It’s tax season for everyone, including repeat offenders.
Yes, Uncle Sam expects to collect taxes on all kinds of shady transactions. It lists many illegal activities that are considered to be illegal. Publication 17the all-purpose guide for individual taxpayers.
Here are some crimes that pay taxes, believe it or not.
How the IRS catches tax evaders
Before you get into taxable criminal activity, though, you might be wondering why the IRS bothers.
It takes a special kind of criminal (honest or stupid, depending on your perspective) to report your ill-gotten gains and pay your taxes faithfully. So how does someone get caught?
It’s actually pretty simple: paid by the IRS Great rewards for those who tip off these tax scammers:
“Internal Revenue Code (IRC) Section 7623 provides rewards for whistleblowers who provide information to the Internal Revenue Service (IRS). Arbitration claims that provide information and lead to revenue collection may be subject to arbitration. […]
Generally, the IRS will pay a reward of at least 15 percent, but not more than 30 percent, of revenues collected resulting from information submitted by a whistleblower. “
However, blaming a colleague or neighbor may not earn you a prize. Only actions with revenue over $2 million or involving individuals earning $200,000 or more annually are eligible. Whistleblowers who were part of the tax evasion they report also receive less compensation.
Rewards for providing information are also taxable, according to the IRS.
One of the shortest and clearest sentences in IRS Publication 17 states:
“If you take a bribe, include it in your income.”
A few pages later it also says:
“Kickbacks, side commissions, push money, or similar payments must be included in Schedule 1 (Form 1040), Line 8z, or Schedule C (Form 1040) income (if self-employed).”
another IRS publication provides more specific information about what constitutes these activities and warns that “engaging in the payment of bribes or kickbacks is a serious criminal matter.”
2. Drug dealing
The IRS casts a broad net on “illegal activity” vaguely, but specifically refers to drug dealers.
“Illegal income, such as money from the illegal drug trade, must be included in income on Schedule 1 (Form 1040), Line 8z, or Schedule C (Form 1040) if self-employed.”
3. Stolen goods
The good news: you can “rent” your property for a while without having to pay taxes. In its section on stolen goods, the IRS states:
“If you steal property, you must report the fair market value of the stolen year as your income unless you return it to its rightful owner in the same year.”
So, criminals: don’t forget to return what you stole and make it part of your year-end tax planning. Unless your New Year’s resolution is to flip a new leaf, you can always steal it later.
If that bothers you, ask the victim what the fair market value of the property is so the tax can be calculated properly.
If you’ve ever heard the gang way Al Capone was eventually dropped for tax evasion, which is well known.
1927 Supreme Court Case Concerning Trafficking (Illegal Alcohol Smuggling) During Prohibition, USA vs. Sullivanand became the grounds for arresting Capone for trafficking in alcohol and drugs.
5. Spy income
In the 1990s, a CIA agent turned Russian spy and his wife were arrested and charged with espionage. $2 million spy income that they didn’t pay their taxes. “Prosecutors did not formally charge the two men with tax evasion.