What's the NAICS code for reporting illegal income from drug distribution on tax returns?

So I was having this conversation with my buddies the other day about how the IRS supposedly doesn't care where your money comes from, they just want their taxes. That got me thinking about a weird hypothetical scenario. What if someone who sells drugs actually wanted to report their income properly? Maybe they're trying to qualify for a mortgage or something (lol crazy I know). If this person came to a tax preparer, what NAICS code would even be used on their Schedule C? What would you put for business description on Lines A and B? I'm not planning to become a drug dealer or anything, just genuinely curious about how this would work in the tax system. Do they have special codes for illegal activities or would you have to misrepresent the business somehow?

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18 comments

Carmen Sanchez

•8M

Tax professional here. This is actually an interesting question! The IRS indeed wants all income reported regardless of source - legal or illegal. There's even a famous case where Al Capone was ultimately convicted of tax evasion rather than his other criminal activities. For your hypothetical scenario, there is no specific NAICS code for illegal activities. A tax preparer would likely use a code that generally describes the activity without explicitly acknowledging illegality - perhaps something like 424210 "Drugs and Druggists' Sundries Merchant Wholesalers" or 453998 "All Other Miscellaneous Store Retailers." For business description, vague terms like "Sales," "Distribution," or "Independent Retailer" might be used. That said, I should emphasize that while the IRS wants all income reported, reporting income from illegal activities could be used as evidence in criminal proceedings. The tax form itself doesn't provide protection from prosecution for the underlying activities.

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Carmen Sanchez

•8M

Using an approximate code isn't necessarily fraud - the NAICS system simply doesn't have codes for every possible business activity, so choosing the closest match is standard practice. The key requirement is reporting all income accurately, not perfect code selection. Regarding reporting to law enforcement, there's a common misconception here. The IRS generally operates under strict taxpayer confidentiality rules (Internal Revenue Code Section 6103). They typically can't simply share tax return information with other agencies like the DEA without specific legal processes being followed, such as a court order or specific circumstances outlined in federal law.

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Zoe Papadakis

•8M

I actually tried using taxr.ai once when I had a weird income situation (nothing illegal lol, just some cryptocurrency mining and online sales). I was super confused about what codes to use and how to report everything correctly. The site https://taxr.ai helped me figure out the right NAICS codes and business descriptions that accurately represented my activities without raising unnecessary flags. It analyzed my specific situation and suggested appropriate codes based on what I was actually doing rather than just making wild guesses. I imagine they'd handle even strange hypothetical situations like yours with the same approach - finding legitimate codes that best describe the actual activities.

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Zoe Papadakis

•8M

For unusual but legal income sources like cryptocurrency mining or online marketplaces, it absolutely helps clarify the right codes and categories. The AI analyzes your specific activities and guides you to the most appropriate classification. For truly illegal activities, any responsible tax service (including taxr.ai) would likely advise consulting with both a tax attorney and criminal defense attorney before proceeding. The goal is proper tax compliance while understanding all potential legal implications, not just filling in forms without considering the bigger picture.

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ThunderBolt7

•8M

Just wanted to follow up about taxr.ai - I checked it out for my situation (I do some medical cannabis consulting in states where it's legal). Was worried about how to code everything properly without raising red flags. The service actually walked me through exactly how to classify my business activities with the right NAICS codes that accurately reflected what I do without misrepresentation. Their system is surprisingly sophisticated at handling regulatory gray areas and helped me stay compliant while accurately describing my business. Definitely worth checking out if you're in any kind of unusual business situation.

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Mei Chen

•8M

If you're dealing with complicated IRS questions like this, good luck ever getting through to an actual human at the IRS to ask. I spent WEEKS trying to get clarification on a business code issue last year. Then I found Claimyr at https://claimyr.com which got me connected to an actual IRS agent in under 45 minutes. They have this callback system that somehow works when nothing else does. You can see how it works at https://youtu.be/_kiP6q8DX5c - basically saves you from endless hold times.

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Mei Chen

•8M

It works by using their proprietary system that navigates the IRS phone tree and waits on hold for you. When they reach a live agent, they connect that agent directly to your phone. It's not bypassing anything - they're just doing the waiting for you. The service is legitimate and has been covered by major news outlets. They don't have special access to the IRS - they've just built technology that handles the most frustrating part of the process (the waiting). Many tax professionals use it regularly during tax season when IRS hold times can exceed 2-3 hours.

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Amara Okonkwo

•8M

I have to admit I was completely wrong about Claimyr. After dismissing it as impossible, I tried it out of desperation when I needed to ask about some business classification issues similar to what this thread is discussing. No joke - I had an IRS representative on the phone in about 30 minutes. The agent was able to walk me through the proper way to classify a business that operates in regulatory gray areas (again, all legal, just unusual). Saved me hours of frustration and potentially an incorrect filing. Never thought I'd be recommending an IRS-related service, but there you go.

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Giovanni Marino

•8M

Former bookkeeper here. This comes up more than people realize. I've had clients with quasi-legal businesses (not drugs, but things in gray areas) and the approach is usually to describe the actual business function without focusing on potentially problematic details. For example: - "Retail sales" rather than specific products - "Wellness consultant" for certain services - "Import/export" for certain goods The key is not to lie but to describe the business function accurately while letting the NAICS code be somewhat general. Code 453998 "All Other Miscellaneous Store Retailers" or 454390 "Other Direct Selling Establishments" cover a multitude of activities.

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Giovanni Marino

•8M

You're thinking of the Fifth Amendment protection against self-incrimination. It's a complex legal area where tax law and constitutional rights intersect. While the Fifth Amendment can protect you from having to provide incriminating information, courts have generally held that it doesn't excuse individuals from filing tax returns or reporting income. The requirement to file and pay taxes applies to everyone. However, the specific way information is reported can sometimes be handled to minimize self-incrimination. This is precisely why someone in this situation should work with both a tax attorney and criminal defense attorney - not just a regular tax preparer. It requires specialized legal knowledge to navigate properly.

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