The IRS, the trustworthy federal tax-collecting agency that always has its stuff together, announced a shift in policy that should lead to less arbitrary targeting of Americans.
No, this has nothing to do with the tea party.
It has everything to do with “structuring,” or the act of conducting financial transactions in such a way as “to avoid certain recordkeeping and reporting requirements” under federal law. Financial institutions are required to report suspicions that customers might be structuring their deposits to avoid the requirements.
Radley Balko broke it down helpfully (in March, mind you — this “structuring” issue and objections to its implementation aren’t exactly new):
… Most structuring cases stem from a 1970 law called the Bank Secrecy Act, which requires banks to report any deposits, withdrawals, or transfers of more than $10,000. The law has since been revised several times, but generally it’s intended to make it easier for the government to track tax cheats, money launderers, illegal gambling operations and other criminal enterprises.
… So if you have $100,000 to deposit in your bank account, and you deliberately choose to deposit that money in increments of $9,999 so your bank won’t automatically notify the federal government, you’re guilty of structuring. It’s a felony punishable by a fine and/or up to five years in prison.
Notice how motive is key to the crime. Depositing less than $10,000, even regularly, is not a crime itself. Which brings us to the lead of a weekend New York Times piece:
For almost 40 years, Carole Hinders has dished out Mexican specialties at her modest cash-only restaurant. For just as long, she deposited the earnings at a small bank branch a block away — until last year, when two tax agents knocked on her door and informed her that they had seized her checking account, almost $33,000.
The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report.
“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?”
The federal government does.
With the reporting requirement on banks to report suspicious activity — and with banks facing the threat of sanctions if it doesn’t comply — the law is rife for such abuses as this one. It’s another instance of how the government is shifting the burden of proof to the taxpayer; “The government can take the money without ever filing a criminal complaint, and the owners are left to prove they are innocent. Many give up,” the Times story reads. So a law designed to fight crime also fights innocent Americans. Go figure.
What’s more, the government may have incentive to cast such a wide net and catch innocent Americans in its supposed “crime-fighting” efforts. This issue is linked to asset forfeiture, that much reported practice of late of law enforcement seizing assets — and keeping some of them — if they are suspected of being linked to a crime.
Naturally, the IRS announced a shift in its policy Thursday, and the Times printed a statement from the agency’s chief of Criminal Investigation.
“After a thorough review of our structuring cases over the last year and in order to provide consistency throughout the country (between our field offices and the U.S. attorney offices) regarding our policies, [we] 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.”
Here are some questions: Was it accepted practice to indiscriminately seize the bank accounts of individuals who deposited less than $10,000 regularly without any further justification? How is “seize first, ask questions later” a fair policy to taxpayers? Why is it en vogue to strip Americans of their assets on mere suspicion? It’s de facto presumed guilt. If only the IRS would approach seizure in these “legal source” investigations the same way it approaches its efforts to demonstrate criminality: “Once a transaction has been identified as a potential violation of 26 USC 6050I(f), evidence beyond a mere accounting record must be developed.”
For background on the matter of structuring and circumstances involving abuse of the law, Balko’s piece is the must-read.
