The Criminal Investigation division of the IRS plays a key role in a complex regulatory scheme aimed at preventing not only tax evasion, but also money laundering, fraud and violations of the Bank Secrecy Act (BSA).
One of the tools the IRS uses to enforce compliance with this regulatory scheme is civil forfeiture. Using civil forfeiture, the IRS can seize assets of people or businesses for allegedly violating the requirements of the BSA or other related laws.
Does the IRS generally use its forfeiture authority evenhandedly or are there concerns that it is overused or used against the wrong targets?
The short answer is that there are well documented concerns with the IRS’s use of civil forfeiture.
In a widely discussed case a couple of years ago, the IRS seized the assets of a family-fun grocery in Michigan that was not suspected of any crime. The IRS did this despite having no evidence the business was trying to “structure” its transactions to avoid BSA reporting requirements for cash deposits in excess of $10,000.
To be sure, one case could be considered only anecdotal evidence. But the Michigan case was only the tip of the proverbial iceberg.
Congress held hearings due to widespread concerns about the IRS’s asset forfeiture policy in civil cases. And the Treasury Inspector General for Tax Administration (TIGTA), the IRS’s watchdog agency, began an investigation.
TIGTA looked into the IRS seizure of bank accounts from business owners in hundreds of cases based on nothing more than mere suspicion about the pattern of deposits. The report found that often the IRS has gone after legitimate businesses and law-abiding citizens, rather than drug traffickers or other money launderers.
In an upcoming post, we’ll look at how the IRS is revising its asset forfeiture policies in response to all the concerns.