Recently, the IRS was brought before a congressional subcommittee where they discussed the standards for seizing the assets of small businesses. After the hearing, the IRS changed its policies. Why did congress feel they must investigate this policy?
More than 700 small businesses had their assets, totaling approximately $43 million, seized between 2009 and 2014 on suspicion of fraudulent business practices. However, after an investigation the IRS could not find any wrongdoing and yet, was stalling when it came to returning the funds to the taxpayers.
Was the IRS whimsically making a grab for cash?
When businesses make deposits greater than $10,000 into an account, their bank is required by law to file paperwork notifying the feds of the large sum of cash. It became standard practice for banks and small businesses to limit the size of their deposits to less than $10,000 in order to avoid the bother of the paperwork.
However, in 2009, the IRS put a policy into place that if they saw a pattern in the size of deposits that seemed to be skirting the $10,000 law, they could seize the bank accounts and begin an investigation of the business for possible money laundering, tax evasion or other criminal activity.
The problem for everyone except the IRS, was that it seemed that even after investigations were complete, and no wrongdoing was discovered, the funds were not being released in a timely fashion.
While the decision-making process for the seizure of property seemed to be created in a good faith attempt to halt any attempt at hiding criminal activity, it became clear that the IRS, Treasury and Justice Department was simply unable to execute the plan in an effective and fair manner. The cumbersome bureaucracy of the government was negatively affecting the welfare of innocent civilians. So, the policy had to be changed.
The law is changed – in favor of small business
The appearance of structuring payments or deposits to a bank account for just under $10,000 is no longer considered sufficient cause for the government to freeze a bank account pending further investigation. There must be other factors present in order for the court to order the seizure.
Meanwhile, the return of the $43 million dollars to the aggrieved parties is going slow. The parties who were affected had to file petitions for the return of the property where the petitions would be reviewed to determine how much money would be released.
The wheels of justice are turning in the favor of the taxpayer in this instance, but they are still spinning slowly. Anyone dealing with a tax-related problem, particularly an audit or collection situation, should speak with an attorney before attempting to handle the situation on their own.