How do you disclose income from crimes?
https://www.irs.gov/publications/p17
> Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8, or on Schedule C (Form 1040) if from your self-employment activity.
You're theoretically safe from them disclosing this to other law enforcement agencies. (I wouldn't want to test that, though.)
https://money.cnn.com/2013/02/28/news/economy/illegal-income...
> If you tell the IRS you made $1 million from stealing money or dealing drugs, does the agency tip off the cops?
> Legally, it can't, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return. The IRS isn't supposed to proactively alert other agencies about misdeeds unless terrorism is involved. In that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own.
See my comment about the Chicago Outfit in this thread. They figured out the best way if you have a lot of illegal income.
In theory. In actuality I think you could make a reasonable argument that the suspicion of parallel construction means that you may plead the 5th.
IRS is federal isn’t it? Does that mean they would consider weed sales illegal?
Weed is illegal under US law. Nothing meaningful about the federal prohibition on weed has changed for decades.
AFAICT all dispensaries are admitting federal crimes when they file federal tax returns. I believe the statute of limitations on controlled substances violations is 5 years, meaning dispensers are theoretically always under threat that the next administration will bring down the hammer and prosecute them for sales occurring today.
You are dreaming if you think a tax return which shows both illegal income and personal identifying information won't be shared with other enforcement agencies. Even the Post Office reports suspicious mail. Ditto FedEx and the "American kilo" (two pounds instead of 2.2). Even Amtrak alerts the DEA of suitcases containing legally-purchased California weed when the train will leave the State.
You report the amount as "other income", I believe. You don't have to say that it is from crimes.
I don't do crypto currency and have been wondering whether you are supposed to report it and pay tax on it when you receive it, or only when you sell it. Before you sell it, maybe it is an unrealized gain, which is currently not taxed.
1. You buy an artwork by a famous artist for $10k and it appreciates to $20k. This is an unrealized gain and you are not taxed until you sell it. Note that trading one crypto for another is effectively a sale of the first crypto and a purchase of the second, such that you pay gain depending on the value of the second crypto at the time of the trade.
2. Someone gives you a $10k artwork as partial payment for some work you do, eg web design. This is income and taxed as if they paid you $10k. Mining crypto is also income I believe.
3. Someone gifts you an artwork worth $10k. You don’t pay tax.
Etc.
I would think the best way to characterize this transaction is that it is income, although it’s certainly unusual enough that I won’t say I’m certain.
Not tax advice / speak to your own accountant.
I had this problem in 2018 - I bought BTC in 2017 before the boom, exchanged a bunch for ETH at the peak of 2018, and then rode the ETH all the way back down. I had to pay a bunch of taxes on the BTC gains I “realised” even though I didn’t get any actual cash out. I had to pick a price settle for BTC/USD on the day I bought ETH.