Author Topic: Do you think criminals accurately report their income for tax purposes?  (Read 3919 times)

lhamo

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Browsing through IRS Publication 525 (which discusses what types of income are taxable -- http://www.irs.gov/publications/p525/ar02.html#en_US_2014_publink1000229492), and found the following gems in the "Other Income" section:

"Bribes.   If you receive a bribe, include it in your income.

...

Illegal activities.   Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

...

Kickbacks.   You must include kickbacks, side commissions, push money, or similar payments you receive in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

...

Stolen property.   If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to its rightful owner.

..."

Somehow I am now dying to go write a short story about a CPA who builds his whole small business around helping criminals report their illicit gains on their taxes.  The clincher would be that neither he nor any of his clients ever get noticed/audited/arrested because the IRS is too busy figuring out how to put sentences like those quoted above into the tax guidance....








MDM

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #1 on: January 31, 2015, 11:45:56 PM »
Not that the person in question accurately reported, but...: http://history.howstuffworks.com/history-vs-myth/capone-tax-evasion.htm

marty998

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #2 on: February 01, 2015, 02:19:51 AM »
There was a story in the Netherlands about an armed robber being asked to declare his takings as income. He took the tax authority to court and won after they denied him a deduction for the cost of the gun.

mozar

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #3 on: February 01, 2015, 11:06:58 AM »
Wow that's a loaded question. Well first of all a cpa wouldn't help "criminals" because they could lose their license. Second of all the IRS doesn't link their information with other agencies or do background checks. This is mostly done as a way to get taxes from undocumented immigrants, so they can pay taxes without fear of deportation.
Thirdly most "criminals" are people who are struggling to make ends meet and don't have information about how to make their lives better/ don't have access to quality jobs where they live. People like that don't usually file taxes in the first place. And you don't have to file taxes if you make less than 10k a year. But you can to qualify for EIC which you get no matter how low your income. Lastly you don't have to report income if it is under $600 from one source. So you would have to steal a lot of beef jerky to have to report it.

Now with white collar criminals (who are rarer) who for example might engage in money laundering etc, probably wouldn't report because they don't want anyone to know they have this money in the first place. You would be holding cash and buying things with it and giving those things away. I remember recently a DC council member was raided. They found thousands of dollars in the freezer and in his wife's bra. Was he reporting it on his taxes? Nah. If you think you deserve an extra 100k without working for it, you definitely won't be excited to share it with uncle sam.
But you don't say where you got stuff on your tax form, you just say you have it. You would have to be under investigation first, then the fbi would look over your taxes to see if anything looks unusual. They also look at what kind of stuff you have vs your reported income. That is what forensic accountants do.

crispy

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #4 on: February 01, 2015, 11:17:20 AM »
It sounds like another way to get a known criminal thrown in jail if other charges won't stick or if there is insufficient evidence.  Pretty darn funny though!

PEIslander

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #5 on: February 01, 2015, 11:19:00 AM »
No - I do not think criminals accurately report their income for tax purposes.

I also don't think the vast majority of people who earn tips report all their tip income. I've heard anecdotal reports from friends who work in restaurants that they & their co-workers never declare any more than 10-to-14% of the tips they earn.

Tyler

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #6 on: February 01, 2015, 11:26:00 AM »
That certainly calls into question the ethics of the people writing the tax laws. No surprise there.

PEIslander

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #7 on: February 01, 2015, 11:59:21 AM »
Those reporting requirements related to the proceeds of crime probably are included to give more bite when the government go after crime bosses. If they can't get them for gangsterism at least they can put them away as tax evaders. Its probably easier to make that stick.

johnny847

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #8 on: February 01, 2015, 12:08:51 PM »
I would assume not. However, I did read that on the year that they are caught, they do end up reporting the income from illegal activities, simply because they want to avoid another confrontation with the law for tax evasion.

MoneyCat

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #9 on: February 01, 2015, 12:11:33 PM »
Stuff like this just shows how unnecessary government really is.  It would be so much better if we just had roving gangs dispensing street justice instead.

ClaycordJCA

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #10 on: February 01, 2015, 12:22:20 PM »
Tax evasion is how Al Capone wound up on Alcatraz.

slugline

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #11 on: February 01, 2015, 12:32:34 PM »
Marijuana growers might find themselves grappling with these very questions. They may be trying to conduct a completely legitimate business in a state where pot is legal, but they are technically in violation of federal law.

deborah

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Re: Do you think criminals accurately report their income for tax purposes?
« Reply #12 on: February 01, 2015, 03:16:31 PM »
In Australia the crims are more scared of the tax office than they are of the police. No way will they inaccurately report their income for tax.