IRS Asks Americans to Report Income From 'Illegal Activities'

Internal Revenue Service Building is located in Washington D.C., USA. The IRS invites taxpayers to declared their income from “illegal activities.”

The Internal Revenue Service’s request (IRS) that taxpayers report any income they might have received through illegal activities such as dealing drugs has gone viral on social media, with users joking about the unlikely demand.

“Don’t forget to report your income from illegal activities and stolen property as you’re doing your taxes this year,” one social media user wrote on X, formerly known as Twitter, sharing the IRS 2023 documentation for preparing 2023 returns. The post received over 6.8 million views.

“Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity,” the IRS publication 525 states. In case of stolen property, taxpayers “must report its FMV [fair market value] in your income in the year you steal it, unless in the same year you return it to its rightful owner,” the IRS writes.

The guidelines are not new but have been in place for years, at least since IRS publication 17, which was published in 2021, when the issue also became viral on social media.

Newsweek contacted the IRS for comment via phone early on Tuesday morning, outside of standard working hours.

Social media users joked about how unlikely it is for someone who has committed a crime to denounce it so that their income can be taxed appropriately by the federal agency. But jokes aside, the IRS rules carry heavy consequences for those found in breach of them.

Gangster Al Capone, long sought by U.S. authorities, was finally jailed in 1931 over tax evasion—not over the many murders he was directly or indirectly responsible for. The mob boss, who had famously said “They can’t collect legal taxes from illegal money,” was sentenced to 11 years in prison for failing to file tax returns reflecting the extent of his wealth. Despite living a very public lavish lifestyle, Capone had never filed a federal income tax return.

Admitting an illegal activity to the IRS doesn’t necessarily equate to turning yourself in. The agency isn’t forced to “tell the federal authorities about [the] activity.” This type of income falls in the “other income” category.

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