The Treasury Inspector General for Tax Administration (TIGTA) has found the Criminal Investigation Unit of the IRS wrongfully seized millions from legal business entities and individuals. The investigation was opened after several complaints were filed in 2014 regarding IRS seizures of property or bank levies without evidence of a crime.
TIGTA’s audit found that a whopping 91% of the 278 structuring investigations in its sample were of businesses and individuals whose funds were obtained legally. IRS procedures clearly state that “the agency’s civil forfeiture program targets criminal enterprises.” This resulted in $17.1 million in seizures that were inappropriately forfeited to the government across 231 cases. These weren’t criminals. These were normal, legal businesses. Jewelry stores, gas stations, restaurants, even scrap metal dealers. TIGTA’s audit found the IRS investigators typically relied on the pattern of currency transactions to support their seizure, instead of seeking appropriate information about property owners. IRS agents didn’t always identify themselves according to laws and IRS procedural guidelines, didn’t explain to the taxpayers why they were being interviewed or explain their rights, and inappropriately told the property owners at the end of the interview they had committed a crime.
In many cases TIGTA’s audit found the IRS didn’t even investigate the explanations of the taxpayers. In some of the cases, the IRS used non-existent criminal issues to bargain for a resolution of the civil (financial) case with “no prosecution.” All evidence pointed to the conclusion the IRS wrongfully seized millions from legal business owners and individuals. TIGTA’s findings further found that cases with similar fact patterns were resolved inconsistently, and that IRS investigators had mislabeled associated case materials as “grand jury information,” which delayed TIGTA’s audit.
While the IRS made policy changes after completion of TIGTA’s audit, inconsistencies were still monitored. Two congressional hearings later the IRS began notifying 1,800 property owners (who had previously been informed that they had committed felony structuring violations) to submit petitions to retrieve their forfeited funds. In the end, the investigation found the IRS wrongfully seized millions from legal business owners and individuals in the vast majority of cases reviewed.
“Criminal Investigation has now made important improvements to this program; however, the IRS should ensure that protections are in place so that people have rights and that innocent people do not feel compelled to settle a civil forfeiture matter under the pressure of possible criminal prosecution,” Treasury Inspector General J. Russell George said in a prepared statement.
Allen Barron’s seasoned IRS tax attorneys defend San Diego taxpayers from the State of California and the IRS in audits, bank levies, wage garnishments and other tax controversies. We hold IRS revenue officers to the laws and tax codes of the United States while providing our clients with aggressive representation and the protections of the attorney client privilege. We invite you to contact us for a free consultation at 866-631-3470.