Reporting Found Cash: Legal, Tax, and Practical Considerations
Imagine you stumble upon a large sum of money, perhaps $700,000, and wonder if simply reporting it as found money to the Internal Revenue Service (IRS) is the answer. While it sounds appealing, the process is more complex than you might think. This article delves into the legal and tax implications, helping you understand the risks and steps involved in reporting found money.
Legal and Tax Obligations
Found cash, known colloquially as a "treasure trove," is taxable under the Internal Revenue Code (IRC). According to Section 61, all forms of income, not just legitimate or legal income, are subject to taxation. However, reporting found money to the IRS is mandatory. Non-reporting can be considered tax evasion, a serious offense with potential legal and financial consequences.
Case Studies and Scenarios
Let's explore some real-world scenarios to better understand the legal and practical implications of reporting found money:
Scenario 1: Found Money in a Bank Container
If the money is found in a clearly marked container belonging to a bank or armored car company, it likely belongs to the rightful owner. Keeping it without reporting would be theft (also known as larceny), which is illegal and could lead to criminal charges.
Scenario 2: Found Money on Someone Else's Property
Similarly, if the money is found on someone else's property without permission, taking it is considered burglary, which is a crime. Legally, this is not a viable option.
Scenario 3: Found Money at an Airport or Train Station
If the money is found mistakenly at an airport or train station, it is your responsibility to return it to the station or airport. Failing to do so could lead to legal action against you.
When Reporting Found Money is Permissible
Fortunately, there are cases where reporting found money is permissible. This usually applies to money found on public land, buried in unmarked boxes, or in items lost on the side of the road.
When reporting found money, it is advisable to:
Take photos or a video of the area where the money is found Document the precise location and details of the find Report the find to the local authorities if possible Keep a record of your report and any documentation provided by law enforcementTax Implications
Once you report found money to the IRS, it must be declared as taxable income. This could involve filling out Form 1040, Line 21, which is typically used for income from illegal activities. This line is a catch-all for various types of miscellaneous income, including embezzlement income and illegal drug proceeds.
While reporting the income is mandatory, it does not make the money legitimate or legal. The IRS will not determine the source of the money but will ensure that you are paying the appropriate taxes based on the amount reported.
Legal and Ethical Considerations
The IRS has a criminal division that often engages in asset forfeiture profit-sharing with the Department of Justice. This creates a conflict of interest, as the IRS may have an interest in the funds associated with criminal proceedings.
Moreover, if the money can be linked to illegal activities, it can be confiscated by law enforcement. Even if reported, the funds may still be at risk of forfeiture, especially if they are suspected of being the result of criminal activity.
Conclusion
Reporting found money to the IRS is a legal requirement, but it is not without its risks. If the money is the result of illegal activities, reporting it may make you a target of further legal action. Understand the legal and tax implications thoroughly before deciding how to proceed. If you are unsure, consulting with a legal professional is highly recommended.