Legal, illegal, IRS expects income reported for taxing

It might seem counterintuitive, but the government doesn't care how you make your money when it comes to taxes. However you earn your income, the Internal Revenue Service wants it reported so that appropriate taxes can be collected. Filing instructions make it clear that income, even from illegal activities, must be recorded and reported.

It will come as no surprise to Washington, D.C., area readers of this blog that the instruction isn't one that is typically followed by those who make their livings through illegal means.

Still, there are times when a person might want to opt for reporting illegal income. For example, if one has been convicted of a crime from which they derived financial gain, they might find it beneficial to report the income for that year's return to avoid complex tax issues and any possibility of being convicted of tax evasion. Even someone who thinks they might be on the brink of being caught for suspected illegal activity might choose to report illegal gains to avoid possible tax charges and penalties.

Some might see such reporting as the pinnacle of giving up your Fifth Amendment right against self incrimination. Not necessarily. The IRS is blocked by law from informing law enforcement about income reported on returns from illegal activity short of terrorism. But an agency could get the information by obtaining a court order. And the IRS isn't prohibited from sharing information obtained as a result of an audit with other agencies.

Considering the potential repercussions that can result from disclosure of any information, from whatever the source, persons concerned about being scrutinized by the IRS would be wise to consult an experienced tax attorney.

Source: WPMT-TV, "The IRS wants to tax your illegal income," Matt Bushey, Feb. 28, 2013

No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map