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Account seizure and structuring allegations: IRS to dial it back

RS may be able to seize your bank account or other assets if you don’t pay your taxes or work out an arrangement to do so. This is a pretty basic principle, though its application to particular cases naturally depends on the specific facts.

But the IRS has recently come under media scrutiny for using forfeiture laws to grab the property of innocent taxpayers who have not even been under suspicion of money laundering or tax evasion.

In this post, we will discuss this controversy about how the IRS has responded to it.

The New York Times reported last week on a particularly egregious case from Iowa that raises the seizure issue. IRS agents seized the checking account of owner of a family-run restaurant. For years, the woman had been making deposits for her cash-only businesses at a nearby bank without incident.

The IRS claimed that the cash deposits constitute the structuring of transactions to avoid federal reporting requirements. “Structuring refers to attempts to avoid government reporting requirements that apply to transactions of $10,000 or more.

These reporting requirements were put in place to try to crack down on drug kingpins, organized crime activity and terrorist networks. They allow the seizure of assets even without a criminal complaint.

Using such tactics against law-abiding, middle-class taxpayers is a serious concern. Amid the media reports, the head of the IRS’s Criminal Investigation division announced that the agency will step back from the practice of using seizure so indiscriminately.

Much remains to be done, however, to reform forfeiture practices that have resulted in so much unfairness. The Institute for Justice (IFJ), a nonprofit law firm that advocates for forfeiture reform, has been gathering data to quantify the scale of the issue.

According to the IOJ, the number of IRS seizures in cases of alleged structuring has increased more than five-fold in less than a decade. And yet in 80 percent of these cases, no criminal structuring charges have been brought.

Seizing a taxpayer’s bank account for nonpayment of taxes is one thing. But as we have discussed, seizure can also occur due to overly aggressive application of bank deposit reporting requirements.

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