If you commit fraud do you have to report the illegal income on your tax return? Absolutely! Illegal income is just as taxable as legal income. Al Capone went to prison not for the murders and other crimes he committed but for tax evasion.
William Richmond of Atkinson, New Hampshire learned that lesson. He held a durable power of attorney and used that to allegedly commit fraud. This past week he pleaded guilty to tax evasion (but not the underlying fraud); he failed to report the illegal income on his tax returns. As part of his plea he will be required to make restitution to the couple he stole from. He may also be heading to ClubFed.