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IRS Reminds Thieves To Report Stolen Property As Income Or Return Property To Owners

Washington, DC – Criminals who have stolen items or raked in cash from drug deals or other illegal activities over the past year must not forget to report those financial gains on their 2021 taxes, according to the Internal Revenue Service (IRS).

“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,” the IRS explained in a helpful list of tax tips shared online.

Similar rules apply to other illegal financial gains.

“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 noted.

Reporting bribes and kickbacks is also required, according to USA Today.

While bribes can simply be included as part of an income, kickbacks should be listed on Schedule C or Schedule 1, the IRS explained.

“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?” one curious Twitter user wrote in response to a viral post about the IRS mandates.

“Wait, so if I bought $5 worth of crack and stole a $7 pipe but had to sell the crack for $3, would I get a $4 refund and claim the pipe as a depreciating asset?” another person inquired.

Others were still confused about how to properly report their earnings.

“Do I report money laundering under illegal activities section or under crypto?” one tweet read.

“Once you report your stolen stuff you legally get to keep it right?” another person asked. “Asking for a friend.”

Some frustrated entrepreneurs complained about the unfair manner in which illegal income is taxed.

“The IRS double screws you for illegal income. They count the gross revenue as taxable income and you aren’t allowed to deduct business expenses to determine net income,” one post read. “Imagine selling a load of cocaine and not getting to deduct the cost of goods sold. Amirite?”

An IRS spokesperson confirmed the agency’s website includes details about how to report illegal income, but refused to comment on the issue further, USA Today reported.

The statutes are not new and have helped bring down criminals like prohibition-era gangster Al Capone in the past, NBC News reported.

“All income, from whatever source, is taxable income, unless excluded by an act of Congress,” Maryland-based tax preparer Gary Schroeder told the news outlet. “If you receive $500 to kill your neighbor’s annoying rooster, or find $1 on the street, or embezzle from your employer, that’s all taxable income, as well as your paycheck from flipping burgers at McDonald’s.”

San Francisco tax attorney Stephen Moskowitz said some criminals who are expecting to be convicted of embezzlement will report the stolen income in order to avoid being prosecuted for tax evasion, NBC News reported.

Moskowitz noted that defendants are also allowed to deduct the cost of restitution as long as they declare and pay taxes on their illegal income, according to the news outlet.

Written by
Holly Matkin

Holly is a former probation and parole officer who is married to a sheriff’s deputy. She is a regular contributor to Signature Montana magazine, and has written feature articles for Distinctly Montana magazine.

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Written by Holly Matkin


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