The Institute for Justice has spent years trying to get government agencies tostop stealing from the people they serve, and its efforts are likely part of the reason for recent media interest in thieving police departments and embezzling tax collectors. The Washington Post last month devoted amulti-part series to documenting highway robberies by cops whose departments keep all or part of the proceeds. Now The New York Timesscrutinizes the curious IRS practice of draining people’s bank accounts because they regularly deposit relatively small sums of cash.
Writes Shaila Dewan:
Using a law designed to catch drug traffickers, racketeers and terrorists by tracking their cash, the government has gone after run-of-the-mill business owners and wage earners without so much as an allegation that they have committed serious crimes. 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 trigger for the seizures is regular deposits of under $10,000, the threshold above which banks are supposed to report financial activity. But depositing money below that amount is considered suspicious “structuring” and is also reportable.
According to the IRS’s rules about reporting cash transactions over $10,000:
The penalties for failure to file may also apply to any person (including a payer) who attempts to interfere with or prevent the seller (or business) from filing a correct Form 8300. This includes any attempt to structure the transaction in a way that would make it seem unnecessary to file Form 8300. “Structuring” means breaking up a large cash transaction into small cash transactions.
The IRS has regularly interpreted this rule to apply to restaurants, corner stores, and other cash-heavy small businesses that undergo the oh-so-suspicious process of bagging up the week’s receipts and taking them to the bank. Keeping lots of cash on hand is, in many cases, an invitation to a stick-up. And, as the Times story points out, some small businesses are insured only up to $10,000 for cash in their possession—so when the mount gets close, they’re naturally inclined to make a deposit. After a few such efforts at safekeeping the proceeds, the IRS feels justified in taking it all.
Why don’t banks inform their customers of the danger they face? Some do. But that could be interpreted as a “structuring conversation,” which is illegal.
The Institute for Justice points out that “Eighty percent of people from whom the federal government seized property for forfeiture were never even charged with a crime.” That’s right, it’s rare the feds even try to pretend that anybody did anything wrong—they just make the people who lost the money chase after them to get it back. If they can.
Media coverage can make a difference when government conduct is this despicable. “[I]n response to questions from The New York Times, the I.R.S. announced that it would curtail the practice, focusing instead on cases where the money is believed to have been acquired illegally or seizure is deemed justified by ‘exceptional circumstances.’”
Maybe that will make a difference to some people in the future (depending on what “exceptional” means). But the feds specified that nobody who has already been robbed is getting their money back.
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