If the FBI pays you to be an informant, or the CIA pays you to steal secrets (and you file taxes in the US), do you get a 1099 at the end of the year? Do they take taxes off the top? Or is it somehow tax exempt?
Does one have to pay taxes on the money given by the US government for bribes, espionage, etc?
There is a good answer to this question from John Madinger, an author and former government investigator, on Quora.
He essentially says that income from government agencies is indeed taxable income, and agents are required to notify their informants that this is the case. However, if an identity needs to be protected, the agency involved will not notify the IRS of the income.
6Note that even illegal income is taxable. The Al Capone case is the famous one, but it's true generally.– keshlamMar 10 at 12:49
3In the USA and in Germany, you can report income without giving the source. If you rob a million from a bank you should tell the tax office “I made a million, but I don’t tell you where the money came from”. In Germany, the tax office can notice that you bought a very expensive car and have no matching income and suspect tax evasion and investigate. So you point at the million that you declared and paid taxes for. Mar 10 at 13:48
You can always report it under "miscellaneous/hobby income", if nothing else...– keshlamMar 11 at 19:51