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Tax Evasion and Tax Avoidance: Definition & Comparison for Kids, Teens & Beginners

What are Tax Evasion and Tax Avoidance? Taxes 101: Easy Peasy Finance for Kids and Beginners

Introduction to Investing for Kids and Teens

This video presents a Tax Evasion vs Tax Avoidance comparison in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about Tax Evasion and Tax Avoidance, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

Tax Evasion and Tax Avoidance - Definition and Comparison for Kids Teens Beginners
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:

What is tax evasion?

Tax Avoidance vs Tax Evasion - Comparison for Kids Teens Beginners
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Tax evasion is when someone intentionally hides income or other important information from their country’s tax authority.

Some examples of this are under-reporting income, not filing tax returns, and not reporting income from some sources – like tips.

Tax evasion is illegal, and the penalty for tax evasion can range from hefty fines to time in prison.

What is tax avoidance?

Tax avoidance is when someone reduces the amount of tax they have to pay, by smartly using the provisions of the law. Tax avoidance is completely legal, and there is no punishment for doing it.

Tax avoidance techniques include itemizing your expenses, taking advantage of tax deductions for interest or charitable donations, claiming tax credits – like child and dependent care credit, using tax advantaged accounts like 401k, Roth IRA, and 529, etc.

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Not at all! Using tax avoidance strategies to legally lower your tax bill will not only help you save money on your taxes and maximize your post-tax income, but will not have any negative consequences whatsoever!

In fact, it is often encouraged – for example, allowing mortgage interest deduction promotes home ownership, and childcare expense credit helps primary caregivers go back to work.

So tax avoidance is not just completely legal but actually good!

Tax Avoidance and Tax Evasion - Should You Practice It
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How can I remember which is which?

You can think of tax evasion as evading the authorities and illegally paying less tax.

And you can think of tax avoidance as legally avoiding paying any more tax than you have to.

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: Tax Evasion vs Tax Avoidance

What are Tax Evasion and Tax Avoidance - A Comparison
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