Not really tax free lol! In both cases you arent getting withholding so you need to declare it.
Your hookers and blow dealers won't report you to the taxman.
And yeah if you want normal stuff like a house or car you'd need to wash the money. How do I know? Breaking Bad. Which lets be honest is probably for most of us, our only reference point here.
[1] https://www.elizabethhoney.com/45--47-stella-street.html
The IRS isn't referring suspicious (whatever that means) tax returns to the authorities. What happens if you are a criminal is that the authorities have there attention on you because you are doing illegal things. One angle of attack for them is your finances. That is why money laundering exists.