Did you steal a luxury car in 2022? Loot a convenience store? What about accepting a bribe? If so, the IRS would require you to self-report income from those crimes on your tax return. The IRS Publication 525: Taxable and Nontaxable Income advises sticky-fingered taxpayers to accurately report stolen property at Fair Market Value in their income unless returned to its rightful owner within the same year. As for illegal drug money or receiving bribes, Uncle Sam needs you to include those profits on your 1040 form. Furthermore, do not forget to document any kickbacks and other illicit activities received while doing business.
The IRS stated it was unaware of any instance where it publicly published statistics on how many taxpayers reported income from crimes. Additionally, federal legislation prevents the IRS from voluntarily disclosing this information to law enforcement without a court order.
Not reporting stolen income can result in possible charges. For example, the notorious gangster Al Capone, also known as Scarface, went to jail in the 1930s for tax evasion and prohibition. Authorities indicted him for not paying taxes on the income earned from his mob activities. He spent seven years in federal prison. More recently, the IRS reported 370 tax fraud offenders in 2021, up more than 12 percent from the previous year.
Remember, this puzzling IRS law is not an April Fool’s joke, and all income, whether legally or illegally obtained, is taxable.