6. Tax evasion versus tax avoidance Money Management and Tax Planning Money management includes effective tax planning, Your financial plan should include ways to lower your tax liability so you have more money to spend, Invest, or donate. The key to effective tax planning is to reduce your taxable income, rather than your gross income, through all appropriate and legally available opportunities. The act of reducing taxes by deliberately understating Income or overstating deductions is called Tax evasion or tax avoidikace? Aaron is preparing his tax return for the year and is looking at ways to save on his tax bill, Aaron worked a full-time teaching job and tutored on the side. Aaron eamed $500 from tutoring in December, but in order to avoid paying taxes on that income this year, he collected the $500 in January. Is this tax evasion or tax avoidance? Tax evasion Tax avoidance