I have seen multiple times on Lemmy that the IRS wants people to report income from illegal means and that they don’t care to bust someone for it. For example, an illicit drug dealer is expected by the IRS to report their drug sale revenue without having to worry about being caught for drug dealing.

Will the IRS seriously not report illegal activities or individuals that report they earned income through vague illegal means?

If they don’t, do law enforcement agencies skim IRS tax reports to find people that report illegal income to further investigate?

Can IRS tax forms that report illegal income be used against someone in court?

It just seems ridiculous that reporting illegal activity, however undefined, to the federal government would be a safe option.

  • EleventhHour@lemmy.world
    link
    fedilink
    arrow-up
    88
    arrow-down
    1
    ·
    edit-2
    17 days ago

    while it’s probably true that the IRS is more interested in you paying your taxes than prosecuting you because that income may have been “illegitimate,” that doesn’t mean that other agencies might not be interested in the information you provide to the IRS. The FBI/DEA/DHS could easily get a hold of those records and use them to pursue an investigation.

    and, yes, your tax returns can be used as evidence in court.

    this is why money laundering (obfuscating the origin of illegitimate earnings to make them appear legitimate, esp for tax purposes) is such a lucrative trade.

    my advice: never volunteer information which could later be used against you.

  • Delphia@lemmy.world
    link
    fedilink
    arrow-up
    37
    ·
    17 days ago

    Now I’m not American but I did read something about this before but I’m quoting from memory… huge grains of salt to be taken with this.

    Essentially I believe you can report it as “other income” not specify a source and refuse to elaborate if questioned or plead the 5th if it goes more serious. So in a way you are protected. They have to PROVE you got the money from committing a crime… “I’m just a lucky gambler”. Im pretty sure Whitey Bulger used to pay 30% more than a winning lottery ticket was worth to people so he could cash the ticket and justify his wealth.

    I cant imagine the FBI are trawling tax returns, but if you hit their radar for some reason it will probably flag you as someone to be looked at. Just remember, tax evasion is how they got Al Capone but money laundering is also a crime so which one would you rather fuck with?

  • Boozilla@lemmy.world
    link
    fedilink
    English
    arrow-up
    22
    arrow-down
    1
    ·
    17 days ago

    Always remember: law enforcement is legally allowed to lie to you, you are not legally allowed to lie to them.

    Do you really need to know anything else?

  • DeLacue@lemmy.world
    link
    fedilink
    arrow-up
    17
    ·
    15 days ago

    Actually yes. Or well sort of. I believe some tax forms even have boxes for illegal income. This is because there is an odd interaction between two very important laws; you must report all income truthfully for tax purposes and you cannot be compelled to incriminate yourself. Tax law cannot overwrite the 5th amendment. This means they have a choice; either they can prosecute anyone they see as having an illegal income but make it so people writing nothing but “I plead the 5th” on all their tax paperwork is perfectly valid. Or they can choose not to prosecute reported criminal income and retain the ability to go after people who refuse to do their taxes. The only way the tax system can work is if reporting your own illegal income doesn’t legally incriminate you.

    The things you write on your taxes cannot be used against you in a court of law unless you are lying in some way. So it is legally safe. Practically perhaps not. Both the police and many of the security agencies love using something known as ‘parallel construction’. It’s where they get some information they shouldn’t have access to or shouldn’t be using and build an investigation that explains how they got that information legitimately so they can use it in court.

  • Ultraviolet@lemmy.world
    link
    fedilink
    English
    arrow-up
    14
    ·
    edit-2
    16 days ago

    The IRS won’t report you unprompted, but the FBI can get it from them, at which point you’re fucked either way. If you reported it, they have additional evidence for existing charges, if you didn’t, they add tax evasion to the list.

      • BezzelBob@lemmy.world
        link
        fedilink
        arrow-up
        3
        ·
        16 days ago

        Yes, hypothetically, according to this show i just watched, the best way to launder would be a cash only (or primary) business such as strip clubs, casinos, etc. Or you can simply create any business and make it cash only like a bakery.

        That way its much harder to link because there won’t be any bank records to say otherwise

  • Kidplayer_666@lemm.ee
    link
    fedilink
    arrow-up
    9
    ·
    17 days ago

    I think there’s only a camp on the IRS forms for illegal activity because some random criminal was charged with something and then tax evasion. He successfully argued it couldn’t be tax evasion cause there was no field for it and if he put it elsewhere, it would be fraud

    • AwkwardLookMonkeyPuppet@lemmy.world
      link
      fedilink
      English
      arrow-up
      1
      ·
      edit-2
      15 days ago

      I’ve never heard someone refer to the most successful and famous prohibition era mobster as “some random criminal” before. That criminal was named Al Capone. He controlled all of Chicago, and smuggling routes to many other major US cities. There are several books, TV shows, and movies made after the story of his life.

  • TotesIllegit@lemmy.world
    link
    fedilink
    English
    arrow-up
    9
    ·
    17 days ago

    Tax evasion on top of the other illegal activity can increase the consequences if you’re caught. They tend to require warrants before divulging information to other authorities, however any information gathered through legal means can be used against you.

    The main benefit of reporting the income is to reduce the likelihood that somebody gets suspicious of the change in buying habits and starts in investigation in the first place.

  • slazer2au@lemmy.world
    link
    fedilink
    English
    arrow-up
    13
    arrow-down
    5
    ·
    17 days ago

    Why would the IRS need to know the source of the money? You generally don’t have to report the source of income, just the income itself to IRS.

    Now no person is going to directly report the drug money, it will be reported via a front company where cash transactions are normal and expected.

  • Tramort@programming.dev
    link
    fedilink
    arrow-up
    5
    arrow-down
    2
    ·
    16 days ago

    Short answer: no

    Longer answer: if it were that simple, then money laundering would not be a billion dollar industry.