IRS Urges Americans to Declare Earnings From 'Illegal Activities and Stolen Property'

Social media has been abuzz with reactions to the Internal Revenue Service’s (IRS) call for taxpayers to disclose earnings from unlawful activities like drug trafficking.

Tax Season Alert

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One viral post on X, previously Twitter, shared the 2023 IRS guidelines for tax returns, reminding users, “Don’t forget to report your income from illegal activities and stolen property as you’re doing your taxes this year.”

Illegal Income Must Be Taxed

The IRS makes it clear in their publication 525: “Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity.”

Stolen Goods and Taxes

For stolen property, the IRS instructs taxpayers to “report its FMV [fair market value] in your income in the year you steal it, unless in the same year you return it to its rightful owner.”

Long-Standing Rule

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These guidelines are not a recent development; they have been around at least since the IRS publication 17 in 2021, a time when the topic also gained traction on social media.

The Serious Side of Tax Jokes

Users often jest about the improbability of criminals willingly reporting their illicit income for taxation. However, the humor masks the serious repercussions of violating these IRS rules.

Notorious Gangster’s Downfall

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Notorious gangster Al Capone, infamous for numerous crimes, was ultimately imprisoned in 1931 for tax evasion, not his alleged murders.

Capone’s Irony

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Capone, who ironically claimed, ‘They can’t collect legal taxes from illegal money,’ was convicted for not filing tax returns that reflected his immense wealth, despite his extravagant lifestyle and having never filed a federal income tax return.

Brooklyn Beginnings

Born in 1899 in Brooklyn, New York, to Italian immigrant parents Gabriele Capone and Teresa Raiola, Capone struggled to adapt to his new environment and was expelled from school at 14 for assaulting a teacher.

From Odd Jobs to Organized Crime

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Despite trying various odd jobs, Capone eventually gravitated towards crime, influenced by his acquaintance Johnny ‘The Fox’ Torrio, who was later dubbed ‘the father of American gangsterdom’ by Elmer Irey, the inaugural chief of the IRS Enforcement Branch

Rise in Crime

In the background of Al Capone’s extravagant public persona, the feds were quietly putting together a case against him for tax evasion. Capone, despite his wealth, never filed a federal income tax return, asserting he had no income to declare.

The Tax Evasion Breakthrough

The breakthrough came due to IRS Special Agent Frank Wilson and his ‘T-Men,’ who uncovered evidence of Capone’s untaxed millions. Capone was eventually indicted on 22 counts of tax evasion and found guilty on October 17, 1931.

His subsequent appeal for a rehearing was rejected.