Could the IRS Empty Your Bank Account?

A little-known rule lets feds steal money from people who haven’t been convicted—or even accused—of a crime. Federal law requires banks to report all cash transactions over $10,000 to the federal government. Federal law also makes it a crime, called structuring, for bank customers to deposit or withdraw cash in amounts under $10,000 in order to avoid that reporting requirement. IRS agents across the country, often in cooperation with state and local law enforcement, monitor banking activity for frequent sub-$10,000 cash transactions. The IRS can then use civil forfeiture to seize entire bank accounts that it believes were involved in “structured” transactions.

Moreover, when the IRS takes property using civil forfeiture, that property goes into a special federal fund, the Treasury Forfeiture Fund, which allows the IRS to fund its law enforcement activities. That arrangement provides an incentive for the IRS to seize as much property as possible, even when the property owner may have done nothing wrong. In theory, this system is supposed to root out criminals seeking to hide their activities from the government. In practice, its targets are all too often small-business owners guilty of nothing more than doing business in cash.

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