According to Robert Wood at Forbes Breaking Bad has some serious tax law issues embedded in the story line. Woods points out that illegal income is still income and that many criminals have been convicted not on their more heinous crimes but rather on tax evasion. For example, Al Capone was not convicted of murder, graft or racketeering, but of income tax evasion.
Criminals also have an issue with deductions. If you report your illegal income-which may be admitting to a crime- tax deductions can be limited. Currently even the legalized medical marijuana industry is having problems with deductions. Section 280E of the tax code denies tax deductions for those dealing in controlled substances, even if they are legal.
Some criminals might attempt to launder their money and create a false return. Filing a false return is still a felony that can result in a prison term of up to three years plus a fine. Failure to file a return can also land you a one year in prison per violation. In short there is no way to exactly legally declare your ill gotten gains without landing in some hot water.