Western Governors University (WGU) ACCT3630 C237 Taxation I Practice Exam

Question: 1 / 435

What is the impact of tax avoidance on tax liabilities?

It increases overall tax liabilities

It has no impact on tax liabilities

It reduces the amount of taxes owed

Tax avoidance refers to the legal strategies used by individuals and businesses to minimize their tax liabilities. This approach makes use of deductions, credits, exemptions, or other provisions in the tax law to reduce the overall amount of taxes owed. By strategically planning and taking advantage of these legal methods, taxpayers can lower their tax obligations in a completely lawful manner.

As a result, tax avoidance effectively reduces the amount of taxes owed, allowing individuals and businesses to retain more of their income. It's important to distinguish this from tax evasion, which is illegal and can lead to penalties. Therefore, recognizing the legality and legitimacy of tax avoidance is crucial in understanding its positive effect on tax liabilities for those who engage in it properly.

Get further explanation with Examzify DeepDiveBeta

It is illegal and results in penalties

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy