If you’re doing any tallying in preparation for filing your 2021 taxes, here’s a tip to keep in mind: Don’t forget to report the money you made while committing felonies.
That’s been a trending topic on social media in the last couple of days. It appears to have all started with posts on Twitter and Instagram from accounts belonging to Litquidity Capital, the anonymous financial observer who has been described as the “Wall Street memelord.” The posts simply declared: “Remember to report your income from illegal activities and stolen property to the IRS.”
Litquidity Capital’s point is accurate, at least judging from the IRS rules outlined in its Publication 17. As the IRS notes, “Income from illegal activities, such as money from dealing illegal drugs, must be included in your income” declarations. Similarly, it says, “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.”
IRS officials didn’t respond to a MarketWatch request for additional comment.
The world has taken plenty notice of Litquidity Capital’s musings on this quirk of our tax code. The Twitter post has been shared more than 6,700 times, while the Instagram one has nearly 40,000 likes.
Among the responses on Twitter are these gems:
All of which amuses the person behind Litquidity Capital, who spoke to MarketWatch on an anonymous basis. The social-media maven said the posts were inspired by a comment they had recently heard about this odd tax rule — and they were skeptical about it being true. “I thought, ‘There’s no way,’ ” they said.
But when they dug into the IRS code, they confirmed it was for real. And it was something too unbelievable not to share with the world, they thought. “You can’t make it up,” the person said.
At the same time, the Litquidity Capital commenter-in-chief notes the rule is essentially what put notorious gangster Al Capone in jail in 1931. Indeed, a 1927 Supreme Court case, United States v. Sullivan, paved the way for the government’s case against Capone — the 1927 case essentially declared that criminals had to pay their fair share of taxes for their, ahem, earnings.
Still, tax professionals whom MarketWatch contacted say they’re hard-pressed to recall a time a would-be client came to them wondering if they needed to declare their earnings from, say, robbing a bank.
“It’s sort of ridiculous to think that somebody in this situation is going to say, ‘I want to pay taxes because it’s my patriotic duty,’ ” says Richard Rampell, a retired Palm Beach, Fla., accountant who worked in the industry for nearly 50 years.
Rampell does, however, point out the many nontraditional gains that must be reported to the IRS, from the value of items acquired through barter to monies earned from gambling. Technically, even coins found on the street count for something, Rampell notes. “That’s income,” he says.