A bakery was almost shuttered after armed IRS agents accused the owners of trafficking drugs or running a prostitution ring. After a three-year battle they have their money back, but an investigation continues that could still lead to criminal charges.
This story reported by the Huffington Post illustrates what can go wrong under current civil forfeiture laws. A pattern of cash deposits between $7,000 and $9,500 over several years had raised red flags. The IRS alleged that the owners were purposefully staying under the $10,000 threshold to avoid bank reporting requirements.
In our February 23 post, we wrote about structuring. The crime involves a deliberate effort to keep cash deposits below $10,000 to avoid scrutiny by Federal authorities. This law was designed to fight money laundering by criminal organizations.
The law has ensnared many business owners in cash industries. A criminal conviction is not required to seize bank funds. This has meant that years can pass before it is possible to get the money back.
Return of property
On June 10, IRS Commissioner John Koskinen explained in a letter that the agency is taking action to right the wrongs imposed on innocent business owners. As of today, the IRS should be sending out 700 letters to affected individuals and businesses.
The change comes after the House Ways and Means Oversight Subcommittee investigated the use of civil asset seizure and forfeiture. In October 2014, the IRS stopped seizing funds associated with structuring if there was evidence of an underlying legal source.
Proof that money came from a legal source is necessary to get the money back. It is also important to show that structuring was not used to cover up tax evasion or another crime. This will finally provide a remedy for those left in limbo for years.