Yes, the IRS requires people to report income from stolen property and illegal activities.
If a person steals property or makes money from illegal activities, the IRS requires taxpayers to report it on their tax return.
Many Americans received their W-2 forms for declaring legitimate income on their 2022 tax returns. But what about the dishonest way?
Viral tweet from a venture capital firm reminds people to report their “proceeds from illegal activities and stolen assets” to the IRS.
TV viewer James also asked, “Can you check if the IRS website actually states that if you steal property, you must report the stolen property?”
QUESTION
Does the IRS require people to report income from stolen property and illegal activities?
SOURCES
ANSWER
Yes, the IRS requires people to report income from stolen property and illegal activities.
WHAT WE FOUND
On its website, the Internal Revenue Service (IRS) writes that if a person steals property, they must “report its fair market value” as income unless they return it to its rightful owner within the same year.
In addition, the IRS warns taxpayers on its website that any money received from illegal activities, such as selling drugs, must be included in their income on Form 1040, the same document used to register additional income, such as prize money. benefits and benefits. unemployment. But theft isn’t the only thing to report: Bribes and kickbacks also count as income, the IRS says. An IRS spokesman declined to comment further.
While a tweet about reporting stolen property to the IRS has gained a lot of attention in recent weeks, the tax authorities and the federal government have been cracking down on criminals for over 100 years. Congress passed the Revenue Act of 1921 requiring people to pay taxes on all income, no matter how it was earned.
United States v. Sullivan, a Prohibition-era Supreme Court case brought by a South Carolina bootlegger posed the issue of registering money from illegal activities before the federal government. According to the Mob Museum’s website, defendant Manley “Manny” Sullivan is appealing his 1922 conviction for federal tax evasion for whiskey trafficking. Sullivan said filing a crime income tax return violated his right not to incriminate himself under the Fifth Amendment to the United States Constitution.
Supreme Court records show that the federal government won this case in 1927, setting the precedent that the Fifth Amendment does not protect the recipient of income derived from illegal activities from prosecution for refusing to file returns under income tax law.
According to the Mob Museum, the Supreme Court’s decision set the stage for the indictment of mobster Al Capone in 1931. IRS officials estimated Capone’s income at over $1 million from 1924 to 1929 and said he evaded about $219,000 in federal taxes when he did not file any tax returns.
According to the FBI, Capone was found guilty of tax evasion on October 18, 1931, and subsequently sentenced to 11 years in federal prison, a $50,000 fine, and $7,692 in legal fees, as well as $215 $000 plus interest on back taxes.
In 1994, the government also prosecuted Aldrich Ames, a 31-year veteran of the Central Intelligence Agency (CIA) who spied for Russia for nearly a decade, and his wife for tax evasion after they failed to declare nearly 2 million dollars in payments from the CIA. Soviet Union, according to the FBI.
More from CHECK: Yes, Cash App users will receive a Form 1099 if annual payments exceed $600.
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