As We See It

Pimp tax: How the IRS dances with illegal income

Like Chicago gangster Al Capone, Vegas pimp Johnny Ray Taylor is answering not only for his illegal activities but also for not declaring the subsequent income on his taxes. The Las Vegas Sun reported last week that Taylor pled guilty to one count of tax evasion for “pandering and living from the earnings of a prostitute” and then hiding the cash.

Taylor has agreed to pay more than $117,500 in restitution for illegal income earned over three years, because the law treats compensation for services—whether you’re giving oral sex or a haircut—pretty much the same. The IRS site instructs that “other income” from shady activities such as drug dealing has its own line on Form 1040. Bribes, too. (On a totally random tangent, even the pittance we earn from jury duty is taxable!)

CNNMoney did an eye-opening piece on illegal income around tax time this year, indicating that crooks tend not to report crooked dollars unless they’re caught or about to be. Even when they do declare, as Taylor is now doing, it’s not like he keeps receipts. Auditors may have a hard time verifying his claims. Whatever they find, they can’t just call the cops. Without a court order the IRS can’t disclose an individual’s crimes to other agencies, though two expert sources told CNNMoney that might not be so true in practice.

Still, you gotta hand it to the IRS for trying to play fair. The story points out that in some cases, restitution paid for illegal income is tax deductible.

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