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New law reduces IRS seizures of small business assets

On Behalf of | Aug 11, 2019 | IRS |

IRS seizure is something that no small business owner wants to deal with. That being said, if the IRS suspected owners were skirting the laws about financial transactions, the possibility of having their assets seized was all too real. 


How the IRS seizes business assets

For many, the idea that the IRS can seize your money with no formal charges or other evidence may seem absurd, for some small business owners it is a nightmare that they are already living. Under provisions of the old Bank Secrecy Act of 1970, the IRS had been able to seize assets from business owners suspected of deliberately getting around reporting rules for financial transactions in excess of $10,000. And once seized, the business owners were considered guilty until they could prove themselves innocent. Getting their assets returned to them required an uphill legal battle.

Basically the The Bank Secrecy Act of 1970 states that banks are required to alert the IRS of any transaction over the amount of $10,000 in order to better keep track of money that is being made. Those transactions that are under $10,000 do not have to be reported.

What, exactly, is the crime?

The IRS has long used this standard as a way of charging business owners with an offense called structuring; the use of many smaller transactions that do not have to be reported to the IRS in order to hide money that is coming into a business. This is a method that is most often used by people trying to hide money obtained illegally. For some small business owners, however, making many smaller transactions is the norm, it is safer for their particular business, and it is simply their preferred banking style.

The IRS, between the years of 2002 and 2015, collected more than $200 million from small business owners accused of structuring, according to a study conducted by the Treasury Inspector General for Tax Administration. Of the more than 200 cases reviewed, fewer than 10 percent were found to have been knowingly guilty. 

The Taxpayer First Act

The new law, the Taxpayer First Act, was signed into effect this year by President Donald Trump and was designed with the protection of small business owners in mind primarily. The new law states that the IRS cannot seize funds on the grounds of structuring unless they come directly from illegal goings on. This helps to insure that the IRS cannot randomly take money from business owners unless they have some sort of a substantiated claim or proof that the money is the direct result of some illegal activities on the part of the business owner.

The act includes the RESPECT Act that was created in response to a 2012 case in which two small business owners had over $500,000 seized and had to spend years and a great deal of their own money trying to recover the money that was taken. For small business owners this is certainly a step in the right direction and a step toward true protection by the United States Government. The act states that money cannot just be taken and also that the business owner has the right to appeal the decision and that the case must be seen by a judge within 30 days of filing to swiftly take care of the case and get the money back to the rightful  owners.


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