IRS requires taxpayers to report illegal sources of income

By Felix Sarver

Money made from gambling, hobbies, bribes and even drug dealing are things the Internal Revenue Service (IRS) wants to know about.

Taxpayers must include in their tax income return forms all income they receive in the form of money, property and services unless the tax law states otherwise, according to IRS Publication 17 Chapter 12.

The IRS requires people to report the income from legal and illegal activities because it is a constitutional amendment, said Patricia DeSanto, office manager at H&R Block, 495 N. Route 47, Sugar Grove.

“Whether it’s illegal or not, you’re supposed to report all income to the IRS,” DeSanto said.

Jorge Butler, industrial management technology major, said he was not aware of the IRS requiring reports on all sources of income.

“I don’t think it’s fair but I guess it’s tradition,” Butler said.

The IRS is usually able to catch people who do not accurately report on all sources of income by auditing them, DeSanto said. The IRS can look at bank statements or look at the total income and check people’s claims, she said.

If an individual possesses huge sums of money or a corporation has unconfirmed income, there is usually a whistle blower, DeSanto said.

“If it was from an illegal activity, the police will find out,” DeSanto said.

An FBI or IRS agent or local police handling cases where income was obtained illegally will assess the source of income for their street value or fair market value, DeSanto said.

People who do not honestly report on all their sources of income can be punished for fraud, DeSanto said. The legal punishment for not reporting on money a person receives can vary however, she said.

“When you sign the form, you are attesting all the information is factual and truthful,” DeSanto said.

Mark Girardy, physical therapy graduate student, said except for the lottery he does not think he would report on all the income he made from activities outside of his job.

“Smaller stuff shouldn’t matter,” Girardy said.