IRS allowed to seize ‘suspicious’ bank accounts in civil forfeiture

On Behalf of | Oct 27, 2014 | Tax Controversies

Most Americans are resigned to pay what they owe to the Internal Revenue Service, and they do so without complaint. This is because most of us understand that tax revenue keeps the country running.

But imagine that you are a small business owner and that your profits are mostly cash. You deposit several thousand dollars at a time into a bank account, knowing that this is where it will be safe. But one day, you learn that the IRS has seized the entire account even though you have not broken any laws. This happens more often than most people realize. Unfortunately, many innocent victims of civil asset forfeiture never get their money back.

Civil asset forfeiture laws were designed to help law enforcement agencies battle the mafia, drug traffickers, racketeers and other groups committing organized crime. If IRS investigators or law enforcement agencies suspect that your money is tied to a crime, they can seize it, even if no criminal charges are ever brought.

A recent New York Times piece tells the stories of several people who have had their bank accounts seized because they made regular deposits of less than $10,000. Any cash deposits over $10,000 require the bank or financial institution to file a report with the government. However, banks are also urged to report individuals who make “suspicious transactions” below the $10,000 threshold because they may be doing so to evade the reporting requirement.

Once assets have been seized, the burden of proof is on the account holders. In other words, you can only get your money back if you can prove that you are innocent and that the money was not tied to any criminal activity. Meeting that burden of proof is often too expensive and time-consuming, which means that many people simply give up.

Civil asset forfeiture has long been a controversial area of law, and it’s easy to see why. These practices seemingly violate the property rights of law-abiding citizens while allowing government agencies to treat people as guilty until proven innocent.

If you are approached by an IRS special agent, it is important to have a tax law attorney representing you when meeting with the agent. Remember that having a lawyer present in your meeting with the IRS is your legal right.

Source: The New York Times, “Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required,” Shaila Dewan, Oct. 25, 2014