Crime Pays, But You Have To Pay Taxes On It!
The old adage is crime doesn't pay, but one certainly can wonder sometimes about the accuracy of it given the number of politicians that seem to be criminals! Regardless, the fact you are making money from a crime doesn't mean you don't have to pay taxes. That's right. The IRS wants its unfair share of your ill gotten gains!
It is considered income, you must pay tax on it. This is the overriding rule of the tax code. You'll note that there is no qualifier indicating the income has to come from some legal gain. No, the drug enforcement agency might have a thing or two to say about you smuggling pounds of marijuana, but the IRS only cares if you pay the tax on it. The agency will even admit as much.
The truth is you already know this is the case. How so? Why, one needs only look to one of the more famous villains in the history of the United States ' Al Capone. Capone was a gangster through and through. When prohibition was passed, he saw a business opportunity in importing booze from Canada. He became so 'successful' that he more or less was untouchable until the feds got involved.
The federal government is a powerful force. Despite the best efforts of agents, they could never nail Capone for murder, violating prohibition or any other charge directly related to his conduct. What did they get him on? Tax evasion. Yes, the great Al Capone when to jail after being convicted of tax evasion. A loose rendition of the story is told in the Untouchables movie.
Now, I am hardly suggesting you go out and take up a life in crime. Tax issues would be minor compared to spending time in jail. Frankly, it just isn't worth it, but it is at least somewhat interesting and humorous to see how the government uses tax laws to go after illegal conduct.
