Comments on: Fix the Tax Code Friday: Illegal Activities

By: irie

irie — Sun, 07 Mar 2010 21:27:15 +0000

Legalized or not, any income from illegal activities should be reported on line 21 of tax form 1040 if filing an individual return or it should be reported on line 18 with class code c on a tax form K-1.

The only “lost” revenue results from caregivers not filing their taxes correctly. Report all Gross income. (no expenses, credits or deducuctions subtracted) In theory, the IRS would receive more tax revenue from operations taxed as illegal income than if they leagalized such operations.
If legalized, companies and individuals could take expenses and credits against their gross income. Example – You gross 50,000.00 but it costs you 25,000.00 to run your business – if legalized you get taxed on the 25K. If it’s illegal the tax would be on the full 50k.

If you are a caregiver, please note that no where on the tax forms does it say -”do you sell illegal drugs?” Basically the tax forms ask for your gross income and non deductible expenses. Lots of individuals and companies report amounts on these lines – often for things like meals and entertainment. The only tell tale sign that you may be a caregiver is the name of your company and how you characterize your business code on the tax form itself.

To avoid such issues I suggest that you avoid forming confusing partnerships and corporations. Stick with sole proprietorships. The taxes are easier to report and less conspicuous. Each State has different laws, my advice pertains to federal income taxes only.

I hope this info helps someone.

By: Skip McQuaid

Skip McQuaid — Sun, 01 Mar 2009 18:28:03 +0000

I actually have two prostitutes as clients. Both are S-Corporations and those companies are listed as entertainment companies. Both ladies are very nice, well dressed ladies and both are supporting their husbandless households. And they are doing it fairly well also. Certainly a lot better than they could if they worked in a store or factory somewhere. And they are both available to take their kids to school, pick them up, make sure they do their homework and both have hired responsible people as babysitters at night when the ladies work. And both seem to be pretty devoted to their children as well as paying their taxes. It seems to me that the defnition of prostitution were to sell yourself for money then there are a whole lot of folks in in the political arena that would qualify for the term. But at least my two clients are honest about what they do and they pay their taxes. And they also pay my fees promptly which is more than I can say for some of the other clients who engage in “more acceptable” lines of work.

As to drugs – I know folks who smoke marijuana – I know folks who drink – I even know folks who do both – If someone lights up, I leave – not because I approve or disapprove but it is against the law and I really can’t see me chatting with “Bubba” in a jail cell. If they pour a drink I simply ask them if they have any “Captain” and we go from there. And yes, I have had to call my housekeeper to come get me because I was afraid I would flunk the test if I got pulled over. But usually when I am with some folks and there is drinking going on things tend to get rowdy and loud sometimes. The only experience I have ever had with marijuana was about 40 years ago in a far away place. And the folks that smoked it then seemed rather subdued and quiet after awhile. Did a lot of laughing but that was about it. I never really understood why there was a big fuss made over whether they smoked dope or not. I just knew my Dad would beat my butt if he found out and that he would, somehow, find out.

At least let the people decide. Vote on it.

Skip

By: Kelvin Kao

Kelvin Kao — Fri, 27 Feb 2009 21:56:03 +0000

If these things are going to be regulated or legalized, I don’t think they should be because of tax reasons. Prohibition told us that banning alcohol created more problems, so we are back to legalized and regulated alcohol. They should do the same with other drugs and “sins”. Not for tax reasons, but because it’s better for the society. In a way it’s like the debate about birth control. Do you want an all or none, or do you want something allowed and controlled?

By: Boyd Thomas EA

Boyd Thomas EA — Fri, 27 Feb 2009 21:37:58 +0000

I have been saying exactly this for years. Prostitution, like MJ use, is essentially a victimless “crime.” Both should be legalized, prudently regulated and taxed. As for hard drugs, I think there are some convincing arguments for the legalization of them as well; however, this area is a little more controversial, and I must admit that I’m still on the fence.

By: Ray Harris

Ray Harris — Fri, 27 Feb 2009 20:47:22 +0000

How about we just have a one time sales tax to fund the government ? Give me my paycheck, my land and I’ll pay 30% in sales tax, just like every one else. 10% fed, 10% state, 10% local. not hard math to follow and ALL can pay, not just us with a real JOB .

By: Nunya Bidness

Nunya Bidness — Fri, 27 Feb 2009 20:14:04 +0000

Here in Texas you already have to have a “tax stamp” on your pot just like is on cigarettes. This was not done to collect revenue, but to be able to charge anyone you caught with threshold amounts with tax evasion also. I haven’t heard of it being used recently, but it was used several times after the legislation was passed.

By: Rick

Rick — Fri, 27 Feb 2009 19:46:23 +0000

What makes you think that if you legalized prostitution to tax it, there still wouldn’t be illegal prostitution so that people could do it on the QT and not pay tax on the money they make. I had a dancer (read stripper) come in to the office and actually report to me what she made and then was appalled at how much tax she owed. She left saying she was going to check her records on tips and we have not seen her since. (and I am sure we won’t)

By: Candy Beauchamp

Candy Beauchamp — Fri, 27 Feb 2009 14:25:12 +0000

It’s a hard thing, right? I’m actually all for legalizing marijuana and prostitution. I see them both as things people are going to do (relatively openly actually) and they don’t really hurt anyone. I hate to be the one to tell everyone this, but there has always been and there will always be a sex industry. *gasp* Yes. That’s right. Why not put laws in place to protect those that choose that career and their clients? Why not make sure the federal/state/whatever government sees some tax revenue from that? Leave “sin” out if it, in my opinion. Who am I to say it’s morally wrong? It’s two consenting adults. Have at it.

As for weed. Eh. I know very few people that haven’t tried it in their youth. I know very few people that actually use it as adults. Cigarette tax it and get over it. We need the tax revenues and frankly, I’m sick of paying for all these raids and court costs and jail time for people that want to smoke it.

Interestingly enough because I’m full of it… I’m against legalizing other drugs for various reasons.

By: M Cook

M Cook — Fri, 27 Feb 2009 12:56:43 +0000

One of the most unbelievable tax laws calls for the reporting of gains (and potentially losses) of revenues that are the result of illegal activities, such as the paying or receiving of bribes. To document such activity on your tax forms would seem to be the same as signing a confession and, I would think, could be used as evidence in a criminal case. The illegal purchasing or selling of controlled substances as well as prostitution would, it seems, fall into the same category. Seems just stupid of the IRS to even ask for such information, unless they are just trolling for taxpayers that are even more clueless. It would be interesting to find out how many (if any) criminal cases have resulted in such disclosures vs. how many times such information has been reported on a tax return.