Recently, the Internal Revenue Service has been seizing the assets of businesses and individuals who have been making deposits of less than $10,000, even though no laws have been broken. To make matters worse, the IRS is apparently refusing to return the seized assets.
Under U.S. civil forfeiture law, U.S. government agencies, such as the IRS, may seize anyone’s or any company’s assets. There need not be a criminal conviction or even any criminal charges. Instead, the only thing required to seize one’s assets is a “suspicion of a crime.” Originally, the law was designed to catch drug traffickers, racketeers and terrorists by tracking their cash. The low threshold that the government must meet, however, is ripe for the government to abuse its powers.
Up until recently, the IRS had been seizing the assets of small businesses and individuals engaging in “structuring,” which is a tactic often used to launder money. Structuring occurs when a deposit or withdrawal is made for less than $10,000, which avoids the bank having to report the transaction to the IRS or the Financial Crimes Enforcement Network.
The New York Times reported how the IRS had been using its authority to freeze the assets of many small businesses making deposits under the $10,000 threshold. The process to have seized assets released can be costly and time consuming-often taking longer than a year. In the interim, businesses and individuals suffer from not being able to access their funds. To resolve the dispute, many parties settle with the IRS to release the funds, sometimes at a significantly reduced amount than what the IRS seized.
IRS to curb seizure and forfeiture activities relating to “legal source” structuring
In response to the New York Times article, the IRS issued a statement that the IRS will stop seizure and forfeiture of funds associated solely with “legal source” structuring cases, unless there are exceptional circumstances and it is approved by the director of field operations. While the IRS maintains that the act of structuring, whether from legal funds or not, is against the law, the IRS will instead focus on cases involving seizure and forfeiture in “illegal source” structuring.
U.S. House of Representative Tim Walberg is working to change law to prevent innocent business owners and individuals from having their assets seized. Under the Civil Asset Forfeiture Reform Act of 2014, Rep. Walberg is proposing legislation that would require the government to have proof of criminal wrongdoing before any assets can be seized, as opposed to just a suspicion.
Contact a California tax attorney today
Having your assets seized by the IRS or any government agency can be a stressful event. An experienced tax attorney can help guide you through tax controversies and how to approach tax audits, liens and bank levies. If your assets have been seized by the IRS, Janathan L. Allen, APC’s highly experienced tax attorneys can help protect you and your assets. Call us today for a free consultation or visit our tax attorneys at one of our Southern California locations.
