Did you steal anything last year? Embezzle money from your employer or clients? Maybe you sold drugs on the street or worked as a prostitute for part of the year. If so, make sure you report the money you made from your illicit endeavors as income on your taxes this year. You don’t want to get in trouble with the IRS.
Is This a Joke?
No. As crazy as it sounds, the IRS wants to remind everyone that any income gained from illegal activities is taxable and must be reported as income on their tax return. This includes income “earned” from drug deals, thievery, prostitution, embezzlement, bribes, and other unspecified illegal activities.
The IRS wants its share of all your income. To that end, it’s reminding taxpayers in IRS Publication 17 to include “income from illegal activities, such as money from dealing illegal drugs” on their tax return. It goes on to explain that the IRS also treats stolen property as income if it’s not returned to its rightful owner by the end of the year. In that case, the thief should report the item’s fair market value on their tax return. All income from illegal activities should be reported on Form 1040, line 21, or Schedule C if you’re self-employed, according to an IRS spokesperson.
Why Would Anyone Do That?
We’re assuming your question pertains to reporting illegal income and not performing the illegal act itself. Believe it or not, there are criminals who report stolen or ill-gotten gains on their taxes. Most individuals who ‘fess up in this way are already in hot water. They’ve either been arrested or are about to be. In that case, it’s to their benefit to report illegal income to avoid getting charged twice — once for the crime and again for tax evasion. After all, tax evasion is what brought Al Capone up short in the end…
Won’t the IRS Tell the Feds?
Another good question. Tax returns are confidential, and the IRS can’t rat anyone out. It’s not supposed to proactively contact the authorities unless suspected terrorism is involved. Law enforcement officials must get a court order to access a specified taxpayer’s records. Since the IRS doesn’t require much in the way of documentation, reporting illegal income is probably safer than it sounds. However, if you get audited, you should be ready for some tough questions.
Keep Yourself Out of Trouble
Of course, we don’t condone illegal activity of any kind. But if you need tax preparation advice or assistance, we’re here for you. Adams Accounting Solutions specializes in small business and individual tax preparation. We’ll help you get your taxes prepared correctly and filed on time. Call or stop by today!
