Bay Area Estate And Tax Planning Law Firm

The uncivil nature of civil forfeiture: People, businesses suffer

On Behalf of | Nov 4, 2014 | Uncategorized |

Was it 9/11 or the financial meltdown and recession that put more small businesses in the IRS’s crosshairs? A mere sideways look from the agency can cost a small business more time, money and credibility than most can afford — even if the business has done nothing wrong. Welcome to the land of civil forfeiture.

If there is an upside, it is that the IRS is open to change, albeit under pressure. After an article in The New York Times pointed out the curious implementation of the law, the IRS actually vowed to change its ways.

Banks are required to report individual cash deposits of more than $10,000 to the federal government. When an accountholder, usually a small business, makes numerous cash deposits of less than $10,000, the IRS takes notice. The deposits could be evidence of a deliberate attempt to avoid the reporting threshold, a tactic primarily used for drug trafficking, terrorism and other illegal purposes. Like the Great Eye of Sauron, the agency’s focus pivots instantly to the suspect account, and the IRS seizes the funds.

The IRS takes it all. The agency is allowed to clean out an individual’s or a business’s bank account or to seize tangible property, like a car. In fact, the law applies to any law enforcement agency: Local police can trigger a sweep of a bank account and then can get paid a kind of finder’s fee for the trouble. In some cases, the reporting agency can keep all of the money seized.

The law requires no notice, no criminal charges, nothing at all to warn the accountholder. According to the Institute for Justice, 80 percent of the accountholders are never charged with a crime. That makes sense, though, in light of the law’s focus on the property. It is the property that is guilty, not the depositor.

We’ll finish this up in our next post.

Source: The Daily Caller, “Guilty Until Proven Innocent: Law Lets IRS Seize Citizens’ Cash When No Crime Is Suspected,” Derek Hunter, Oct. 26, 2014