&t;I&gt&uot;The Income Tax has made more Liars out of the American people than Golf has.

Tuesday, April 09, 2002

“The Income Tax has made more Liars out of the American people than Golf has.” – Will Rogers in “Helping the Girls with Their Income Taxes,” The Illiterate Digest, 1924

One of the most appalling dates on the calendar is just around the corner. Next Monday will be April 15, the day income taxes are due. We all know that we have to report the obvious sources of income: our jobs, tips, interest income and alimony. If we follow the letter of the law, though, paying taxes may not be as simple as we think. It is surprising, and sometimes hilarious, to discover exactly what the IRS considers “taxable income.”

Barter is somehow considered a form of income, which I’m guessing could make for some interesting paperwork. If some guy gives his neighbor a Molly Hatchet CD for a six-pack of Pabst Blue Ribbon beer, how would something like that be recorded? Does the IRS have a list of what everything is worth? Would it make a difference if it was a Lynyrd Skynyrd CD and a six-pack of Bud Light?

If they really want to enforce this, school children will soon have to report “cafeteria currency” transactions every time they swap chocolate chip cookies for fudge brownies.

Gambling winnings are considered taxable, and technically, we are required to report any winnings on our tax forms. To offset this, we are allowed to deduct our gambling losses as well, if we can prove a loss. This could open up a new market in the “non-winner lottery ticket” market, selling losing tickets to large prizewinners at one-tenth face value. The catch is that we can only deduct losses up to the amount of winnings. Apparently, the house does always win, even outside of the casino.

Similarly, prizes won in raffles are also taxable, as are those won by correctly answering trivia questions on radio call-in shows. I’d like to see a 1040 form with “Amish quilt” or “Burger King gift certificate” listed under “other income.” The next time I win something that way, I think I will document it, just to see the reaction from the people who prepare my taxes when I say, “Last year, I also was paid one bacon double cheeseburger and a large Coke.”

Jury pay is taxable as well. You’d think they’d cut us some slack on that one, considering how if we are selected for jury duty, our only other option is jail. I don’t know anybody who actually wants to sit in on a jury. Whatever they pay for that should be considered “inconvenience pay,” and be non-taxable.

Illegal income is taxable. This includes, but is not limited to, stolen or embezzled funds. How many corporate accountants are dishonest enough to siphon funds from their employer, yet law-abiding enough to report how much money they stole to the government?

I wonder if this tax law extends to drug dealers as well. If someone had $50,000 in cocaine sales, but $45,000 in business expenses, would the low net income make them tax-exempt? And just what would their business expenses be, besides the product? I don’t imagine they spend a lot of money on advertising. Would they be allowed to claim their legal fees if they were arrested?

What about shoplifters? Do they have to claim the retail value of their pilfered merchandise? If so, I’d like to know how they keep track of it. It’s not like they can call up the store manager and ask for a receipt. If they buy a long overcoat with numerous deep pockets, can they claim that as an expense?

The most likely reaction to “taxable illegal income” is laughter. What criminal would be foolish enough to essentially confess to a crime by claiming the income derived from it, when it would be easier to just keep quiet about it? Well, Al Capone thumbed his nose at the IRS, saying that the government couldn’t collect legal taxes from illegal money. He was eventually sentenced to 11 years in prison for tax evasion.

It is amusing to discover just what the IRS deems “income.” I wouldn’t be at all surprised to find out that I have to report every time someone pays me a compliment.

Dustin Petersen is an Albert Lea resident. His column appears Tuesdays.