Tax Planning vs Tax Evasion – Do You Know the Difference?

Tax planning and tax evasion are both methods of reducing the amount of taxes paid. The essential difference between tax planning and tax evasion is legality: tax planning is perfectly legal, while tax evasion is illegal.

Tax evasion can come in many forms: two examples are cash income that is earned but not reported, and a charitable donation claimed that was not actually donated. The penalties for tax evasion can be severe: a person convicted could face fines of up to $100,000 ($500,000 for corporations), and/or a prison sentence of up to 5 years.

Tax planning uses legal methods to reduce taxes payable as much as possible. There are many ways to reduce taxes legally: some examples include optimizing RRSP contributions, taking advantage of the small business deduction, and declaring business expenses such as a home office or CCA. These tax planning opportunities, and more are services we can provide for you; contact us today for help!

This post has been prepared for general information purposes. It is not advice. The information presented may not fit your unique situation, please consult one of our trusted business advisors at RHN CPA for further clarification and interpretation of your circumstances.