What is tax evasion?

Tax evasion refers to the illegal act of not paying the correct amount of taxes owed to the government. It typically involves underreporting income, inflating deductions, or hiding money in offshore accounts. Because it is a criminal offense, tax evasion results in legal penalties, which can include fines and imprisonment.

The choice indicating that tax evasion is about illegally reducing tax payments captures the essence of this concept, as it highlights the unlawful methods individuals or businesses might use to minimize their tax liabilities. This practice undermines the tax system and can lead to significant consequences for both the evader and the economy at large. Understanding this distinction is crucial, as it contrasts with legitimate methods of tax planning or minimizing tax obligations that are within the law.