In October of 2014, we wrote about a controversial practice that the Internal Revenue Service and certain other government agencies have been employing for years. A process called civil asset forfeiture allows the IRS to confiscate the entire balance of bank accounts and seize other assets of businesses engaging in "suspicious" transaction activity. The transactions that raise red flags are sometimes as simple as making numerous cash deposits of less than $10,000.
Civil asset forfeiture laws were intended to help the government seize assets of criminal enterprises, including drug traffickers, terrorists and the mafia. In many cases, however, the IRS is seizing legitimately earned revenue from small business owners, often without ever filing criminal charges or even making accusations. Because fighting to recover the money proves to be so costly, time consuming and difficult, many business owners must resign themselves to losing tens of thousands or even hundreds of thousands of dollars.
Although this practice has been going on for years, it gained widespread attention last fall when the New York Times and other media outlets began writing about it. Recently, the Times followed up on one business it had profiled in its original article. More than two years ago, the IRS seized $447,000 from a family-run business that distributes candy and cigarettes. No criminal charges were ever filed.
According to the recent news article, the Institute for Justice sued on behalf of the business owners, and the IRS agreed to return the money without admitting any wrongdoing.
All things considered, these business owners were actually quite fortunate compared to others who have had assets seized by the IRS. Outgoing U.S. Attorney General Eric Holder recently announced plans for a policy change that will seemingly curtail civil asset forfeiture by federal agencies, but only time will tell if this change actually occurs.
In the meantime, business owners in Connecticut and around the country need to be aware of the risks they take just by making cash deposits or frequently depositing less than $10,000. Because civil asset forfeiture laws essentially remove the right to due process, even the appearance of impropriety can result in devastating financial losses.
Source: The New York Times, "$447,000 Seized by Government Will Be Returned to Business," Shaila Dewan, Jan. 20, 2015