Middle-class Americans caught up in IRS dragnet
The Internal Revenue Service is widely known and feared for its zealous pursuit of taxpayers who are suspected of committing tax crimes. However, the reality is that many people who have never broken the law are completely shocked to find that they are being investigated by the IRS. Another disconcerting reality: the IRS can seize your bank account even if no criminal complaint is ever filed against you.
This troubling practice has become more frequent in recent years, as the federal government has increasingly used an asset forfeiture law to go after individual taxpayers and small business owners. The law is meant to be used to seize cash from terrorists, drug traffickers and other criminals, but innocent, everyday Americans have been caught up in the dragnet. Once the IRS seizes your bank account through civil asset forfeiture, the burden is placed on you to get your money back.
Most people are not aware that the IRS may suspect you of the crime of structuring if you make a pattern of bank deposits of less than $10,000. A deposit of more than $10,000 triggers reporting requirements, and banks are additionally required to notify the IRS of any suspicious patterns of transactions below $10,000.
Consequently, the IRS has seized the assets of middle-class taxpayers who have done nothing wrong and who were unaware of the crackdown on structuring. Making deposits of less than $10,000 is not illegal unless the depositor intends to evade the reporting requirement, but people still run into serious legal and financial problems because of mere suspicions on the part of the IRS.
According to analysis by the Institute for Justice, in 2005 the IRS made 114 civil forfeiture seizures, and in 2012 the number of seizures was up to 639. Note, however, that only one out of five cases was prosecuted for alleged structuring. Taxpayers whose bank accounts have been seized must nonetheless take it upon themselves to prove their innocence and have their money returned to them in full.
An article in The New York Times provides a number of troubling examples of civil asset forfeiture. The IRS has announced a policy update that will supposedly curb the practice, but the update will not apply to seizures that have already occurred.
While the announced policy update sounds good, in reality the practice of seizing bank accounts on suspicions may continue. Policies from the head of government agencies are not always followed. Local IRS agents can claim that the facts justify seizure even when criminal charges are not forthcoming. Anytime the government seizes property, it should bear the burden of proving the seizure is legal and proper. The forfeiture laws while intended for legitimate law enforcement purposes, have become an area of abuse by depriving citizens of their property.
If you have been contacted by the IRS regarding a criminal tax investigation, then it is important that you seek legal counsel immediately. Early intervention in the process could prevent indictment and formal charges. There is also no rule that you have to wait to be investigated before you begin defending your assets and freedom.