IRS says stolen property and bribes must be reported as income

[Hydrogen]

Did you steal a car in 2021? How about taking a bribe? If you did, the IRS says to make sure you report it on your taxes.  

Those provisions went viral Monday following a tweet alerting taxpayers to those somewhat surprising requirements to note the value of your ill-gotten gains.

"Tax szn is around the corner," read the tweet from @litcapital. "Remember to report your income from illegal activities and stolen property to the IRS."

The requirements can be found at IRS.gov amid other missives to report income earned from jobs in the gig economy and what to do about taxable alimony payments.

"If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year,"' read the provision for stolen property.

What if you're dealing drugs or caught up in other crimes?

In that case, the IRS publication says jot your earnings on line 8z, Schedule 1 of your 1040 form, "or on schedule C ... if from your self-employment activity."

And don't forget to report any bribes or kickbacks you took in the course of doing business.

The kickbacks also go on Schedule 1 or Schedule C, while the IRS says bribes should simply be included in your income.

"If I steal a bunch of tvs from walmart and a homeless man steals them from me can i write that off as a loss?" read one tweet.

"So once you report your stolen stuff you legally get to keep it right? Asking for a friend."

An IRS spokesman confirmed the provisions are on its website but declined to comment further.

https://www.usatoday.com/story/money/2021/12/28/irs-says-stolen-property-must-reported-and-twitter-goes-wild/9035694002/

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Meme reaction:  https://www.youtube.com/watch?v=G56VgsLfKY4


The US tax code is alleged to be an odd thing weighing in at more than 60,000 pages in length. Whether the IRS was forged in the image of the US tax code or vice versa is up for debate. One thing is for certain. The IRS has many odd quirks and foibles. It does not function in the way most would expect. Most reading this would expect all reports of criminal activity reported in tax documents to be forwarded to local law enforcement. Yet the IRS has maintained a demonstrable degree of confidentiality over the years, and is provably shown to be lawfully bound from sharing confidential data under certain circumstances.

One example of this is illegal immigrants in the USA who report and pay taxes. Most might expect such reports to be forwarded to immigration officials so residents illegally in the country can be deported. But that is not the case. It has been documented in some cases, that the IRS is legally bound and restricted from sharing such personal information regarding immigration. Even if they are connected to ongoing criminal cases.

While I can't say I completely understand the process or future of the IRS in the country. It is quite possible that in the future, the IRS will be legally bound from sharing accounts of criminal activity with law enforcement to guarantee the government reaps a higher share of tax revenues from crime.

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[fiulpro]

This is honestly not funny and not even reasonable. Maintaining confidentiality when you know which people are involved in the criminal activities and not forwarding it to the government, not reporting it is awful. I don't even understand why did they do it for so many years? Illegal activities and stolen properties are something that should not be taken lightly, tweeting about it, makes me sure that there is nothing right with the government. Apparently they only help the law when the police finally comes and knocks at their door and ask about the particular person. "Confidentiality"
They are talking it too far. Shouldn't they be so kind to answer why do they have probelms with cryptocurrencies like *Bitcoins* then?? This is a twisted reason for them. As long as the government is getting taxes, they will keep mum about it and that's about it.

[Gozie51]

Well I don't understand the duty of the law enforcement agency in the case where stolen bitcoin will be reported as income. I mean that in the instance is stealing and the person has to face punishment and not just the interest of the income to it . This is to discourage hackers and scammers. Is awful to here such that the first interest should be tax.

[wxa7115]

The US tax code is alleged to be an odd thing weighing in at more than 60,000 pages in length. Whether the IRS was forged in the image of the US tax code or vice versa is up for debate. One thing is for certain. The IRS has many odd quirks and foibles. It does not function in the way most would expect. Most reading this would expect all reports of criminal activity reported in tax documents to be forwarded to local law enforcement. Yet the IRS has maintained a demonstrable degree of confidentiality over the years, and is provably shown to be lawfully bound from sharing confidential data under certain circumstances.

One example of this is illegal immigrants in the USA who report and pay taxes. Most might expect such reports to be forwarded to immigration officials so residents illegally in the country can be deported. But that is not the case. It has been documented in some cases, that the IRS is legally bound and restricted from sharing such personal information regarding immigration. Even if they are connected to ongoing criminal cases.

While I can't say I completely understand the process or future of the IRS in the country. It is quite possible that in the future, the IRS will be legally bound from sharing accounts of criminal activity with law enforcement to guarantee the government reaps a higher share of tax revenues from crime.

I will admit that I do not know much about the IRS but if this is the way it works then I would say that is incredibly weird, after all it would be expected that such kind of income must always be hidden as I would expect that information to be shared with the authorities and it could lead to an arrest.

But at the same time it makes sense, the IRS in theory should only care about getting taxes and nothing more, so in a way I can understand why in order to encourage people to pay their taxes on all kind of income they may decide to turn a blind eye to some illegal activity.

[BernyJB]

I think it's great!
I mean, we wouldn't want criminals to be breaking the law now, would we?

[kryptqnick]

Wow, the IRS is really focusing on what's important to it: to get as much in taxes as legally possible. It's cool that they don't report undocumented migrants and take tax reports from them. It's even cooler that they're legally not allowed to share this information, although it's indeed very surprising to me. But in a way, it doesn't really make much sense because paying taxes on bribes and stolen property somehow legitimizes such actions (I checked the IRS website, and it's not a joke, apparently), while it really should not.

[DaveF]

Tax evasion is how they got Al Capone 90 years ago
https://themobmuseum.org/blog/capone-tax-evasion-trial-jury-finds-chicago-mobster-guilty-on-5-of-22-counts/

I thought everyone knew this. It's actually an interesting way to go about it for people who declare very little income abut spend tons of money.
There have been a few others over the years. Interesting part is there have been some other criminal enterprises that have setup fake businesses and run all their 'dirty' money through them. Paid all the taxes needed and so on and gotten 'clean' money out the other side. Still got caught.

-Dave

[Quidat]

I will admit that I do not know much about the IRS but if this is the way it works then I would say that is incredibly weird, after all it would be expected that such kind of income must always be hidden as I would expect that information to be shared with the authorities and it could lead to an arrest.

But at the same time it makes sense, the IRS in theory should only care about getting taxes and nothing more, so in a way I can understand why in order to encourage people to pay their taxes on all kind of income they may decide to turn a blind eye to some illegal activity.

Who would really be in their right minds in doing so?

If they do know that proclaiming out something that those illegal activity or crimes that you had done must be reported as an income and dealing with IRS?
No one would be dumb in doing so yet the primary thing that would put up into their minds is that they would really get arrested on high chances
if ever they would tend to report out. So its totally nonsense imho.

[paxmao]

Reporting bribes as income just made me chuckle 

My view is that you have to pay taxes insofar as you enjoy benefits. Regardless of your legal status in a country, if you enjoy infrastructures, health benefits, safety, legal rights, etc... you have to contribute. The sticky point here is the same as the one that originally started the war of independence in the US (allegedly) - taxation without representation is unfair. Thus, these illegal immigrants could argue that they are not paying taxes that will be managed by politicians they cannot elect.

[dothebeats]

It's as if the IRS is treating theft and bribery as legal and normal forms of where people can get their money from, even going so far as urging people who committed such crimes to file their "gains" on tax. Idk whether I should be happy with this meme-y decision or not, but it's certainly going to receive a lot of mockery from other countries for a long while.

The government agencies of the United States seem to get dumber and dumber every year, with propositions that seem sarcastic at first due to its silliness, and ending up being the real thing.

[hatshepsut93]

I can understand taking taxes from something like selling drugs, but taxing theft just makes the IRS an accomplice. I wonder if we'll see a court case where someone sues the IRS to get their stolen money back.

How does this all make any sense when the US projects an image of being tough on crime, has a very high rate of incarceration, and then on the other hand seemingly supports criminal activity?

[Darker45]

Funny! But if we are to be strict about it, what the IRS is doing sounds just right, although they seem to be too religious on their job that they seem to be doing the unnecessary extra mile and obviously look ridiculous as a result. But they're doing their job perfectly. I'd say they deserve an applause for it. Indeed, income comes in many forms and it certainly includes bribes and whatnot. But what I am curious of is whether the people who are involved in such activities would be so honest they would declare even their stolen money or properties?

[bittraffic]

Robbers from now on have to have thier inventory for the stolen cars and money they got from robbing. Unless they are returning it in the same year 
They are going to be listed as the dumbest criminals after reporting thier inventory to the IRS.

This has got to be the most unbelievable laws they've created but they are pretty much serious about it so one thing is for sure politicians are likely to be jailed soon.

[timerland]

Ah yes - criminals are going to expose themselves by paying their taxes so that when they do get charged, they will at least avoid the tax evasion ones

It's honestly ridiculous and a perfect encapsulation of how archaic and unreasonable the current tax code is in most countries.

Hopefully blockchain technology can help the processing of tax be more efficient and fair for everyone involved.

[Sithara007]

We have similar laws in our country (India) as well. Even if the income is sourced from an illegal business, the tax law states that it needs to be reported in the returns and due tax needs to be paid. A few years ago, when the legal status of Bitcoin was in limbo, several of the Bitcoin traders received notices from the income tax department. It explicitly stated that Bitcoin trading is not 100% legal, but the traders still need to pay taxes on any profits they receive from these transactions. Fortunately in India, the IT department is not as stringent as the one in the States.

[odolvlobo]

This is old news.

Al Capone, the famous Chicago crime boss in the 1920's, was not convicted and sent to prison for murder, etc. He was convicted and sent to prison for tax evasion.

[kaya11]

Well I don't understand the duty of the law enforcement agency in the case where stolen bitcoin will be reported as income. I mean that in the instance is stealing and the person has to face punishment and not just the interest of the income to it . This is to discourage hackers and scammers. Is awful to here such that the first interest should be tax.

It is a trap, where in a side your free to steal Bitcoin and therefore when you report it to the authorities, cuffs and bars are waiting for you and goodbye to stealing Bitcoin again. What the hell is wrong with the people today, telling people it is okay to steal then report it as an income?

[hello_good_sir]

This is beyond absurd.

Do they expect criminals to reveal all their wrongdoings for the greater good? What is even the point of saying this anyway?

They must be high when they wrote this law - legitimately. Or perhaps they unironically thought that it would be a good profit-making undertaking to include these two paragraphs. Wouldn't be surprised either way.

[DaveF]

Do they expect criminals to reveal all their wrongdoings for the greater good? What is even the point of saying this anyway?

The point as was shown above was a round about way to go after people like Capone and other criminals who through bribes / influence / killing of witnesses / fear / etc. could not be convicted of other things other ways. They rarely go after the smaller people with this it's is usually the bigger criminals who would get away with it.
It's also used against politicians where you can see that they have been spending more then they earned but you can't figure out where the bribe came from....

-Dave

[so98nn]

. . and why is this not a part of money laundering? I mean if we go with this news then imagine the amount of drugs that is caught up at the airports every year around the world! This could be part of big revenue in terms of taxes. However, I don't understand one thing here, in what legal book this one is written? Or is it like they are making their own comforting rules for themselves? How they can levy taxes on smuggled things if no one is gonna utilise it after it is being captured by the legal authorities. For example, goods and services when sold get the taxes paid by end user which then is paid to the IRS while filing the income tax returns.

Since in this case there are no organisation, no user, how are they getting the same? 

If property is stolen and it got captured by authorities then its value is zero because it wont be sold up ahead, right? How is it going to be taxed property!