The Internal Revenue Service has recently been wracked with scandals, inefficiency and claims of incompetence, with the agency recently coming under fire for seizing assets from a small grocery store operated by the same family for over three decades. However, the IRS recently filed to voluntarily dismiss the case, which will allow the family to reclaim the seized funds almost one year after the dispute began.
The IRS initially took action against the business due to suspicions that the business operators were depositing money in such a way as to skirt regulations regarding the reporting of their assets, though the family was steadfast in its assertion that they never violated any federal or state laws. Instead, it claimed that its depositing practices are dictated by the store’s insurance policy, which covers theft of up to a maximum of $10,000.
The family ultimately filed a constitutional lawsuit after the IRS refused to return the seized assets when analysis supported by the Bank Secrecy Act showed that the tax agency never confirmed any tax violations. The case was only weeks away from trial when the IRS submitted a motion for dismissal and returned all of the seized money.
Small business owners in Texas may believe they are protected from IRS investigations if they have relatively modest profits and an inconspicuous nature, but this case shows that the IRS does not overlook a company due to its size, net worth or revenue.
The tax agency has a number of powerful tools to use against filers it believes have concealed or omitted some portion of their assets. In addition to the forfeiture action used against the family-owned grocery store, the IRS can also subject filers to tax liens or bank account levies. As federal budgets continue to tighten, the tax agency’s collection efforts have become substantially more aggressive – the government seized over $4 billion in forfeitures in 2012, compared to just $27 million in 1985. The court system is crucial in allowing small businesses and individual taxpayers to defend themselves from attacks by the IRS and other government bodies.
Forbes, “IRS Backs Down, Returns Seized Cash to Family Businesses” Kelly Phillips Erb, Nov. 15, 2013