A tax shelter often conjures up negative images of illegal wrong-doing. But, a tax shelter is also a legal strategy that can help reduce your taxes. There are many types of tax shelters including deduction tax shelters, and tax credit tax shelters.
Some tax shelters offer illegal ways to shelter your income from the IRS. Penalties for entering into illegal tax shelters are clear, but also severe, including a penalty charge, criminal prosecution, and the possibility of a prison sentence.
What's the difference between Tax Avoidance, Tax Evasion, and Tax Sheltering? Our partners at TurboTax explain.