You can rant all you want about the IRS. Inefficient. Bloated. Vindictive toward the little guy. All true. But don't say they lack ambition.
Buried in IRS Publication 17 (the official guide to filing federal income tax) is a section that reads like a user manual for criminals with a conscience. Or at least criminals with an accountant.
Here are the guidelines for the compliant criminal:
- Deal drugs? Report the income. Use Schedule C. The government wants to know if you're running a sole proprietorship or just freelancing.
- Receive a bribe? Include it in your income. Bribes are taxable. They are not, however, deductible. So if you bribe someone, you eat that cost. But if someone bribes you, congratulations, you've got a tax obligation.
- Steal property? Report its fair market value as income. Unless you return it to the rightful owner within the same calendar year. The IRS operates on a seasonal morality system. Steal in January, return by December, and the ledger resets. Clean as a baptism.
- Kickbacks, side commissions, "push money" are all taxable. All reportable. The agency even specifies the exact line on Schedule 1 where you should confess.
The same government that will prosecute you for the crime wants you to self report the proceeds. On a form. With your name on it. Filed under penalty of perjury. Who cares about the 5th.
And the beautiful part? Tax returns are technically confidential under Section 6103. The IRS can't just hand your return to the FBI. They need a court order or a specific statutory exception. In theory, you could report income from dealing fentanyl, and the IRS would just nod and process your return like you sold cupcakes at a farmer's market.
In theory.
In practice, the exceptions to that confidentiality are wide enough to sail a prosecutor through. And if you don't report the income? Now you've got a second problem. Al Capone went down for tax evasion. Same with Soviet spy Aldrich Ames: two million in cash from Moscow, not a dollar on his returns. The tax fraud got him convicted.
The logic of the system is perfect in its cynicism. The government doesn't care how you got the money. It cares that it gets its share.
There's even a special provision for marijuana businesses. Section 280E says if your trade involves trafficking in Schedule I or II controlled substances, you can deduct the cost of goods sold, but nothing else. No rent. No utilities. No advertising.
That's the arrangement. You can break the law, but you cannot break the tax code. One gets you a trial. The other gets you buried.
The message from the IRS is clear: we don't care what you did. We care what you earned.
And they want it on the right line.
Buried in IRS Publication 17 (the official guide to filing federal income tax) is a section that reads like a user manual for criminals with a conscience. Or at least criminals with an accountant.
Here are the guidelines for the compliant criminal:
- Deal drugs? Report the income. Use Schedule C. The government wants to know if you're running a sole proprietorship or just freelancing.
- Receive a bribe? Include it in your income. Bribes are taxable. They are not, however, deductible. So if you bribe someone, you eat that cost. But if someone bribes you, congratulations, you've got a tax obligation.
- Steal property? Report its fair market value as income. Unless you return it to the rightful owner within the same calendar year. The IRS operates on a seasonal morality system. Steal in January, return by December, and the ledger resets. Clean as a baptism.
- Kickbacks, side commissions, "push money" are all taxable. All reportable. The agency even specifies the exact line on Schedule 1 where you should confess.
The same government that will prosecute you for the crime wants you to self report the proceeds. On a form. With your name on it. Filed under penalty of perjury. Who cares about the 5th.
And the beautiful part? Tax returns are technically confidential under Section 6103. The IRS can't just hand your return to the FBI. They need a court order or a specific statutory exception. In theory, you could report income from dealing fentanyl, and the IRS would just nod and process your return like you sold cupcakes at a farmer's market.
In theory.
In practice, the exceptions to that confidentiality are wide enough to sail a prosecutor through. And if you don't report the income? Now you've got a second problem. Al Capone went down for tax evasion. Same with Soviet spy Aldrich Ames: two million in cash from Moscow, not a dollar on his returns. The tax fraud got him convicted.
The logic of the system is perfect in its cynicism. The government doesn't care how you got the money. It cares that it gets its share.
There's even a special provision for marijuana businesses. Section 280E says if your trade involves trafficking in Schedule I or II controlled substances, you can deduct the cost of goods sold, but nothing else. No rent. No utilities. No advertising.
That's the arrangement. You can break the law, but you cannot break the tax code. One gets you a trial. The other gets you buried.
The message from the IRS is clear: we don't care what you did. We care what you earned.
And they want it on the right line.
