You can also take deductions for costs relating to criminal activity!

Completely seriously; while I’m sure essentially no one actually does, the IRS is not going to like network with the FBI or your local police department if you, for some reason, decide to pay taxes on your weed sale profits. Unless you report that you’re selling sex slaves they seriously could not care less.

I know it’s just a joke image but I do love the idea of someone who makes much of their money illegally but also has this very honorable commitment to paying their fair share in taxes.

154

It sounds odd but there was a Supreme Court about it. Essentially someone claimed they shouldn't have to pay taxes on the profits of crime and the Court ruled they did. So they had to create a way for people to do that. For what it is worth, the 5th amendment protects you from incriminating yourself, so you are allowed to decline to provide the details of where the money came from, but it's a bit like paying your parents for something you broke and then just not telling them what it is, and then expecting them not to look around the house.

“it would be an extreme if not an extravagant application of the Fifth Amendment to say that it authorized a man to refuse to state the amount of his income because it had been made in crime. … He could not draw a conjurer’s circle around the whole matter by his own declaration that to write any word upon the government blank would bring him into danger of the law.” .... "It is urged, that, if a return were made, the defendant [Sullivan] would be entitled to deduct illegal expenses, such as bribery. This by no means follows, but it will be time enough to consider the question when a taxpayer has the temerity to raise it.”

United States v. Sullivan, 274 U.S. 259 (1927)

88

Dang.

"We're not the cops, we just want our cut."

-- IRS Probably

61

It's cool if you return it at the end of the year that you don't have to pay taxes on it. You could steal something, use it to make more money, and then return it. This avoids paying any kinda sales taxes when you took it. And since inventory is taxed you wouldn't have to pay on that.

Someone could exploit this. Make a fake company that steals from the real company, returns the property at the end of the year.

44

Just be rich and pay nothing instead

44

They still miss the "declare here the wages you stole"

39

Europeans: You guys have to file your own taxes?

38

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

Lesson learned. Steal on Jan 1st 00:01, return to owner on Dec 31st 23:59, rinse repeat.

38

me: I stole a bike.
owner: Plz, gov, help me get it back.
me: Here, my income taxes.
gov: Yup. We're all goood. Bye.

37

Yeah, they say this shit but hide the addendum forms like five layers deep in a FAQ link tree. And don't even get me started on the forms you need if you steal drugs. Like, holy shit. I hate to be a bureaucan't, but somethings gotta change

27

Yeah, they got Al Capone for tax evasion, and they’ll get you for confessing to a crime on official government documents.

24

So, if you declare that money it is already clean?

If I declare 100m of selling coke, and pay 60m in taxs, the remaining 40m are clean?

17

So then if you get caught and these are taken away from you, I assume you can declare it as a loss and get an equivalent deduction the next year? I wonder if anyone's ever used this to their advantage to game their tax rates?

17

https://en.m.wikipedia.org/wiki/Parallel_construction

TL;DR- if you do this you are foolish and you are going to get fucked, probably forcefully in prison.

15

What about legally questionable activities? You know, from things that aren't exactly crimes, but sure look like it? Asking for a friend

14

You need to take a sensible deduction.

9

Oh sweet, so I can steal stuff Jan 1 and return it Dec 31 with no hit on my taxes. This changes everything.

8

The feds are actually disturbingly fair about this. You can deduct your legal fees as a business expense.

wikipedia excerpt

While embezzlers, thieves, and the like are forced to report their illegally acquired income for tax purposes, they may also take deductions for costs relating to criminal activity. For example, in Commissioner v. Tellier, a taxpayer was found guilty of engaging in business activities that violated the Securities Act of 1933.[8] The taxpayer subsequently deducted the legal fees he spent while defending himself.[8] The U.S. Supreme Court held that the taxpayer was allowed to deduct the legal fees from his gross income because they meet the requirements of §162(a),[9] which allows the taxpayer to deduct all the "ordinary and necessary expenses paid or incurred during the taxable year in carrying on a trade or business."[10] The Court reasoned (and the Internal Revenue Service did not contest the point) that it was ordinary and necessary for a person engaged in a business to expect to have legal fees associated with that business, even though such things may only happen once in a lifetime.[9] Therefore, the taxpayer in Tellier was allowed to deduct his legal fees from his gross income, even though he incurred the fees because of his crime. The U.S. Supreme Court in Tellier reiterated that the purpose of the tax code was to tax net income, not punish unlawful behavior.[11] The Court suggested that if this was not the case, Congress would change the tax code to include special tax rules for illegal conduct

8

Hobbies are tough to take deductions on. They want you to form an official business to take all the deductions. Report that income though, garage sales, Facebook market and the like as well.

2