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A new report issued by the Treasury Department's Inspector General is calling into question the IRS's practice of seizing the bank accounts of small businesses suspected of laundering money. In essence, the IRS was seizing money with no evidence of criminal wrongdoing and refusing to return the money without getting a cut.
The report explains that, from 2012 to 2015, the IRS seized over $17 million dollars from small businesses for allegedly structuring bank deposits. In many of these cases, the business owners were completely innocent of any wrongdoing, but were faced with the choice of agreeing to a return of a lesser amount than was seized, or trying to fight it out in court to get their money back (which is a costly, and uncertain, process).
Unintentionally Structuring Deposits
Under both federal and state laws, structuring deposits is a crime. The act involves individuals or businesses deliberately ensuring that their bank deposits and withdraws stay below a bank's required mandatory reporting threshold. Under the law, financial institutions are required to report all transactions in excess of $10,000 to the IRS. If an individual or business deliberately deposits or withdraws less than $10,000 to evade the laws on structuring deposits, they can be found guilty under these regulations. The key here is that there must be an intent to avoid the reporting laws.
However, for small to medium sized businesses, making deposits or withdrawals of less than $10,000 is a regular part of business, and often advisable. For instance, if a business regularly makes large weekly cash deposits in the bank, then making multiple deposits of smaller amounts a few times a week can reduce the risk of robbery on the way to the bank. However, the IRS does not only monitor the large reported transactions, they also will look into transactions trying to fly under the reporting radar.
Tying the Hands of Small Business
For many business owners, the IRS's tactics were no different than an extortion scheme. For those business owners without sufficient credit, or other assets, fighting for the return of their money is impossible. One business owner explained that the IRS offered to return all of their seized monies except for $40,000. However, that business owner instead retained a forensic accountant to the tune of $20,000, and after the costly forensic accounting, was able to receive all their money back.
As a result of the investigation and report, the IRS has committed to making changes, and claims that many changes were made years ago. If your business is subject to an IRS bank account seizure, seeking the assistance of a qualified business attorney may be the first step in getting your money back.