A taxpayer earning income in "cash" and not reporting it as taxable income is an example of:

Question

Quizplus · Accepted Answer

Tax evasion refers to the illegal act of not reporting or under-reporting taxable income with the intention of evading taxes. In this scenario, the taxpayer is not reporting the cash income as taxable income, which is a clear example of tax evasion. Income shifting refers to the legal act of transferring income from a high tax rate entity to a low tax rate entity, while tax avoidance refers to the legal and strategic use of tax laws to minimize tax liability. Conversion is the act of changing the form of income to avoid taxes. None of these terms are appropriate for this scenario, making option D the correct choice.

A Taxpayer Earning Income in "Cash" and Not Reporting It