this post was submitted on 16 Jun 2024
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No Stupid Questions

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I have seen multiple times on Lemmy that the IRS wants people to report income from illegal means and that they don't care to bust someone for it. For example, an illicit drug dealer is expected by the IRS to report their drug sale revenue without having to worry about being caught for drug dealing.

Will the IRS seriously not report illegal activities or individuals that report they earned income through vague illegal means?

If they don't, do law enforcement agencies skim IRS tax reports to find people that report illegal income to further investigate?

Can IRS tax forms that report illegal income be used against someone in court?

It just seems ridiculous that reporting illegal activity, however undefined, to the federal government would be a safe option.

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[–] [email protected] 76 points 5 months ago (2 children)

It is not a safe option.

It is designed as a catch all.

The FBI isn’t going through tax returns looking for Illegal income; rather if you’re suspected of illegal activity, they WILL go through your tax returns, because if you didn’t report your illegal income that is another law you’ve then broken. — See Al Capone

So. It is both a very bad idea, and a good idea to report your illegal income

A better idea is to not do anything illegal; or at least do the illegal thing offshore and hide the income there. Like a good multinational corporation would.

[–] [email protected] 35 points 5 months ago (4 children)

What you need to do is report your illegal income in a legal way. Like say you are a life coach, and you advise people.

[–] [email protected] 14 points 5 months ago (1 children)

If it looks extremely questionable, like you're a life coach in Alabama and made 380k, it'll raise a lot of flags.

  • Do you have a paper trail?
  • who pays for life coaching in cash? And 100% of customers?
  • Life coaching in Alabama and you made that much? " Is there also some business presence like a website?

There's more things to consider. I say that as a person who has to set up my own company to protect myself when I got freelance clients, and complicated the hell out of my taxes.

[–] [email protected] 8 points 5 months ago (1 children)

Probably why fronts are often restaurants. They would have lots of money going in both ways.

[–] [email protected] 2 points 5 months ago (2 children)

Or car washes? Night clubs maybe.

[–] [email protected] 3 points 4 months ago

There's always money in the banana stand

[–] [email protected] 3 points 4 months ago (1 children)

Laser tag is actually the best option.

[–] [email protected] 7 points 5 months ago

That is a pretty good explanation of money laundering, actually.

[–] [email protected] 3 points 5 months ago

I was looking into doing some mutual "consultant work" with a friend to make it look like I had an income. The taxes wouldn't have made it viable though.

[–] [email protected] 3 points 5 months ago (2 children)

Would that not be illegal under the fifth or does the right for congress to collect taxes override that?

[–] [email protected] 6 points 5 months ago (1 children)

Oooh. I like that.

I’d think that courts would say that you can’t claim the fifth, since you self reported the illegal income. And that had you failed to claim it, you’d be evading taxes….

So yes. You COULD claim your 5th amendment rights against self incrimination, but then you’ve violated the 16th where you’ve failed to declare income.

[–] [email protected] 1 points 5 months ago

Yeah that's what I was thinking. Thank you.

[–] [email protected] 0 points 5 months ago (1 children)

You can only plead the 5th while you're in court. Prosectors are free to use all the shady crap you did that they have evidence of in building a case against you though.

[–] [email protected] 4 points 5 months ago

Hi that is not true.