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!