Even if You Derived Your Income Illegally, You Still Have to File a Tax Return

One odd fact about the U.S. Tax Code is that it doesn't matter whether you earned your income legally or illegally—you're still required to pay taxes on it. Of course, this requirement is always observed in the breach, since very few felons are willing to list an occupation like “cat burglar” on their yearly tax returns and declare a substantial income in jewels and fur coats. And if you file a less-specific return with the IRS, won't the feds still want to know where you got all that money?

Failure to Pay Taxes Is Another Way to Reel in Felons

You may be familiar with the story of Al Capone, the Chicago crime boss who reaped millions of dollars in graft, bootlegging, and extortion—yet was sent to prison for the much-lesser crime of failing to pay his taxes. That, in a nutshell, is why the government mandates that taxes be paid on illegal income; this is yet another way to potentially catch a person who:

  • Makes his living in organized crime and fails to declare hundreds of thousands (or even millions) of dollars' worth of cash proceeds
  • Operates a cash-only business like an illegal gambling parlor, or traffics in controlled substances like cocaine or heroin
  • Has a legitimate job (say, a politician or municipal employee), but collects under-the-table bribes and graft payments
  • Isn't a dangerous felon herself, but happens to be married to one, and signs off on their fraudulently prepared annual tax return
  • “Launders” the proceeds from other criminal enterprises, by investing the money in legitimate businesses and then cashing out

Did You Make Your Money Illegally? You Still Have to Pay Taxes

Granted, if you made a bundle of money by robbing a bank or selling 20 kilos of pure, uncut heroin, the last to-do item on your list is to declare all this income on your annual tax return. Be assured, though, that the IRS will come after you, either before or after a criminal prosecution—and you'll have to cede all of your ill-gotten gains. Questions? Contact the Oklahoma tax experts at Travis W. Watkins, PC (800-721-7054) for a free consultation today!