Paying for crime a taxing proposition

By Ted Blankenship | May 1, 2023

By now you have no doubt sent your tax returns to the federal and state governments and are anxiously awaiting your check for paying the IRS more than you actually owe.
And, you’re not worried about going to jail for tax evasion because you’ve been honest about how much money you made during the year and you declared all of it on your return. Right?
Not so fast. Did you find a ten-dollar bill on the street? And did you pick it up and put it in your wallet? If you did, you’re guilty of tax evasion if you didn’t declare it.
Did you steal a car in 2022? Or take a bribe? If you did, the IRS says you must report it on your tax return.
If you’re selling illegal drugs, the IRS warns that you must report your earnings.
According to an article in USA Today, an IRS spokesman said he was not aware of the agency ever having published statistics on how many taxpayers actually report illicit income.
But if you do, said the spokesman, the IRS won’t turn the information over to law enforcement.
These rules make me wonder about several possibilities that I don’t think I will ask the IRS about.
1. If I rob a bank, and a thief breaks into my home and steals the money I stole from the bank, can I declare it as a loss on my 1040?
2. If I buy stolen merchandise from a person who stole it, and sell it at a profit, who pays the taxes?
3. If I pay taxes on my income from illegal gambling, can I deduct the cost of gambling rehab?
It’s also interesting that some tax payers list their actual occupations on their returns, even if illegal.
In 2020, there were 324 tax fraud convictions, according to the U. S. Sentencing Commission, down from 595 in 2016. The “tax gap” — the difference between the taxes owed and taxes collected —runs in the hundreds of billions of dollars a year.
That doesn’t mean you should go out and steal something and pay the taxes on it to help out.
Contact Ted at