Tax season is slowly approaching and the IRS doesn’t want you to forget to report all income even if it’s illegal.
The IRS is asking taxpayers to report all “income from illegal activities, such as money from dealing illegal drugs,” according to IRS publication 17.
They are also asking that “if you steal property, you must report its fair market value.”
However, this is only if you “return it to its rightful owner in the same year.”
An investigative journalist who specializes in tax codes says, “Congress requires that you report all of your income, whether legitimate or not. There are people who file tax returns and list as their occupation criminal activities like ‘prostitute.’”
This is unusual being that people usually don’t report their illegal activity on their taxes. But it’s actually less risky than you may think. The IRS cannot legally share tax information with authorities because they are confidential unless court ordered.
According to NBC News, a tax attorney says that people who are suspected of embezzlement can report the income to avoid prosecution.
“If a person declares and pays taxes on their illegal activities. Then they also get to deduct the cost of any restitution as well,” the tax attorney says.
“All income, from whatever source, is taxable income unless excluded by an act of Congress. If you receive $500 to kill your neighbor’s annoying rooster, or find $1 on the street, or embezzle from your employer, that’s all taxable income, as well as your paycheck from flipping burgers at McDonald’s,” one tax preparer said.
