Define tax compliance.

Tax compliance refers to the act of correctly reporting and paying taxes owed in accordance with applicable tax laws. This involves individuals and businesses accurately reporting their income, calculating the taxes owed, and submitting the necessary forms and payments to tax authorities within specified deadlines. Compliance ensures that taxpayers fulfill their legal obligations, which helps to maintain the integrity of the tax system and contributes to public finances.

Focusing on the correct answer, tax compliance emphasizes adherence to regulations, such as the accurate declaration of income, allowable deductions, and credits. Compliance is crucial as it helps prevent legal repercussions, penalties, and interest that could arise from underreporting or failing to pay taxes owed.

In contrast, options that discuss tax avoidance or strategies for deductions do not align with the definition of compliance, as they may involve interpreting the law in a way that does not strictly adhere to proper reporting and payment standards. Additionally, the process of tax auditing focuses on reviewing compliance after the fact rather than the act of compliance itself. Overall, understanding tax compliance is vital for accurate financial management and legal adherence.