Nobody likes to pay taxes, and most Americans will find ways to keep more money in their pockets rather than give it to the government.

There are several legal methods of paying less in taxes, along with some that are illegal. Knowing the difference can protect you from criminal charges.

Legal loopholes

There are several sections of tax law where accountants and tax professionals can use loopholes to legally exploit the tax system to reduce the amount owed to the government. This may include:

• Utilizing tax credits and deductions where applicable
• Making contributions to retirement accounts
• Structuring business operations in tax-efficient ways

On the other hand, tax evasion is deliberately misrepresenting or concealing information to reduce tax liability. Underreporting income, inflating deductions or hiding money and assets can be accomplished through the following:

• Failing to report cash transactions
• Claiming personal expenses as business expenses
• Using fake documents to claim deductions

Tax evasion is a felony with significant legal consequences. A conviction can result in fines of up to $250,000 ($500,000 for corporations) and five years in prison. Accountants convicted of tax evasion can also lose their professional license.

Several defenses can be used when facing charges of tax evasion, such as:

• There is a lack of willfulness to purposely evade taxes, and it was done accidentally or due to negligence
• The defendant relied on the advice of a qualified tax professional and followed their advice in good faith
• There were steps taken to correct any errors before being contacted by tax authorities
• The defendant suffers from a health or mental condition that impairs their ability to understand their tax obligations

Tax evasion is illegal, but it’s not always done intentionally. Anyone facing charges should work with someone who can help them build a strong defense.