while it’s probably true that the IRS is more interested in you paying your taxes than prosecuting you because that income may have been “illegitimate,” that doesn’t mean that other agencies might not be interested in the information you provide to the IRS. The FBI/DEA/DHS could easily get a hold of those records and use them to pursue an investigation.

and, yes, your tax returns can be used as evidence in court.

my advice: never volunteer information which could later be used against you.