At least one state wants their tax money from illegal income. North Carolina has an Unauthorized Substances Tax, where you buy a tax stamp covering your possession of the items (various drugs and/or moonshine).<p><a href="https://www.ncdor.gov/taxes-forms/other-taxes-and-fees/unauthorized-substances/about-unauthorized-substances-tax" rel="nofollow">https://www.ncdor.gov/taxes-forms/other-taxes-and-fees/unaut...</a><p>From talking to folks I used to know at the Department of Revenue, they have never sold any stamps to people in advance of the cops arriving on the scene. Only to stamp collectors.<p>The tax rate for marijuana is $3.50 for each gram (or fraction thereof) above 42.5 grams. Bulk spirituous liquor is $12.80 per gallon.
The section on marijuana is particularly interesting. You are apparently allowed to deduct ordinary business expenses, even if the business in question is illegal. However, Congress has explicitly disallowed these deductions in the case of illegal drug trafficking. Since marijuana is illegal federally, the courts have ruled that medical and recreational marijuana businesses that are legal under state law may not deduct any of their ordinary business expenses from their federal taxes.
In their examples section they mention how a double agent was charged with tax evasion based on $2m of undeclared income from bribes.<p>But if the agent WERE to mention the income on their tax documents, even as "Unspecified due to 5th amendment protection" that surely would be incriminating enough to cause further investigation from the state. (I assume the US government keeps a close eye on their agents papers).<p>I'm just not sure how you're supposed to declare ill-gotten gains without 5th amendment worthy self-incrimination.
Well, what's the alternative? Income is only illegal after trial and conviction, and that may not be black and white. If you are a gardener driving a truck that fails emission regulations, you may at some point be fined, but otherwise you just pay taxes on your earnings like everyone else?
Stupid question: can you report your income as illegal on purpose in order to pay tax on it because you fear the wrath of the IRS more than the police? If you don't specify the exact nature of your crimes but only that you wish to pay them more money, will you get audited or get in trouble with the police/DA?
Your tax exempt entities (retirement accounts, non profits) are exempt from a lot of criminal liability because they dont have a tax reporting dilemma.<p>If only Al Capone used a non profit right? Makes me wonder what might be going on now.
Joker's take on the issue: <a href="https://www.youtube.com/watch?v=QK0UxenfV4Q" rel="nofollow">https://www.youtube.com/watch?v=QK0UxenfV4Q</a>