Nathan, heroically, does our taxes himself. That's right-- himself. And he does it quite well. And he's very honest, keeping track of everything he earns from many different sources. Even my music-lesson-teaching money is accounted for. I'm sure it makes him a little more crazy every year, but he manages quite well.
So this morning, we were reading in the tax law to find an answer to a question about some income. We found what we needed to know, but we also found out that all the answers to life's most persistent questions (well, insofar as the IRS cares, anyway) is found in the tax laws. I'm not kidding, EVERYTHING is covered in there.
"Income from illegal activites, such as money from dealing illegal drugs, must be included in your income on Form 1040, line 21, or on Schedule C or Schedule C-EZ if from your self-employment activity."
"If you steal property, you must report its fair market value in your income in the year you steal it unless in the same year, you return it to it's rightful owner."
There you have it folks. As far as the IRS care, it ain't illegal as long as you report it in your taxes.