It is not so important what you do as what not to do. Do not put the money in a bank account. That is the first place the police look. Also, you can report the money to the IRS as illegal income without any worry of prosecution. You might want to report at least some of the money you have in case you ever get caught. The statute of limitations for income tax fraud is very long. Even gifts are taxable. Of course, you are going to report all cash to the IRS, as every business owner does.
You might want to consider opening a bank account in the name of an EIN Number you will receive from the IRS. That money you will report to the IRS. State law enforcement will not have access to that bank account as the IRS will not tell them who opened the trust with the IRS. The bank account will not be in your name or in your soc sec. number, so there is no way local law enforcement will be able to trace it to you. If you are a California resident, it is not illegal to make a profit selling marijuana to members of you collective who associate with you to collectively cultivate marijuana. If the federal government thinks you got the money from a marijuana operation, they will probably leave you alone. According to Obama, the feds are to make marijuana offenses a low priority. It is important to note that the State, including the BOE cannot look at your federal return.
You other option is to "wash" the money. You can wash money legally or illegally. So long as the state and feds get their tax money the washing is probably legal. But if they get bilked out of thier tax money then the washing is probably illegal. So, if you wash your money simply to protect your privacy from snooping law enforcement, there is nothing illegal with that.
How to wash money:
You can incorporate or create a fictitious business name statement and open a bank account in the name of that business. You can deposit money into a bank account in the name of that business. The business can then write you out a paycheck, which you will pay taxes on. You will report the money you put into the bank account as business income usiness (illegal businee income) and report the money you receive as a business expense and as salary. When your landlord says, "where did you get all this cash?" You will reply, "from my job. Would you like to see my paycheck?"
So long as you are reporting enough money to the IRS and the State to cover your living expenses, they probably wont audit you, and if they do, all they will see is the money you deposited into your bank account, and as you are engaging in illegal activities you can invoke your 5th amendment right on any other questions they may ask you. I want to reiterate, you are to report ALL money to the taxing authorities, even though there is no way they can trace cash not deposited into your bank account.