IRS: We Don’t Care How You Get it. Just Be Sure and Report it!

I was reading through the “Other Income” section (scroll down as the page doesn’t seem to be loading correctly) in Publication 17 and found some pretty funny stuff. The section deals with all sorts of “other income” and whether or not you have to report it. Here’s some of the funny stuff I found (word-for-word as the IRS has it written):

Bribes. If you receive a bribe, include it in your income.

Illegal income. Illegal income, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

Kickbacks. You must include kickbacks, side commissions, push money, or similar payments you receive in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040), if from your self-employment activity.

Stolen property. If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.

LOL! That last one made me laugh out loud! My question is: If a person is dealing in these illegal activities, are they moral enough to pay taxes on them?

Funny stuff!

44 thoughts on “IRS: We Don’t Care How You Get it. Just Be Sure and Report it!”

  1. The reason is to that federal authorities have one more thing to through at criminals. Tax evasion is a useful way to prosecute otherwise difficult cases.

  2. There is no law that you have to pay taxes so how do they prosecute under a law that doesn’t exist?

  3. There is no law requiring payment of tax to the Federal government, but there is an amendment in the constitution.

    The way they’d approach it is this: If you recognize the Federal government as a governing body of your citizenship, then you have every requirement to follow the rules of the constitution.

    I knew a few people that are way, way, way libertarian. They refused to even get license plates on their vehicles because in part the fees fund the Federal coffers, and in turn would validate their recognition of the Federal government. They even call themselves “nationalists” versus “American”, since that also validates their recognition. Provocative stuff.

  4. I’ve always wanted to put down like $1.29 in illegal income, just to see what would happen. Say I took some pocket change from my brother’s apartment last time I was there, and didn’t tell him…that’s theft!

    Although I suspect the answer is “lots and lots of paperwork for me”.

  5. I’ve wondered how you’re supposed to handle “found money” like if you found $10 in the gutter. Is it a gift? Gifts are not taxable to the receiver. They are to the giver though. Do you remember the buzz around Mark McGwire’s record breaking ball? That whoever touched it would be responsible for income taxes on it, and if they gave it back to McGwire, they’d be responsible for paying gift tax on it? I think the IRS publicly waived that requirement in that instance, but it’s true in other ones.

  6. This is why I’m becoming more of a fan of consumption taxes. It’s literally impossible for a person to be completely compliant with our current tax system. Who’s going to report couch money, the pennies found on the street, etc? But those are supposedly taxable income.

    And who, other than a recent poster, would bother to report random stuff won at a church raffle or whatever? Frankly, such a person is better than me – I only report “real” taxes, and regard the law as an ass.

  7. If a thief that steals from me has to report whatever he stole as income, then presumably I can claim the amount or value of items stolen as a tax deductible loss.

  8. I have talked to the IRS this, I was auditing the books and found an employee had stolen hundreds of thousands of dollars. They told me as long a he reports it as in income it was ok with them.

  9. DenisM:
    Actually there is a line on the 1040 form for items lost due to theft. I used it a couple of years ago when my car stereo was stolen.

  10. Im sure there has to be a legal checks and balances somewhere that the IRS must goes through in cases like this. Its hard to believe that stealing a million (or even a twenty dollar bill) is ok as long as its on your 1040.

  11. This is hilarious.. as someone else said, there is no law requiring a federal income tax to be paid by individuals.. and that “amendment” that someone mentioned, presumably the 16th Amendment – besides the fact that it was never ratified by the states (thus meaning there is no amendment, not legally anyway) – the amendment doesn’t give any nex taxation powers.. see http://www.freedomtofascism.com for some facts…

    And if you think I’m talking out of my ass, I’ve never paid a dime in federal income tax, and I never will, because there is no law requiring it.. but the IRS has got a good 99% of the American populace into believing that there is a law. How sad.. really it is.

  12. I think on my next return, I’m going to report $1 of “Ill-gotten gains.” The bigger question is whether one can deduct the interest paid on a deal with the Devil as an investment interest expense.

  13. “Mark Says:
    December 14th, 2006 at 11:16 am
    This is hilarious.. as someone else said, there is no law requiring a federal income tax to be paid by individuals.. and that “amendment” that someone mentioned, presumably the 16th Amendment – besides the fact that it was never ratified by the states (thus meaning there is no amendment, not legally anyway) – the amendment doesn’t give any nex taxation powers.. see http://www.freedomtofascism.com for some facts…

    And if you think I’m talking out of my ass, I’ve never paid a dime in federal income tax, and I never will, because there is no law requiring it.. but the IRS has got a good 99% of the American populace into believing that there is a law. How sad.. really it is. ”

    I agree: there is no law, or rather no constitutional law. But that doesn’t mean they won’t prosecute you and lock you up if “they” really want to.

  14. uh, I wouldn’t rely on a conspiracy theory movie website for tax advice. Feel free to do so if you want to, of course, I’m just saying that *I* wouldn’t do it.

  15. After representing four clients who sell sex for money and average about $100,000 per year; we quickly decided to report their income, claim the deductions for the taxi, toys and attire; we have now moved them into corporations as Adult Entertainers and Professional Escorts and can now reap even more tax advantages including retirement planning.
    I love this country!

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  17. I enjoy the folks who say “Oh, there’s no law about this.” In fact, the tax code, which has been approved by Congress on many occasions, does indeed represent law. I think a fair case could be made that there are an awful lot of things the IRS does that are beyond its authorized scope (and thereby questionable) and I also think we’d all be a lot better off with a flat tax up and down the line, but the days when this country could support itself with trade tariffs passed away with the 19th century.

  18. The 16th amendment was in fact ratified by 42 states. There have been many court cases that have affirmed this fact. It’s not up for debate at this point.

    And there is a law that requires individuals to pay taxes: the Internal Revenue Code. In particular see § 6151:

    “Except as otherwise provided in this subchapter, when a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).”

  19. Yes Mark, I’m sure you’ve never paid a dime in tax…but wait, what about your W-2…something tells me you’ve paid unless you are out of work in which case you should not be spending time on the web

  20. That’s why the Health Care Reform is still still fundamentally flawed. The Health Care Bill mandates health care coverage for the uninsured. Creates more regulatory functions etc so “American People” can all be “covered”

    The resultant product from Congress… Nancy Pelosi… “Let’s Pass It so you can see what’s in it!!!” The original good idea to cover the uninsured becomes a little monster and grows everyday as we find out more about it!

    Why can’t government create a clear, unburdened law that actually accomplishes what it set up to do. There is no insurance portability, there is no relaxation of interstate health insurance(still non-competitive at national level), no support for existing public hospital system… no support for reasonable tort reform… That’s just scratching the surface on what should be done.

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