Originally Posted by
MisterV
Let's assume someone has an illegal source of income and they want to launder it.
Assume they gamble regularly in Las Vegas and they are premium players.
Would the IRS red flag their returns if they reported and paid tax on a large amount of (falsified) gambling income / profit without supporting W-2G's for all of it?
It does seem like a bad idea. Probably much simpler just to open a restaurant and run the cash through it.
I mean, you would need a W-2 from another job or another source of income to go along with it anyway, unless they planned to file as a pro.
I wonder how disproportionately people who file as pro get audited vs the general public? I would wager to guess at a much higher rate.
Of course, I'm sure it's highly correlated to the income claimed and also the deductions.
Edit: I don't know exactly how an unemployed person who "gets really lucky" in Vegas and legally needs to file taxes would file as. After reading your post again, it looks like that is the scenario in question?
I'm sure there is some kind of classification for this, but I would think it would probably only work for one year. Maybe two?
At some point you would have to register as a pro, maybe even year one.