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Make multiple deposits under $10,000? IRS can seize your funds

On Behalf of | Oct 28, 2014 | Tax Liens |

If you have insured your house or your car, you know that policies certainly do not cover every possible scenario. There are limitations to the coverage. An example involves business owners who keep cash on hand. An insurance policy may only cover $10,000 if the cash is lost or stolen. 

Those were the exact terms of the policy for one retail business owner. To ensure that he could maximize the benefit, he never kept more than that amount. In fact, he made a lot of bank deposits that were just under $10,000. The only problem, the Internal Revenue Service flagged his behavior as possible criminal activity and drained his account. Yes, they have the authority to do that.

The Civil Asset Forfeiture Reform Act of 2000 authorized the IRS to make seizures such as this one. The intent was to stop criminal activity, but the IRS’s authority is broad. No formally filed charges, criminal indictment or conviction is required for the agency to seize the funds. 

This means that entirely innocent people, like our retail business owner above, are getting caught up in the increasing use of this power. In 2005, there were 114 seizures made under this law. By 2012, that number had increased to 639, according to a report by The New York Times. Only 20 percent of the cases involved criminal charges.

In one reported case, the IRS seized nearly $500,000 and offered to settle for the return of half when the agency determined that there was no indication of criminal activity.

Even those who absolutely know they are innocent of a crime should consult with an attorney. Dealing with the IRS is not easy. 

Source: Forbes, “A New IRS Horror Story That Makes Past Scandals Pale In Comparison,” Rick Ungar, Oct. 27, 2014

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