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?
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.