Did you sell a few kilos of marijuana, take a bribe or steal a computer in 2011? Be sure to include that income on your tax return, unless you want to get in trouble with the Internal Revenue Service.
Virtually all Americans know they should report income such as wages, capital gains and tips -- even if those numbers sometimes don't make it onto their returns. But if you're an average taxpayer, you might not be familiar with some of the tax code's lesser-known income rules.
The basic rule is this: If it counts as income, it's taxable.
It doesn't matter where that income comes from. Prohibition-era gangster Al Capone contended, "The government can't collect legal taxes from illegal money," but he was wrong and wound up imprisoned for eight years for tax evasion. The tax laws are regularly used to nab other crooks the same way.
Maybe your year was better than a convicted drug dealer's. Did you win a Nobel Prize or a beauty contest? You might have additional income to report.
Don't believe us? We've gone straight to the source -- the IRS website -- and pulled language from the agency's rules on income. The examples below are all in the IRS' own words:
Bribes. If you receive a bribe, include it in your income. (Yes, the IRS actually says this.)
Emotional distress. Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. Do not include them in your income.
If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia and stomach disorders.
Employment agency fees. If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. However, if you pay it and your employer reimburses you for it, it is includible in your income.
Found property. If you find and keep property that does not belong to you that has been lost or abandoned, it is taxable to you at its fair market value in the first year it is your undisputed possession.
Free tours. If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income.
Gambling winnings. You must include your gambling winnings in income on Form Form 1040, line 21. If you itemize your deductions on Schedule A (.pdf file), you can deduct gambling losses you had during the year, but only up to the amount of your winnings.
