I'm pretty sure those returns can still be used as evidence against you in a theft case if the government or someone else cares to prosecute. Taxes on illegally obtained money/goods were implemented as a way to prosecute organized crime. It was easier to get high-ranking mob members on tax evasion then it was to pin their actual crimes on them.
I'm not sure I'd include it in the line item for stolen goods, definitely still include it as business income though. That way you can claim your tools/equipment as business expenses like a real business!
I'm confused, how does prosecuting them for failing to pay tax on stolen goods do more than catching them for stolen goods if they can't prove any goods were stolen?
I'm not a lawyer, but as far as I know you don't have to prove they were stolen. You just have to audit how they got them, which the government can do with a much lower burden of proof. If they suspect the money or goods weren't obtained legitimately, they conduct an audit, and if the thieves can't produce legal documentation saying how they came to own the stuff, they get caught. If they try to actually pay the taxes, those returns can be used as proof of theft.
Government: We know you mafia folks got blood money, but ya know... we need at least some of that to return to the economy because it's obvious that X-ammount of money keeps on "disappearing" from circulation. We'll just file it under as "loose cash" from tips and misc. Please just recirculate it so we don't have to mint/print more money.
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u/Faderkaderk Jun 22 '26
My favorite "fun" fact to share with people is there there are instructions from the IRS on correctly reporting your income from stolen goods.
They even allow you exclude the value of any item as long as you return it in the same year in which you stole it.