Which action constitutes tax evasion?

• A. Donating to charity
• B. Paying all taxes on time
• C. Lying about income or purchases to avoid taxes
• D. Filing taxes honestly

Answer: (C)

The main idea here is distinguishing illegal evasion from legitimate tax actions. Tax evasion happens when someone intentionally misrepresents their finances on a tax return to reduce what they owe. Lying about income or purchases to avoid taxes is exactly that kind of deception, making it illegal and punishable. This is different from donating to charity or filing and paying taxes honestly, which are legitimate ways to satisfy tax obligations (charitable donations can qualify for deductions if properly documented, and paying on time with accurate reporting is compliance). The consequences for evasion can include fines, penalties, and even criminal charges. So this action is the one that constitutes tax evasion.