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Income Tax Traps
Saturday, 08 February 2020 20:29

If you've been naughty, Uncle Sam still wants his share.

Here are some interesting paragraphs from IRS Publication 525 "Taxable and Nontaxable Income."

On page 29:

Bribes. If you receive a bribe, include it in your
income.

This makes me want to inspect the tax returns of all politicians.

On page 32:

Illegal activities. Income from illegal activities,
such as money from dealing illegal drugs, must
be included in your income on Schedule 1
(Form 1040 or 1040-SR), line 8, or on Schedule
C (Form 1040 or 1040-SR) if from your
self-employment activity.

I wonder how many tax returns list the taxpayer's occupation as "Criminal" or "Drug Dealer?"

Also on page 32:

Found property. If you find and keep property
that doesn't belong to you that has been lost or
abandoned (treasure-trove), it's taxable to you
at its FMV in the first year it's your undisputed
possession.

So much for "finders, keepers!"

On page 33:

Kickbacks. You must include kickbacks, side
commissions, push money, or similar payments
you receive in your income on Schedule 1 (Form
1040 or 1040-SR), line 8, or on Schedule C
(Form 1040 or 1040-SR) if from your
self-employment activity.

We should be able to check out the tax returns of everyone that gets a government contract. Just because. Plus, those politicians that vote to approve those contracts, and the bureaucrats that can approve those contracts without any oversight by an elected legislative body or elected public official.

On page 34:

Stolen property. If you steal property, you must
report its FMV (Fair Market Value) in your income
in the year you steal it unless in the same year,
you return it to its rightful owner.

I'm trying to imagine how this works: Does the thief have to obtain appraisals to determine the Fair Market Value? And must they keep those appraisals in case of an audit? Do they list their occupation as "Thief" on their tax return? Inquiring minds want to know!

 

Brent D. Gardner, CLU, ChFC