(Newswire.net — October 28, 2014) — The practice ‒ called civil asset forfeiture ‒ allows The Internal Revenue Service agents to seize property they suspect is connected to a crime, even if no charges are ever filed.
Civil Asset Forfeiture is designed to seize property of criminals and terrorists that try avoid the attention of law enforcement and “structure” illegal activities by making cash deposit of less than $10,000, which is the threshold when banks are federally required to report activity to the IRS under the Bank Secrecy Act. Structuring, sometimes known as “smurfing” finds its legal basis in Title 31 of the United States Code, section 5324, provides (in part):
“No person shall, for the purpose of evading the reporting requirements of section 5313 (a) or 5325 or any regulation prescribed under any such section, the reporting or record keeping requirements imposed by any order issued under section 5326, or the record keeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91–508—… structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.”
Though it is not illegal, depositing large amounts of cash, even in increments of less than $10,000 may cause your bank to report the suspicious transaction to IRS. If the IRS suspects illegal activity within the account, they are empowered to seize your account. The reusult of this practice, however, is that many legitimate small business owners have been victimized by the system, and have gone months and even years without being able to reclaim their hard-earned savings.
Last year, banks filed more than 700,000 suspicious activity reports. According to an analysis by the Institute for Justice, legal costs can easily mount to $20,000 or more, so most owners can’t afford to fight the Government for their money.
“The IRS is after middle-class citizens who have never had any trouble with the law,” said David Smith, a former Federal prosecutor.
Just in 2012, the IRS made 639 seizures, among those, only one in five cases was prosecuted as a criminal structuring case, according to the analysis of the Institute for Justice, a Washington-based public interest law firm that is seeking to reform civil forfeiture practices.
In an article for Forbes, Rick Ungar wrote that “the civil asset forfeiture practice amounts to nothing short of grand larceny on the part of the Internal Revenue Service.”
“Think about that, “ he wrote, “a full eighty percent of the bank accounts emptied by the IRS in 2012 involved completely innocent people and businesses, how is that not a criminal enterprise?”
Most victims of civil asset forfeiture settle with the government for only a small portion of what was seized from them.
Army Sgt. Jeff Cortazzo of Arlington, Va., wanted to deposit cash for his daughters’ college education, but he wanted to avoid unnecessarily taxes. Bank clerk told him that all he need is to have to deposit less than $10,000.
As bank reported suspicious account, IRS seized $66,000 from the sergeant. In the settlement with the IRS he lost $21,000 of his money and as a result, the eldest of his three daughters had to delay college by a year.
The IRS announced in a written statement Thursday that it will “no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture and the case has been approved at the director of field operations (D.F.O.) level.” However, Richard Weber, the chief of Criminal Investigation at the tax agency, stated that “structuring is still a crime, regardless [of the legality] of the source of the funds”.