As the hit show Breaking Bad comes to an end, Forbes ran an interesting article on the tax implications of illegal activities as it relates to the hit show.
The author highlights a few problems that arise when conducting illegal transactions, including:
1. Illegal income is still considered taxable income by the IRS. Regardless of the legality of how the income was generated, the IRS still wants its piece of the pie.
2. Claiming expenses for an illegal business will typically result in an admission of participating in illegal activity, and the claimed expenses are most likely to be disallowed.
4. If the person conducting the criminal action files a tax return but fails to disclose all his/her income, that person could be looking at a charge of filing a false tax return. If the alleged criminal does not file a tax return, then he/she may be dealing with a charge of failure to file a tax return.
5. Finally, if the alleged criminal decides to move his/her money offshore, he/she would be required to file an FBAR (Report of Foreign Bank and Financial Account). Violation of this requirement can carry a maximum civil penalty of $100,000 for each violation, and the criminal penalties can include a $500,000 fine and a maximum 10-year prison sentence.