By Al Brown, The Chicago Times
December 30, 2021
WASHINGTON – According to the IRS, individuals who earned income from illegal activities must include it in their 2021 filings.
“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 said in a statement.
The IRS did not elaborate on how the reporting rule will be enforced, but they highly recommend illegal income be reported in Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) as self-employment activity.
In 1927, the US Supreme Court ruled in United States v. Sullivan that the 5th amendment, which protects citizens from self-incrimination, does not protect criminals from having to declare illegal income. The Supreme Court ruled against Manly Sullivan’s claim that declaring illegal income from the bootlegging of alcohol would violate the 5th amendment. Sullivan was a bootlegger from South Carolina.
The case also acted as a legal litmus test for Assistant Attorney General Mabel Walker Willebrandt’s prosecution of Al Capone for tax evasion in 1931.