Question What are the risks of paying money under the table?

[startupbuilders]

hello i am sure to find some experienced professionals here.
what is the risk of paying money under the counter to a business partner? in a european high tax country with a well trained tax office.
i know it is officially illegal but what are the risks in reality for the person giving this money?
guess the person receiving wouldnt talk about this payment because he could get punished even more than the person paying.

please share your experience about such cases and if they went wrong why they went wrong.

 

[Sols]

If you get caught, you're going to have pay more than just whatever taxes you didn't pay. Both parties are at risk.

Problems can arise in case you, your company, or the person receiving money is audited, which can happen at random or if tax returns don't make sense. It can also be triggered by the bank sending a suspicious activity report. This could be your bank (for example, for sending money to the same person over and over again) or the recipient's bank (for receiving money that looks like salary).

Some countries offer rewards to snitches.

I think tax evasion is one of the dumbest crimes a person can commit. There are so many legal ways to reduce taxes that are available to so many people (but not everyone). If you get caught, the burden of proof can end up being reversed. It's not up to the government to prove you guilty. Instead, it's up to you to prove your innocence. You're basically reverse-prosecuting yourself. A terrible situation to be in.

However, lots of people get away with it for small amounts.

 

[jafo]

hello i am sure to find some experienced professionals here.
what is the risk of paying money under the counter to a business partner? in a european high tax country with a well trained tax office.
i know it is officially illegal but what are the risks in reality for the person giving this money?
guess the person receiving wouldnt talk about this payment because he could get punished even more than the person paying.

please share your experience about such cases and if they went wrong why they went wrong.

Never do ANYTHING with ANYONE where they can use that "privileged" information to blackmail you! Ever! No exceptions!

 

[startupbuilders]

If you get caught, you're going to have pay more than just whatever taxes you didn't pay. Both parties are at risk.

Problems can arise in case you, your company, or the person receiving money is audited, which can happen at random or if tax returns don't make sense. It can also be triggered by the bank sending a suspicious activity report. This could be your bank (for example, for sending money to the same person over and over again) or the recipient's bank (for receiving money that looks like salary).

what if we presume that there is no paper trail for these black money payments and no banks are involved? all done in cash or non kyc crypto.
the payer doesnt get this money through a financial institution and the receiver uses the money outside of the financial system.

Never do ANYTHING with ANYONE where they can use that "privileged" information to blackmail you! Ever! No exceptions!

how could the other person blackmail the person giving the money? the blackmailing person would run himself into s**t by doing so.

 

[Sols]

what if we presume that there is no paper trail for these black money payments and no banks are involved? all done in cash or non kyc crypto.
the payer doesnt get this money through a financial institution and the receiver uses the money outside of the financial system.

You can take steps to make it harder for the tax man to find you. All that does is make things worse if they find you. It's one thing to make a mistake or even be a little naughty. It's another to take multiple steps to make it harder for the tax authority. One is a slap on the wrist. The other could land you money laundering charges, in addition to tax evasion.

Again, for petty amounts, it might work.

But if you're paying someone something akin to a monthly salary in cash and/or anonymous crypto, sooner or later, that money will get spent on something. That's when there's a risk of getting caught.

Let's say you pay someone a decent salary of 5,000 EUR in XMR per month. They have bills to pay, so they convert the XMR to BTC and then BTC to EUR with an EU licensed VASP. Great, they now have 4,500 EUR on their bank account. The first few times, the bank might be OK with it. After all, it's EUR from an EU licensed crypto exchange. But when it happens again and again, the bank might ask where the money is coming from. If the answers aren't satisfactory, a SAR is filed, and the risk of detection goes from moderate to very high.

how could the other person blackmail the person giving the money? the blackmailing person would run himself into s**t by doing so.

"Tell us who paid you this money and we'll cut your penalty in half."
Or
"Tell us who paid you this money and we will make sure you just have to pay fines, not go to prison."

Tax authorities are devious and clever.

 

[jafo]

what if we presume that there is no paper trail for these black money payments and no banks are involved? all done in cash or non kyc crypto.
the payer doesnt get this money through a financial institution and the receiver uses the money outside of the financial system.

how could the other person blackmail the person giving the money? the blackmailing person would run himself into s**t by doing so.

Billionaire Robert Smith *SNITCHED* on his OWN attorney, Carlos Kepke. Smith avoided being indicted. He entered into a non-prosecution agreement and is now the b1tch of the US DOJ in perpetuity, while his attorney Carlos Kepke is going to prison: Tax Attorney Indicted for Facilitating Tax Fraud

Read it yourself! The criminal who paid the lawyer now turns on the lawyers and is willing to testify in a grand jury against the lawyer. Carlos Kepke's life has now ended.

If the recipient of your "black money" gets caught in a (for example) DUI or domestic violence, he can get out of it by offering YOU as his get-out-of-jail-free card.

You thought the "law" was just and fair?

"Tell us who paid you this money and we'll cut your penalty in half."
Or
"Tell us who paid you this money and we will make sure you just have to pay fines, not go to prison."

Tax authorities are devious and clever.

#Bingo!

 

[ActionMan]

hello i am sure to find some experienced professionals here.
what is the risk of paying money under the counter to a business partner? in a european high tax country with a well trained tax office.
i know it is officially illegal but what are the risks in reality for the person giving this money?
guess the person receiving wouldnt talk about this payment because he could get punished even more than the person paying.

please share your experience about such cases and if they went wrong why they went wrong.

In addition to the advice you've already received from other members, which you're likely familiar with, you're here seeking reassurance. Let me be the one to offer that. If you both understand your goals and have tight lips, you'll do just fine.

 

[startupbuilders]

You can take steps to make it harder for the tax man to find you. All that does is make things worse if they find you. It's one thing to make a mistake or even be a little naughty. It's another to take multiple steps to make it harder for the tax authority. One is a slap on the wrist. The other could land you money laundering charges, in addition to tax evasion.

Again, for petty amounts, it might work.

But if you're paying someone something akin to a monthly salary in cash and/or anonymous crypto, sooner or later, that money will get spent on something. That's when there's a risk of getting caught.


"Tell us who paid you this money and we'll cut your penalty in half."
Or
"Tell us who paid you this money and we will make sure you just have to pay fines, not go to prison."

Tax authorities are devious and clever.

ok i understand what you are saying but do you really think tax authorities ask such deep questions in europe? its not the us. i had a talk with someone who worked as a tax consultant until ten years ago and worked almost only preparing voluntary disclosures of tax fraud. she told me this never happened to any of her clients. unluckily just an information from the past.

about the point of the money getting spend. lets assume the receiver always spends the money without identification and declares more than 1 million euro in income every year beside this extra money. is there really a high risk?

how much would you consider petty amounts?

In addition to the advice you've already received from other members, which you're likely familiar with, you're here seeking reassurance. Let me be the one to offer that. If you both understand your goals and have tight lips, you'll do just fine.

you are right but lips are only closed until a certain amount of pressure. for some the amount they can take is low and for some higher.

 

[Sols]

If you both understand your goals and have tight lips, you'll do just fine.

How do tight lips help against things like SARs or UWOs? Silence isn't going to be of much help if the tax man receives a SAR from the FIU and starts asking questions.

ok i understand what you are saying but do you really think tax authorities ask such deep questions in europe? its not the us. i had a talk with someone who worked as a tax consultant until ten years ago and worked almost only preparing voluntary disclosures of tax fraud. she told me this never happened to any of her clients. unluckily just an information from the past.

Yes, they do. Have seen it happen.

You view life a little differently after seeing what tax authorities in places like Spain, UK, Scandinavia, and Germany can do to people they suspect are up to no good. Every single one I've known/heard of wished they had just paid tax instead (and/or taken legal steps to reduce tax). Begging and pleading for mercy, fearing for years . It's sad.

There have even been a couple of threads here by people who got busted. IIRC, one person had been seriously considering suicide during the darkest times in the process. Fortunately, things were looking up for that person.

about the point of the money getting spend. lets assume the receiver always spends the money without identification and declares more than 1 million euro in income every year beside this extra money. is there really a high risk?

Again, every step you take is an aggravating circumstance if you get caught.

1 million EUR in clean income combined with 10,000 EUR dirty is less likely to get caught than 1 million EUR clean plus 10 million EUR dirty. Proportions matter just as much as absolute amounts.

how much would you consider petty amounts?

Depends on who's looking/asking and why. A bank bank not care about a few hundred EUR/month if a person is raking in a few thousand EUR/month from a clean source. Some banks are more sensitive than others.

 

[ActionMan]

how much would you consider petty amounts?

For the right person, who is knowledgeable and skilled, a million dollars could be petty amount

you are right but lips are only closed until a certain amount of pressure. for some the amount they can take is low and for some higher.

As I said, the keywords are: tight lips and knowing what you are getting yourself into.

A common concern is the fear that "I'll be careful, but the other party might slip up." Interestingly, the other party often harbors the same worry. Instead of dwelling on this, if you have confidence in the other party, proceed without further ado. And avoid discussing it more than necessary. If you're uncertain, remember, it's early in the game for you. At this stage, it's crucial to find a partner you genuinely trust instead of asking these kind of questions.

 

[daniels27]

I think you may want to look at this

How to discreetly transfer funds from Paypal to a savings account

Hello everyone, in the last 5 years I have earned some money working online which I have never declared to the tax authority of my country (in EU). We are not talking about large sums, the total is around €55k in 5 years that I received on my PayPal account. I've invested half of it in crypto...

www.offshorecorptalk.com

I am new here too but see such questions quite often and always wonder what answers are expected. If you ask a lawyer, he will tell you all sort of dangers. If you ask a drug dealer, he will tell you that there is no issue about it. If you ask here, check the answers in the other thread about PayPal, it is like a rainbow. Real life is the same.

For most of the time, you can fly under the radar. But then, there may be questions that you fail to provide a suitable answer.

If you give him the money in cash. He uses it for paying groceries, there won't be much about it. If both have a high salary and the amount is negligible, there won't be problems. If the other guy makes 2000 EUR per month and suddenly all goes into savings, the tax guys will notice it and ask where there is more income as there is too much money at the end of the year. Maybe, he then comes up with that he got a loan from his brother and puts him in CC. You will most likely not hear from anybody again.

If it is 200k and you are making both 1M per year, you may use your credit card to pay his taxes and then he forgot to pay you back. Sounds reasonable.

If it is 1M EUR, you probably first figure out how to explain the losses and he the winnings. Maybe you both went into the Casino and he won while you lost?

My advice, meet in person to discuss the logistics and the reason behind the money flow. Then never talk about it again. If somebody asks you both need to bring up the same answer.

 

[JohnLocke]

Never do ANYTHING with ANYONE where they can use that "privileged" information to blackmail you! Ever! No exceptions!

That may indeed be the best advise.

OP please when you open a question thread as you did, use the VOTE (arrow up/down) for the questions you like. The same goes for the rest of the members reading this thread, please up- or down vote answers.

 

[startupbuilders]

first of all this community is amazing! thank all of you for sharing your knowledge!

My advice, meet in person to discuss the logistics and the reason behind the money flow. Then never talk about it again. If somebody asks you both need to bring up the same answer.

this combined with an untraceable payment seems to me the less risky case. for me it looks like in such a case its word against word even if the receiver might be pressured by the tax office. the only link could be to have a look if the person giving the money has withdrawn cash or crypto around the amount stated by the receiver. lets presume you can not find any trace of these withdrawl at the person giving the money.
or is my understanding completely wrong @Sols ?

 

[Sols]

this combined with an untraceable payment seems to me the less risky case. for me it looks like in such a case its word against word even if the receiver might be pressured by the tax office. the only link could be to have a look if the person giving the money has withdrawn cash or crypto around the amount stated by the receiver. lets presume you can not find any trace of these withdrawl at the person giving the money.
or is my understanding completely wrong @Sols ?

It's all speculation, so it's hard to say. One thing all busted tax evaders have in common is they underestimated the tax authority.

Let's say the tax authority (you mentioned it being a high tax and skilled EU tax authority) is offering your partner a deal where they only have to pay taxes and a minimal fine and not spend any time in prison, if they give you up.

The person squeals and says the payments came from you. They provide all the information they can: emails, chat messages, call logs, your contact details, anything it takes to make the tax authority go away. Faced with prison time and/or life-long debt, people get desperate.

What happens next depends on what evidence is made available to the tax authority and how they process it.

They know you're going to deny, so they probably won't even bother asking you. They'll just get all the information they can about you, starting with your tax returns, your bank accounts, and your travel records. They'll start piecing together something and look for anything that could explain how you were able to pay the partner using anonymous payment method.

If you paid your partner in XMR and the tax authority finds you sent money to or from a crypto exchange, that's an opening to get your details from the crypto exchange. They don't need all the evidence. They just need a little bit. Then they can send you a letter asking for all your crypto wallets and any other information they want that you don't have.

But let's suppose you obtained the XMR not via an exchange. The tax authority will look into how you have been spending your money. If they find something that looks like it could be a large cash withdrawal or wire transfer for the purpose of buying crypto anonymously, they have found their way in. Suppose you withdrew several thousand EUR at multiple occasions. Why? What was the money for? They'll ask you for receipts of what you spent that cash on.

Whatever you think sounds unreasonable and too invasive, the tax authority has already been there and done that.

If at some point, they have enough evidence to satisfy their own internal guidelines, they'll send you an invoice for taxes they think you owe. Then you have 30 days to pay the invoice. You can begin your appeal process, to prove your innocence before a court of law. The tax authority might also pass you on to police or prosecutor (depends on local law), so they can investigate/prosecute you for money laundering.

That is if they care and if they catch you, though. It might never happen. A lot of people get away with petty amounts. For larger amounts, though, it's only getting harder and harder...