As I begin another season of wrestling with my Fedral Income tax return, I have always wonderd this:
-Suppose you are a Mob employee (“Vinny 'The Pig” Provolone), and you work as a hitman for your local branch of La Cosa Nostra.
You have (in the past year) whacked two snitches (for which you were paid $20,000).
-You have also collected $120,000 in “vigorish” (interest on loan-shark loans)
-You have also beated the crapoput of 12 teenage punks (on behalf of a grateful Mr. Amerigo ), for which you have been paid $10,000.
-You have also shared in the swag from a hijacked truck…your take was $55,000.
So how do you fill out your income tax form? Are your expenses 9bullets, shovels, having the Caddilac’s trunk cleaned out, cememnt bags, etc. deductable expenses?
Also, does the Mob supply W-2 forms?
Just a WAG here but it seems to me that most of the mob have some sort of semi legitimate operation that does pay taxes, an arcade perhaps or in the case of the Sopranos, a garbage business. This allows them to show some legal income to account for their living expenses.
The 120K vigorish in your example would work just fine for this. The loaning of money isn’t illegal (though the 7,000% APR might attract attention as usury). The busting of kneecaps, etc for slow pay is the biggest legal problem here and a source of most of the social stigma associated with the business. There might be a couple of questions about the record keeping though, should the IRS see fit to inquire.
It seems probable to me that Mr. Provolone wouldn’t claim the whole amount. Just enough to be able to show some means of support. You can go overboard on this honesty thing you know.
Oh, almost forgot. They probably aren’t employes in the strictest sense. My guess is they would be classified as contractore, consultants, etc for the most part.
Theoretically you are supposed to declare all of your income on your tax return, even if it is from illegal activity. The IRS is prohibited from giving that information to law enforcement agencies. Otherwise, filing a tax return could be considered a violation of your fifth amendment right against self-incrimination, and they could not prosecute you for failing to declare income from questionable sources. The same logic applies to the tax stamps that you are supposed to purchase for your marijuana.
“If you need money laundered, simply leave it outside your door in the evening.”
- Fat Tony
This is what money-laundering - the “spending” of money at your front business to explain its presence in your pocketbook - is for.
The tax code does require you to include any monies received from illegal activities. So it seems reasonable that you could claim the industry normal expenses incurred in wacking, punk smacking, etc. If you keep accurate records you can deduct the actual amounts. They may need to show a profit in at least 2 out of every 5 years or face the possibility of the IRS declaring their activities to be hobbies rather than an actual business. In that case expenses would be limited to income. This might also impact your ability to carry forward/back losses.
I should have added in the previous post that as contractors they should get 1099s instead of W-2s.
And you should keep wondering. And don’t bring Cousin Vinny into this.
I told you not to bring Cousin Vinny into this. I’ll let Ms. Lynn take care of you for that.
Now, anyone that pays more than $600 during the year to a single individual must issue that individual a 1099-MISC. They must also report the same information to the IRS.
From my reading of Tax Court and Federal Court opinions, the only expenses you cannot claim on your Schedule C is the cost of the drugs you bought and then turned around and sold. For example…you bought a key of blow for $20,000, broke it down into 35 oz and sold it @ $1,200 an oz, you’d have to show $42,000 in income and $0 as Cost of Goods Sold.
Now, you’ve included a nice list of supplies that can be written off, but I have to say you’ve missed some deductions. You can claim mileage (you have to keep written records, and mileage between jobs goes on Schedule A, not Schedule C), the yearly business licenses fees you have to pay to The Commission, the cost of professional How-To-Manuals, and any other miscellaneous expenses you incur (the deduction for meals and entertainment is limited, as long as they are not reimbursed by your employer).
I’d advise one to keep a log of one’s mileage and all of one’s receipts for the expenses one incurs.
The Mob would have to supply a W-2 only to those that they withheld any payroll taxes from.
And upon preview…what Sandy said.
Yes, i hear that the lat John Gotti was officially employed as a plumbing equipment salesman…just wonder how he hosted those neighborhood parties (and paid for all those $5000 Brioni suits) on a salary of $40,000/year? Seems to me that Vinny the Pig would have to be employed somehow…maybe as a janior?
Anyway, the crroked accountants who make up the tax returns for Mafia guys…are they ever hounded by the IRS? Seems to me that omitting the money made from a few murders would be illegal.
Well, they did get Al Capone on tax evasion. But, I think it’s safe to say that most mobsters, their lawyers and accountants aren’t overly burdened with legal scrupulousness.
There’s always the tried and true method of going to a casino with a load of cash, playing for awhile, cashing out, then showing the receipt to the IRS as if you “won” the money at the tables and slots instead of making it elsewhere. Voila: legal income!
Supposing that Vinnie wants to be absolutely sure he isn’t caught the same way as Capone was, so he wants to report and pay tax on 100% of his income. Is he allowed to declare $205,000 in income in the past year from undisclosed sources? Sure, it’ll cost him a bit more, and he might have a hard time deducting business expenses, but at least they won’t notice that he’s living beyond his means (because he was, in fact, living on $205,000 last year). Is this possible?
Damn…I thought that Mafia employees got pay stubs with "Gotti Crme family"emblazoned on them!
Seriously, why can’t the IRS just bust these people wholesale…there is NO way that John Gotti could have lived on his $45,000/year salesman salary.
Speaking of his…how does Gotti’s daughter (“GROWING UP GOTTI”) swing it…she seems to have lots of money…where is that coming from?