https://www.youtube.com/watch?v=EHH5mj70rcg&t=650s

“Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity,” the IRS website reads.

Real-life implications of the Al Capone Rule. Imagine you're an average person who, through a twist of fate, finds yourself with income from illegal sources. The law is unequivocal – all income must be reported to the IRS, regardless of its legality.

The IRS's mandate to report all income, legal or illegal, remains a powerful tool in the government's arsenal. This rule has been used to target a wide range of criminal activities, from drug trafficking to political corruption. The rationale is straightforward: while proving complex criminal operations can be daunting, demonstrating tax evasion is often more direct and objective.

One notable application of the Al Capone Rule in recent decades was during the crackdown on major drug cartels. In these cases, the leaders of these organizations amassed vast wealth through illegal drug sales. However, just like Capone, their downfall often came not from drug charges, but from failing to declare and pay taxes on their ill-gotten gains. These cases highlighted the effectiveness of attacking the financial underpinnings of criminal enterprises.