A better question is what if your tax evasion savings had been stolen by your friend who has already paid taxes on the property he had stolen, but not returned, last year?
This comment got me laughing really hard, but since this is HN I'm going to try to figure out the answer anyway:
I think this scenario is pretty simple and is essentially just that you deduct the amount of money stolen from you from that year's income, provided you discovered the money was stolen that year. Obviously if you haven't discovered it's stolen yet you won't be deducting anything.
It seems that the tax evasion part essentially becomes totally irrelevant since, as others have said, you don't report evaded taxes as income, you just don't tell the IRS you owe those taxes and don't pay them, so from the IRS' perspective it's no different than you getting that quantity of non-evasion money stolen from you
Vaguely related, one of my biggest tax pet peeves (beyond people that don't understand marginal tax brackets at all) is the people who will cynically claim that a billionaire just donated to charity $X because they actually make more money from doing that because of the tax deduction. And it's like, no, they get to deduct it from their earned income, so they mathematically always end up with less money by donating it and deducting rather than just keeping it.
You can't derive income from tax evasion. You already have the income from some other source, you're just evading being taxed on it. (It's like how, if you buy a video game on sale at $10 off, you didn't make $10, you just avoided spending $10 that you already have in your bank account.)
So you've already reported it (or, if you're evading taxes, perhaps you've already decided not to report it, in which case the answer is simply that you have to not evade taxes...).
If you advise other people on tax evasion and they pay you for your services, then that's presumably employment income of some sort that you should report.
The scammer pretending to be the creator of Bitcoin started off this way: Australia had a refundable tax credit for Research and Development, you could tell them you spent $6 million on R&D and they'd cut you a check for that, even if you had no income. He claimed to have purchased a supercomputer (in panama...). He successfully collected the credit to the tune of millions of dollars, but in a subsequent year asked for something like $40 million, which finally triggered the tax office to act. The whole 'creator of Bitcoin' thing fell out of needing a source for the money supposedly spent on R&D.
(They ultimately didn't fall for it, but he seemed to have escaped criminal prosecution by fleeing the country. He's continuing his scams elsewhere, and sadly now he's started suing journalists and others as yet another component of them.)
In a related story, we (my sharehouse) pay $5000 a month for rent in hard cash, and our landlord declares $2500 a month to the ATO.
As a back of napkin calculation, between her >=2 rental properties, and due to negative gearing, she's declaring a $60,000 loss per annum on her rental properties. Combined with the 50% deduction for capital gains on property sales, I don't think she will pay a single cent for the income earned from her rental property investments.
