avoidance and tax evasion
Tax Avoidance
Tax Evasion must be distinguished from tax avoidance which is the creative but lawful interpretation of tax rules. One example of such tax avoidance is the intentional undervaluing of an asset for tax purposes and overvaluing of the same asset to use the asset as collateral to secure a loan.
Tax Evasion
Tax evasion is the deliberate and illegal avoidance of paying lawfully owed taxes to the Internal Revenue Service. To willfully fail to pay taxes by fraud or deception is a federal offense under the Internal Revenue Service (IRS) tax code.
According to the IRS, those who are effectively indicted for tax evasion are subject to severe criminal penalties, including deportation. Only about two percent of all taxpayers undergo a criminal investigation for tax evasion, and of those investigated, only about a quarter will face criminal charges.
