When it comes to paying bills, the law requires everyone to report all their income. This is regardless of how you make the money, even if you got it illegally. What matters is that the government wants you to pay the right taxes for it.
According to INC, the IRS wants you to declare all your income so that they will be able to collect the right taxes from it. The interesting part is that they do not check your occupation to know where you get your money. However, they cooperate with law enforcement if asked for taxpayer information. They do this as part of a criminal investigation.
The IRS Publication 525 (Taxable and Non-Taxable Income) also has a long list of other incomes that taxpayers are not knowledgeable of. As a matter of fact, some of them may have something to do with illegal or questionable income. It includes Bribes, Kickbacks, Stolen property, Illegal activities such as money that came from illegal drugs, as well as gambling winnings. For those gamblers, you have to declare your winnings. If you itemized your deductions accordingly, then you can also deduct your gambling losses you had during the year. But it should only be up to a number of your declared winnings.
When it comes to ill-gotten wealth, it is really hard for someone to admit or declare it. But if in case the government caught you for your illegal activities, then they will most likely charge you for tax evasion.
Market Watch shares that if you are starting to entertain thoughts of lying on your taxes, then you really have to think twice. It may be tempting to manipulate numbers in order to get an increased refund, but the consequences for it can be a tough one.
Just the thought of being audited can be stressful enough. It is possible that IRS will do an extensive review of your taxes and financial records. If they find out that there are errors, then there would be penalties and fines. That is why it is very important that you declare your income truthfully.
Meanwhile, Jobs & Hire talked about the importance of knowing the difference between a hobby and a business. Things like this matter because whether the venture you are doing is just a hobby or a business, it still affects your tax liabilities.
Watch the video below:
