Tax implications of reporting income from marijuana sales in NYC

But wouldn't the IRS be obligated to report illegal activity to other agencies? I thought there was some kind of information sharing between government departments?

The IRS has strict taxpayer confidentiality rules under Internal Revenue Code Section 6103 that generally prohibit them from sharing tax information with other agencies, including law enforcement. There are exceptions for things like court orders, but they don't typically volunteer information to local police about possible illegal activities. That said, I wouldn't recommend explicitly writing "marijuana sales" on a tax form. Using a more general business description while still accurately reporting the income is usually the safer approach. The goal is tax compliance without unnecessarily raising red flags.

Did it actually help with this specific type of situation? Like did it tell you exactly what codes or categories to use to stay compliant without raising red flags?

I'm skeptical. Wouldn't an AI service keep records of everything you ask it? Seems like creating a digital trail of admitting to something illegal might be worse than just talking to a real accountant who has confidentiality obligations.

It helped me understand what business categories would be appropriate for my situation while still being truthful. It doesn't just tell you how to hide things - it explains the proper way to report different types of income within the existing tax framework. As for privacy concerns, they actually don't require personal details to use the service. You can ask hypothetical questions about tax situations without identifying yourself. It's more about understanding tax regulations than creating some kind of confession.

I don't get it, what exactly does this service do? The IRS phone lines are always busy, so how does this supposedly get you through?

Yeah right. No way they can get you through to the IRS that fast when everyone else is waiting hours or days. Sounds like a scam to me. Did you actually talk to a real IRS agent or just someone pretending to be one?

It uses some kind of system that navigates the IRS phone tree and holds your place in line, then calls you when an actual agent picks up. It's not magic - they're just automating the hold process so you don't have to sit there for hours. They don't answer your questions themselves - they literally connect you to official IRS representatives. I asked detailed questions about reporting requirements for my situation and got official guidance directly from the source, which was way better than relying on internet advice.

But wouldn't you need to explain to the IRS how you made so much money in "retail sales" without a storefront or inventory? Don't they audit people who suddenly claim large income from businesses that don't seem to exist?

The IRS cares about whether you're reporting income and paying taxes, not interrogating every small business about their operations. Plenty of legitimate businesses operate without storefronts (online sales, mobile services, etc). If you did get audited, they would look for documentation of income and expenses, not necessarily the specifics of what you sold. That's why keeping good records of your money flow is important regardless of the source. Many cash businesses get audited simply because of poor recordkeeping, not because of the nature of the business.

Do NY state tax authorities share information with NY law enforcement though? I thought tax info was generally protected unless there's like a specific investigation already happening?