> Declare it and you're certainly going to jail for longer than tax evasion.

The lines you include it in are general income lines, no explanation of the income is expected or required. It's not like there is a separate line item for illegal activities. So, no, you aren't certainly going to jail if you report it.

So IRS is just gonna accept that you made $241,000 and just that dealing drugs? Tax return is step one, if red flags are raised, it's audit time with explanations, witnesses, ledgers etc. If you got caught or want to leave the profession, it's another thing, come clean. No doubt in my mind that agencies talk to each other, formally or informally.

> So IRS is just gonna accept that you made $241,000 and just that dealing drugs

No, they are going to accept that you made $241,000 in regular income from sources that do not provide W-2s, 1099s, etc. The “dealing drugs” part is not part of the filing.

> Tax return is step one, if red flags are raised, it's audit time with explanations, witnesses, ledgers etc.

Red flags are more likely to be raised by living beyond the means suggested by your reported income as by reporting income with no apparent source; IRS audits and investigations are looking for evidence of concealed income or other evasion of tax liability, not satisfying curiosity about the sources of reported income otherwise, and the Fifth Amendment right against self-incrimination applies.

It's true that laundering money so that you can avoid both reported income with no apparent source and living beyond the means of your reported income is a common technique (though still technically usually tax evasion, since it usually involves concealing some part of the gross income which is expended in the scheme, and that income is taxable and you cannot deduct illegal expenses against illegal income, so the cost of laundering is not deductible.)

> No doubt in my mind that agencies talk to each other, formally or informally.

Well, they certainly coordinate in the direction that gets criminals who conceal the details of their other crimes well enough to complicate prosecution but evade taxation busted for the tax offenses. The direction you are concerned about is less evident, though.

Ask Capone how that worked for him.

Well, he got sick but for average Capone it beats doing 20 to life for other stuff.

Edit: are you really suggested that people like John Gotti and El Chapo declare income from criminal activities and detail how they made that once audited?

Stop engaging in criminal activities, I get as advice, but confess to the feds, I don't.

>Edit: are you really suggested that people like John Gotti and El Chapo declare income from criminal activities and detail how they made that once audited

No, I'm suggesting one of the examples used in your premise is wrong. The legality of income has nothing to do with paying your taxes from the IRS's perspective.

I totally understand. BUT if I am going to kill a person, illegal possession of a weapon is the least of my worries. Drug dealers are in that line of business. If you want to stay doing that, declaring income is not smart. That was my point.