I’ve commented from time-to-time that cash income is just as taxable as payments by check or credit card. I’ve also mentioned that certain businesses have more problems than others with that; strip clubs are one example.
Another example would be nightclubs. Abdul Khanu owned three successful nightclubs in Washington, DC: H2O, VIP, and Platinum. If you’ve ever been to a nightclub you might have noticed that many patrons use cash to pay their bills. For the ethical business owner, that’s not a big deal; the cash payments are recorded on their books just like payments made by credit cards.
However, if you’re unscrupulous getting lots of cash gives you an opportunity to evade the law. Just take a little bit of the cash and leave it off the books and you have some “free” money—free from income tax and problems…as long as you don’t get caught.
Mr. Khanu was indicted earlier this year on 22 counts of tax fraud. A search warrant was executed on his home and $1.9 million in cash and a double set of books was found. For the aspiring tax evader I strongly suggest that you avoid ever having the authorities find your real books as I guarantee that if they do ClubFed will be in your future.
Mr. Khanu was found guilty on two counts of tax evasion for 2002 and 2003. Given that $1 million in tax was evaded Mr. Khanu is looking at spending around three years at ClubFed.
