Capone was convicted of Income Tax Evasion...nothing else...The IRS means business.

Income from whatever source derived is income. As my tax professor says, if you're a hitman, you can deduct your bullets as a business expense. The IRS means business.

so get yourself some ho's, prostitution is legal?

And the last time I checked, Income Tax Returns are strictly privileged. Which means that if you reported to the IRS that you made money off of your job as a hired assassin, the police could not use that evidence against you. In fact, I think the IRS protects the information and does not disclose it to police.

And there have been cases where drug dealers are thrown in jail for tax evasion because they didn't disclose their income from illegal transactions. It's nuts.

[ ] please check this box if you have entered in illegal activities in the last year.
If you checked the previous box, please provide and address and time of day that is convenient for you to meet with law enforcement to be arrested.

Thank you for your cooperation.

Yet another reason to eliminate the income tax and institute across-the-board VATs. That way illegal income actually does get taxed when it's spent.

I was told by a law professor once that you're permitted to plead the fifth on tax returns... although I presume you still have to pay what you owe? I'm not really clear on how that would work.

This is just so when they catch you selling hashish they can pin another charge on you. Like the "drug stamps" sold in some states.

"Well Mr. Johnson, we found 10 kilos of heroin in your credenza and none of the bags had stamps on them. That's going to be another five years in Oz."

It's just there so they can slap you with another charge when they catch you selling hashish. It's list like the "drug stamps" they have in some states. Of course no one uses them, but it make the sentences longer.

"Well, Mr. Johnson we found sixty kilos of heroin in your credenza and the bags had NO stamps on them. That's going to be another five years."

This reminds me of those tax stamps that certain states require on the sale of illegal drugs (e.g., Kansas -- http://www.ksrevenue.org/perstaxtypesdrug.htm ). It's kind of hard to imagine someone actually complying with one of these regulations -- I wonder if anyone really does, or if it's one of those things that exist to double-indict people once they're caught.

Well, another thing that happens is something like happened to that insider-trading guy a decade or so ago.

Step 1.) Perform Insider Trades
Step 2.) Profit from it (let's say, $1 million)
Step 3.) Get Caught
Step 4.) Get a fine from the SEC in the amount of your profit ($1 million)
Step 5.) Next april 15, remember that you *DID* make $1,000,000 in "illegal income" the prior year.

The *fine* is punishment, and not considered a "cost of doing business". You still have to pay income-tax on the amount you illegally profited.

I remember a newspaper doing a story on this when it happened, I just wish I could remember which insider-trade scandal it was so I could try to google the newspaper archives....

They don't actually expect anyone to report bribes or income from drug dealing or whatever. They simply have one more thing to nail you with if you're arrested.

"Oh, looks like you didn't report your drug dealing income on your taxes. Now we can give you a sentence for that in addition to your drug sentence."

Yeah, they have a state/county tax for illegal drugs Tennessee. Just walk into your local courthouse, tell them what drug and the amount of it, and they'll give you a tax receipt after you pay the tax on it.
You don't leave your name or anything.

Also on that page, Ctrl or Command+F "Nobel". Yes, if you win a Nobel prize, you must declare it.

Also, I am picturing a movie here. It goes like this:

Crack dealer, surfing the net: "Hey, look here. Consumerist.com says I need to declare all my crack income!"

ON HIS FORM, LINE 21: "Yo, I deal some crack, and I pull 80 grand."

LATER: "This is the police."
Crack dealer: "Daaaang this s**t ain't coo. Why'd I declare my crack dough? Who da hell are these Consumerist a**holes? F*** dis. Daaang."

LATER, AFTER HIS JAIL TIME: "Screw dat Ben Popken. I'm gonna kill him! Aaaargh!"

Fade to black. A scream. Silence. End credits.

Come on, all you good little criminals! Make sure you tell the nice old IRS about every illegal drug sale, armed robbery, kickback and bribe. Shhhhh..it's just between us.

"Thank you for the..umm..'contribution' senator...here's your receipt."

I think JLam4911 has it nailed. They don't actually expect anyone to report ill-gotten gains, but it's just another thing they can nail you with.

Tax filings cannot be used to convict you crimes other than tax related crimes. It's illegal for police or prosecutors to use tax forms as evidence of criminal activity that's not tax-related.

Prostitutes (well, the high-end ones) who file tax returns on their illegal prostitution money stay in business a lot longer than prostitutes who don't bother.

It's honestly the most entertaining part of tax law class, looking at (identifying data blacked out) tax returns for income from illegal businesses. Drug lords make a LOOOOOOT of money ... and since they're very clever at shielding themselves from direct responsibility for crimes committed by their organizations, it's usually cooking the books that gets them caught. A low-level dealer gives up the outfit's "accountant," who agrees to turn over the cooked books in exchange for a deal, and the bosses get locked up for tax evasion, not drug trafficking.

So if you're going to be a criminal, learn from Al Capone and be an HONEST criminal on your tax returns.

The rationale, by the way, is that the government long ago decided that encouraging full compliance by taxpayers by protecting their illegal activities from prosecution when reported on tax forms was worth a lot more to them than picking up a few petty criminals. Tax dodgers cost the US billions annually. A few petty hookers are worth a lot more to the US reporting their illegal income and paying taxes on it than it's worth to lock them up. Moreover, allowing criminal prosecutions from tax records would encourage many people not to file taxes at all, or to plead the Fifth.

PS -- Oprah had a bunch of tax-reporting prostitutes on one day. It was pretty entertaining.

I correct myself. Under certain circumstances they CAN go after you for your illegal activities as resported on your tax return, but generally don't unless you're a big fish. So hookers are still better off reporting.

You also have to report the fair market value of anything you steal!

James v. United States, 366 U.S. 213 (1961) is the case.

Heh, Eyebrows beat me to it, but I was about to spew off everything I learned in my Income Tax class this semester.

If I recall correctly (and didn't just fail my final), you don't have to say exactly where the income came from when you are filling out your tax return. So, yeah, if you make $200K a year from selling drugs, and report that you have no income, the IRS is going to know something's up and audit your ass. Better to just tell them you make $200K, pay your taxes, and be left alone with your drug empire.