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 avoidance?

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 earned $$500$ from tutoring in December, but in order to avoid paying taxes on that income this year, he collected the $$500$ in January. Is

this tax evasion or tax avoidance?

Tax avoidance

Tax evasion