Cash & Carry Your Way to Tax Evasion

Kasia’s Bakery is a very successful bakery in New Britain, Connecticut. Its owner, Marian Kobryn, emigrated from Poland to the US to escape political oppression. He opened the bakery, and it’s been a great success.

The bakery operates on a cash-only basis. Mr. Kobryn was determined to lower his tax burden. Instead of making sure all expenses were noted on his tax returns and perhaps contributing to a SEP IRA, he decided to not deposit all of the cash into his business bank account. He knew about the currency transaction reporting (CTR) rules, so he made his cash deposits just under $10,000 and deposited them into several branches of his local bank.

While neither the Department of Justice report or the news report note what caused the initial IRS investigation, it’s a virtual certainty that it was his multiple deposits of cash. Mr. Kobryn apparently didn’t know about Suspicious Activity Reports (SARs). All financial institutions in the US are required to have programs to detect evasions of CTR rules. Additionally, the IRS investigates nearly all SARs while they don’t investigate many CTRs.

Mr. Kobryn’s evasion was of $730,000 of receipts, for a tax loss of $243,000. The penalties and interest totaled an additional $192,000. Mr. Kobryn was sentenced last week to time served (he is in poor health) and to make full restitution of the tax. He has already paid back all the tax and $50,000 of the penalties and interest. It’s a whole lot easier to simply pay the tax due in the first place…but that rarely occurs when you’re developing that perfect tax evasion scheme.

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