Which of the following best defines tax evasion?

Tax evasion is best defined as the illegal act of not paying taxes owed. This involves deliberate actions taken by an individual or business to avoid paying the correct amount of taxes, such as underreporting income, inflating deductions, or hiding money in offshore accounts. It is important to understand that tax evasion is a criminal offense, as it entails intentionally deceiving tax authorities in order to reduce tax liability.

In contrast, the other options do not accurately capture the definition of tax evasion. Legal reduction of tax liability pertains to legitimate tax planning strategies that minimize taxes owed through permissible means. Failing to file tax returns on time can be viewed as a compliance issue but does not necessarily indicate intent to evade taxes. Similarly, the payment of tax owed after a deadline may result in penalties or interest but does not equate to the illegal act of tax evasion, since the underlying obligation to pay taxes has not been denied or concealed. Thus, option C clearly encapsulates the essence of tax evasion as an unlawful practice.