Through a practice known as civil forfeiture, the IRS can seize property that it believes is tied to a crime even if no criminal charges are filed. The problem is that the IRS has been abusing its power by seizing bank accounts where there is no indication of a crime committed.
The New York Times reported that the IRS has been seizing bank accounts of small business owners and individuals who deposit cash transactions in less than $10,000 increments. The Bank Secrecy Act requires a bank to report to the government when an individual or business deposits more than $10,000 in cash. The Act was designed to catch drug traffickers, racketeers, and terrorists by tracking their cash. The Act was not designed to catch people and businesses who are not trying to break the law.
Structuring, also known as Smurfing, is a crime whereby a person intentionally tries to avoid the banks reporting of income by depositing the cash in increments smaller than $10,000. The problem is there could be legitimate reasons for businesses and individuals to deposit less than $10,000 increments. Unfortunately, the IRS has seized peoples bank accounts who are innocent. Owners are then left to either try to prove their innocence to win back funds, or lose the money that’s been taken.
Last Thursday, the IRS informed the New York Times it plans to reduce the prevalence of this practice, focusing instead on situations where money truly is being illegally acquired or seizure is deemed justified by “exceptional circumstances”. Nonetheless, because the practice of structuring (i.e., making deposits under $10,000 to avoid reporting requirements) is illegal, whether or not that money comes from legal sources, the government will still pursue cases that it deems suspicious.
Accordingly, the IRS now asks banks to report any suspicious deposit patterns, including high reoccurring deposits that are below $10,000. While this practice may help catch more criminals who are trying to evade the law, it also unfortunately leads to the wrongful seizing of assets for individuals who have committed no crime. What’s more, banks are not legally allowed to advise customers when their deposit habits may be illegal, making it even easier for innocent citizens to fall into trouble.
It can be terrifying for hard-working Americans who wake up to find their money taken by the IRS. The Law Offices of Todd S. Unger, Esq. focuses on state and IRS tax dispute and resolution. Contact us for support responding to bank account seizures. The sooner you respond to the IRS, the better. Resolve your situation today by calling a tax attorney at (877) 544-4743.