Hmm. But that flies I’m the face of the entire premise of this article. If I’m a drug kingpin and have millions of dollars in illicit profit. Suppose I simply pay tax on it. Why should I then care if I get audited? The whole point is that the IRS just cares about you paying taxes. In the audit you’d simply state that it’s drug income and show that you’ve fully paid your share of taxes. The IRS supposedly doesn’t work with law enforcement to report the illegal income. How would law enforcement find out?

I’m seriously missing something here.

There are lots of ways to get caught. If you want to buy a house, you either need a mortgage and will have to demonstrate income (which you probably can't), or you have to pay cash. Buying the kinds of houses that drug dealers buy in cash is going to draw a lot of attention that you don't want. Likewise with cars, or really any big purchases. Getting really nice season tickets to sporting events is going to be suspicious if no one can vet that you actually have a job.

Laundering the money is not instead of paying taxes, it's on top of paying taxes. The goal is to make it appear that you're a legitimate business person who makes their money from laundromats or whatever. If the police come snooping about how you can pay for your house or cars or tickets, you can just show them the books for your "business" as evidence that you really are just a regular Joe that runs a chain of laundromats.

What's missing is that, if the police independently discover evidence (well, "independently") of your being a drug kingpin, then they can subpoena your tax records and use them as further evidence. So it can end up being found by law enforcement and used against you.

And of course, the evidence only needs to be strong enough to convince a judge there is enough probable cause to issue a warrant.