The owners of Nick's Roast Beef, a highly popular deli located in the North Beverly suburb of Boston, are facing 17 federal criminal charges after the IRS indicted them for nonpayment of taxes.

The two owners — Nicholas Koudanis and Nicholas Markos — are 65 and 70 years old respectively. Nick's has been a local institution for more than 40 years. It has just one location, in a busy strip mall. So why did the IRS take on a “mom and pop” sandwich shop? Because Nick's is an all-cash business, that's why.

According to a Forbes story on the matter, the IRS says that the owners allegedly diverted millions in cash to themselves to avoid paying more than $2 million in taxes over the past seven years. The restaurant was audited in 2013; its records showed sales of $1 million, but the IRS claims sales were really more than $2.3 million.

Forbes noted that small businesses that tend to be unsophisticated in their financial controls are easy targets for the government. Large cases against big corporate entities are more complex, making small cash businesses low-hanging fruit for prosecutors. In addition, most small businesses lack the financial resources to fight charges against them in court while the government has virtually unlimited resources at its disposal.

Small businesses like Nick's operate as cash-only to cut out the high credit card transaction fees that can cut into their profits. Unfortunately, cash-based businesses draw extra scrutiny from the government because of the temptation to cross legal lines. Due to the Bank Secrecy Act of 1970, banks monitor large cash deposits and withdrawals and alert the government of suspicious activity. At the time of his arrest, Koudanis had $1.6 million in a home safe.

The Cogdell Law Firm is a full service criminal litigation and appellate law firm. We provide client-focused representation at all stages of the process, whether our clients are seeking to avoid charges, have been charged, or are seeking reversal of a conviction on appeal. When results matter most, contact Dan Cogdell at (713) 426-2244or [email protected]