LEXINGTON, Ky. — Federal court records unsealed this week lay out in sharp detail how IRS agents say they caught two Central Kentucky restaurants taking in far more money than they told the government — including multiple years when credit card deposits alone topped the businesses’ entire reported gross revenue.
The Aug. 12 unsealing gives the first public look at the IRS Criminal Investigation probe that sent agents into the Mi Pequeña Hacienda locations on Lansdowne Drive in Lexington and Cynthia Drive in Nicholasville, as well as a private home in rural Fayette County, on Aug. 5.
According to the affidavit, investigators compared the restaurants’ tax returns to bank and credit card processor records from 2019 through 2023. They say the Nicholasville location underreported gross receipts by about $758,000 between 2020 and 2023. The Lansdowne Drive site showed an even larger gap — roughly $1.6 million between 2019 and 2023 — for a combined $2.35 million in alleged unreported sales.
One example in the filings stands out: For tax years 2020 through 2023, the owners reported total gross receipts of about $11.88 million for the Nicholasville location on their filed tax returns. But subpoenaed bank records show that during that same period, the business took in roughly $12.07 million in credit card sales alone — already more than the amount reported. On top of that, the records show an additional $569,000 in cash deposits.
(US District Court)
The affidavit also describes a February 2024 meeting between an undercover agent posing as a buyer and a business broker. The broker allegedly called the Lansdowne Drive restaurant a “cash cow” and said its 2023 net income was around $475,000 — more than four times the “cash flow” figure advertised in a $1.12 million sale listing.
When agents searched the restaurants and the home on Aug. 5, they seized boxes of receipts, deposit slips, payroll records, tax documents, bank statements, luxury item receipts, and building material invoices. They also took multiple computers, hard drives, iPads, USB drives, and security DVR systems. At the home, agents found records linked to property in Mexico, including wire transfers and construction receipts.
IRS spokesperson Genevieve Billia confirmed that IRS Criminal Investigation agents “conducted several court-ordered search warrants in the Lexington area, including one at Mi Pequeña Hacienda, on Aug. 5.” She added that IRS-CI cannot confirm or deny whether an investigation is ongoing.
No charges have been filed, and the restaurants remain open. The warrants indicate the investigation is focused on possible false statements on tax returns, a felony that can carry prison time, fines, and repayment of taxes if prosecutors bring a case and win a conviction.
This article has been updated to add comment from the IRS.
