4 ms·

How do you disclose income from crimes?

ceejayoz 5y ago
You include it on your tax return. https://www.irs.gov/publications/p17 https://www.irs.gov/publications/p17 > Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8, or on Schedule C (Form 1040) if from your self-employment activity. You're theoretically safe from them disclosing this to other law enforcement agencies. (I wouldn't want to test that, though.) https://money.cnn.com/2013/02/28/news/economy/illegal-income-tax/index.html https://money.cnn.com/2013/02/28/news/economy/illegal-income... > If you tell the IRS you made $1 million from stealing money or dealing drugs, does the agency tip off the cops? > Legally, it can't, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return. The IRS isn't supposed to proactively alert other agencies about misdeeds unless terrorism is involved. In that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own.
- Swizec 5y ago
  Where do dispensaries put their revenue? Selling weed is illegal federally but legal on the state level IRS is federal isn’t it? Does that mean they would consider weed sales illegal?
  - deleted 5y ago
    [deleted]
  - shkkmo 5y ago
    The IRS doesn't care if your income is legal or not, they just care if it is reported truthfully and the taxes owed on is are paid.
  - runako 5y ago
    > they would consider weed sales illegal? Weed is illegal under US law. Nothing meaningful about the federal prohibition on weed has changed for decades. AFAICT all dispensaries are admitting federal crimes when they file federal tax returns. I believe the statute of limitations on controlled substances violations is 5 years, meaning dispensers are theoretically always under threat that the next administration will bring down the hammer and prosecute them for sales occurring today.
- SoylentYellow 5y ago
  If the IRS asked for records or sources of the income, I would guess you can legally not answer those requests by pleading the 5th. Of course that would be a big red flag...
  - R0b0t1 5y ago
    No, the IRS actually defends people if their tax information is used against them to prevent people from pleading the 5th. In theory. In actuality I think you could make a reasonable argument that the suspicion of parallel construction means that you may plead the 5th.
- pseingatl 5y ago
  To get around this restriction, IRS special agents work on task forces w/DEA, FBI or Homeland Security (aka Customs) so they can request the records directly. See my comment about the Chicago Outfit in this thread. They figured out the best way if you have a lot of illegal income.
throwaway81523 5y ago
> How do you disclose income from crimes? You report the amount as "other income", I believe. You don't have to say that it is from crimes. I don't do crypto currency and have been wondering whether you are supposed to report it and pay tax on it when you receive it, or only when you sell it. Before you sell it, maybe it is an unrealized gain, which is currently not taxed.
- berberous 5y ago
  It is an unrealized gain if you bought it and it appreciates. If you receive it in exchange for services, it is income. This is the same for non-crypto: 1. You buy an artwork by a famous artist for $10k and it appreciates to $20k. This is an unrealized gain and you are not taxed until you sell it. Note that trading one crypto for another is effectively a sale of the first crypto and a purchase of the second, such that you pay gain depending on the value of the second crypto at the time of the trade. 2. Someone gives you a $10k artwork as partial payment for some work you do, eg web design. This is income and taxed as if they paid you $10k. Mining crypto is also income I believe. 3. Someone gifts you an artwork worth $10k. You don’t pay tax. Etc. I would think the best way to characterize this transaction is that it is income, although it’s certainly unusual enough that I won’t say I’m certain. Not tax advice / speak to your own accountant.
  - fragmede 5y ago
    In point 1, why does trading of crypto incur a taxable event? If I buy a Picasso for $20 million and then later trade it to a friend for a Van Gogh which is worth $40 million, is that taxable?
    - caffeine 5y ago
      Yes it most certainly is.
      - zdkl 5y ago
        In this scenario, what is the taxable base ?
ClumsyPilot 5y ago
If he doesnt give them data, there is no crime?
- RogerL 5y ago
  42 U.S.C. § 2274(a) Attempting or conspiring to do so is enough (IANAL). https://www.law.cornell.edu/uscode/text/42/2274 https://www.law.cornell.edu/uscode/text/42/2274
kingmonk 5y ago
You hire Trump's accountant
pseingatl 5y ago
The Chicago Outfit figured this out after Capone's conviction. What you do is fill out a tax return and pay the tax owed, without a signature, without any form of identification. Failure to file when taxes are paid is a misdemeanor; the maximum penalty, 365 days in jail (minus 55 days for good time=310 days, minus 3 months halfway house). So it's not the end of the world. Failure to file when taxes are owed is a felony and a whole other matter entirely: five years (or is it 10? I don't remember and I'm too lazy to look it up)in federal prison. You are dreaming if you think a tax return which shows both illegal income and personal identifying information won't be shared with other enforcement agencies. Even the Post Office reports suspicious mail. Ditto FedEx and the "American kilo" (two pounds instead of 2.2). Even Amtrak alerts the DEA of suitcases containing legally-purchased California weed when the train will leave the State.

You include it on your tax return. https://www.irs.gov/publications/p17 https://www.irs.gov/publications/p17 > Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8, or on Schedule C (Form 1040) if from your self-employment activity. You're theoretically safe from them disclosing this to other law enforcement agencies. (I wouldn't want to test that, though.) https://money.cnn.com/2013/02/28/news/economy/illegal-income-tax/index.html https://money.cnn.com/2013/02/28/news/economy/illegal-income... > If you tell the IRS you made $1 million from stealing money or dealing drugs, does the agency tip off the cops? > Legally, it can't, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return. The IRS isn't supposed to proactively alert other agencies about misdeeds unless terrorism is involved. In that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own.

Swizec 5y ago
Where do dispensaries put their revenue? Selling weed is illegal federally but legal on the state level IRS is federal isn’t it? Does that mean they would consider weed sales illegal?
- deleted 5y ago
  [deleted]
- shkkmo 5y ago
  The IRS doesn't care if your income is legal or not, they just care if it is reported truthfully and the taxes owed on is are paid.
- runako 5y ago
  > they would consider weed sales illegal? Weed is illegal under US law. Nothing meaningful about the federal prohibition on weed has changed for decades. AFAICT all dispensaries are admitting federal crimes when they file federal tax returns. I believe the statute of limitations on controlled substances violations is 5 years, meaning dispensers are theoretically always under threat that the next administration will bring down the hammer and prosecute them for sales occurring today.
SoylentYellow 5y ago
If the IRS asked for records or sources of the income, I would guess you can legally not answer those requests by pleading the 5th. Of course that would be a big red flag...
- R0b0t1 5y ago
  No, the IRS actually defends people if their tax information is used against them to prevent people from pleading the 5th. In theory. In actuality I think you could make a reasonable argument that the suspicion of parallel construction means that you may plead the 5th.
pseingatl 5y ago
To get around this restriction, IRS special agents work on task forces w/DEA, FBI or Homeland Security (aka Customs) so they can request the records directly. See my comment about the Chicago Outfit in this thread. They figured out the best way if you have a lot of illegal income.

throwaway81523 5y ago

> How do you disclose income from crimes? You report the amount as "other income", I believe. You don't have to say that it is from crimes. I don't do crypto currency and have been wondering whether you are supposed to report it and pay tax on it when you receive it, or only when you sell it. Before you sell it, maybe it is an unrealized gain, which is currently not taxed.

berberous 5y ago
It is an unrealized gain if you bought it and it appreciates. If you receive it in exchange for services, it is income. This is the same for non-crypto: 1. You buy an artwork by a famous artist for $10k and it appreciates to $20k. This is an unrealized gain and you are not taxed until you sell it. Note that trading one crypto for another is effectively a sale of the first crypto and a purchase of the second, such that you pay gain depending on the value of the second crypto at the time of the trade. 2. Someone gives you a $10k artwork as partial payment for some work you do, eg web design. This is income and taxed as if they paid you $10k. Mining crypto is also income I believe. 3. Someone gifts you an artwork worth $10k. You don’t pay tax. Etc. I would think the best way to characterize this transaction is that it is income, although it’s certainly unusual enough that I won’t say I’m certain. Not tax advice / speak to your own accountant.
- fragmede 5y ago
  In point 1, why does trading of crypto incur a taxable event? If I buy a Picasso for $20 million and then later trade it to a friend for a Van Gogh which is worth $40 million, is that taxable?
  - caffeine 5y ago
    Yes it most certainly is.
    - zdkl 5y ago
      In this scenario, what is the taxable base ?

ClumsyPilot 5y ago

If he doesnt give them data, there is no crime?

RogerL 5y ago
42 U.S.C. § 2274(a) Attempting or conspiring to do so is enough (IANAL). https://www.law.cornell.edu/uscode/text/42/2274 https://www.law.cornell.edu/uscode/text/42/2274

kingmonk 5y ago

You hire Trump's accountant

pseingatl 5y ago

The Chicago Outfit figured this out after Capone's conviction. What you do is fill out a tax return and pay the tax owed, without a signature, without any form of identification. Failure to file when taxes are paid is a misdemeanor; the maximum penalty, 365 days in jail (minus 55 days for good time=310 days, minus 3 months halfway house). So it's not the end of the world. Failure to file when taxes are owed is a felony and a whole other matter entirely: five years (or is it 10? I don't remember and I'm too lazy to look it up)in federal prison. You are dreaming if you think a tax return which shows both illegal income and personal identifying information won't be shared with other enforcement agencies. Even the Post Office reports suspicious mail. Ditto FedEx and the "American kilo" (two pounds instead of 2.2). Even Amtrak alerts the DEA of suitcases containing legally-purchased California weed when the train will leave the State.