I'm not from the US but my understanding is that even if you're doing illegal stuff there's still no point in trying to evade taxes, as IRS is not allowed to notify anyone about where you got the money from anyway.

"Illegal activities: Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8, or on Schedule C (Form 1040) if from your self-employment activity"

They thought of everything!

This clause came from the era of Al Capone, who famously boasted, "They can't collect legal taxes from illegal money." (Which was true at the time.)

They added this clause and then ended up catching Capone for tax evasion.

https://www.forbes.com/sites/kellyphillipserb/2020/10/17/al-...

I think the point of this is less that the IRS won't report it to someone else, but that it adds tax evasion as a reason a criminal can be pursued.

You are probably thinking it's like where contact tracers or census workers or whatever aren't supposed to report illegal immigrants because it's more important that they get accurate info than report people to ICE. I don't think that's the case with the IRS, they're probably more than happy to let other agencies know about your illegal activity.

I got it from here (https://money.cnn.com/2013/02/28/news/economy/illegal-income...):

"If you tell the IRS you made $1 million from stealing money or dealing drugs, does the agency tip off the cops? Legally, it can't, unless a law-enforcement agency gets a court order granting it access to a specific taxpayer's return. The IRS isn't supposed to proactively alert other agencies about misdeeds unless terrorism is involved. In that case, it still needs a court order to disclose anything, but the IRS can initiate the legal process on its own."

I have no idea if it is still valid or not.

Definitely still valid. When I trained as a tax preparer for the VITA program (which involves training specified by the IRS), this was a key point of the training. We were also told that information from clients was confidential and we couldn't report to anyone outside the IRS that someone was earning money illegally. The software (paid for by the IRS) even had built-in workarounds for reporting income for someone with a fake SSN on their W-2 because they didn't have work authorization.

I did this for multiple years, and some of the volunteers had been doing tax prep for over a decade. The same clients came in year after year. If we couldn't guarantee that their tax information was safe from ICE, they would definitely have stopped coming.

> so you'll have to explain where you got the money from anyways

Explain to whom?

Assuming you're being facetious, I have always wondered where the line is. If I discover ten thousand dollars in cash in a hole in the ground and deposit it, will the IRS notice? Will the bank require some kind of information? What about if it's a hundred thousand?

The bank will fill out a form about "structuring deposits" for any transaction around $10K. They will also report transactions in general over $10K.

https://en.wikipedia.org/wiki/Structuring

Yes, When large amounts of money are deposited into an account there is an automatic notice sent to the government. A One time event shouldn't be an issue however if you have multiple events of large deposits then it's going to trigger algorithms and the government is going to start asking where you got the money from and they'll perform an audit. If you attempt to bypass the system they have systems in place to detect that and will perform an audit. Just pay your taxes

Try depositing 50k at any US bank. Instant paperwork. Try depositing 10k. No questions asked.

The bank will have to report it to the IRS. They will cross-reference it with your taxes. They will also come talk to you if you have a pattern of doing it regularly. But you will probably not have an issue with it.

Coinbase, for one. There's a whole process under the KYC/AML regulations if you want to deposit large amounts of crypto with a legit exchange.

To your bank? Presumably if you made a lot of money, you'll be buying some houses and maybe some cars or creating your own businesses or something. If you transfer large amounts, it might get frozen if you can't explain the origin (kyc/aml).