Banks have to report deposits of $10,000 or more to the IRS, so some fraudsters "structure" their transactions as a string of sub-$10K payments that escape the regulatory requirement. Structuring is also illegal, and the IRS has the power to seize funds that the agency believes were part of a structuring scheme, under the discredited "civil fofeiture" process through which an inanimate object is sued for being the proceeds of a crime, and then the owner of that object has to prove that the object is "innocent."
The Treasury Inspector General released a report this month that reveals that the IRS deliberately targeted people they knew were not engaged in structuring for millions of dollars' worth of seizures, such that 91% of seizures were made in error, taking money away from people engaged in lawful activity.
These seizures were "quick hits" that allowed IRS enforcers the rack up impressive resolution stats because the victims were happy to negotiate a settlement, as opposed to actual criminal acts "(such as drug trafficking and money laundering), which are more time-consuming."
The result: for the IRS, depositing $10,000 or more was an inherently suspicious act; but so was depositing $10,000 or less. As Yves at Naked Capitalism writes, "Between Wells Fargo and the IRS, it looks like the only safe place for your money is a coffee can buried in the back yard. That should boost the economy!"
“Today’s report confirms that the IRS used civil forfeiture to seize millions of dollars from innocent business owners,” said lawyer Robert Everett Johnson of the Institute for Justice, a legal firm fighting for forfeiture reform, in a statement. "The IRS’s own internal watchdog found that the IRS had a practice of seizing entire bank accounts based on nothing more than a pattern of under-$10,000 cash deposits."
The Treasury report comes on the heels of a separate Department of Justice report finding that the DEA has seized billions of cash from individuals never charged with criminal wrongdoing.
Criminal Investigation Enforced Structuring Laws Primarily Against Legal Source Funds and Compromised the Rights of Some Individuals and Businesses [Treasury Inspector General for Tax Administration]
The IRS took millions from innocent people because of how they managed their bank accounts, inspector general finds [Christopher Ingraham/Washington Post]
(via Naked Capitalism)