Seizing Private Assets to Enhance Fed Budgets?
by Terri Eyden on
By Teresa Ambord, Correspondent
The IRS has suffered numerous hits lately, though they'd be hard pressed to find much sympathy from the public. Recent months have seen fumble after fumble in the news, and here's another. Asset seizure has long been a tool the IRS can use to put a quick halt to suspected criminal behavior, among other things. It can be a force for good, but according to Forbes, the IRS has taken it to a new level. Some wonder if federal agencies are seizing private assets on flimsy evidence to beef up their budgets. In 1985, about $27 million assets were seized. That's no small amount, but leap forward to 2012, when the amount skyrocketed to $4 billion.
The Treasury Inspector General for Tax Administration (TIGTA), which reports on IRS activity, found that while the majority of IRS asset seizures follow the guidelines, a good 30 percent of these confiscations fall outside of the law in one way or another.
Take a look at one case that languished for many months, till the taxpayers turned the tables on the IRS and filed a lawsuit against the tax agency.
Terry Dehko and his daughter, Sandra Thomas, own and operate a small grocery store in Fraser, Michigan, a town of about 15,000 residents. They've been in business since 1978. Then one day last January they went to make a routine withdrawal at their bank and found a zero balance. Turns out, the IRS had beat them to it.
The IRS claimed there was evidence the Dehko family was involved in money laundering – that is, exchanging dirty money, such as from drugs or theft or other illegal activity, for good money by running it through another party. In this case, the third party would have been the bank, if the charges were true.
Naturally, money launderers would be motivated to quickly "clean" as much money as possible in as few transactions as possible, and they may send "runners" all over town making deposits. To deter such activity, banks are required to report to the Treasury single deposits or single withdrawals that exceed $10,000 in one day.
Of course, criminals have learned this, and some structure deposits to come just under that dollar limit to avoid scrutiny. So now the IRS isn't just looking for people with transactions exceeding $10,000, but also those who . . . do not. This is where the Dehkos drew suspicion.
No Hard Evidence, No Heads-up, No Hearing
The family grocery store had a policy of depositing no more than $10,000 at a time. Based on that and no other evidence, the IRS decided the family was structuring their deposits to cover their money laundering. So the tax man swooped in and cleaned out the Dehkos' account, using a practice civil forfeiture that allows the IRS to do so without evidence, warning, or a prompt hearing.
Nobody at the IRS bothered to ask the Dehkos why they made deposits in such a manner. It seems the store's insurance will only cover theft of cash up to $10,000, so they don't send employees to the bank with greater than that amount. It's a simple explanation that would've prevented enormous trouble . . . had any government official bothered to ask. Then again, the trouble was only to the small family business. To the IRS, it was just business as usual.
So then what?
According to Forbes, months passed, while the IRS never offered a shred of evidence that the Dehkos had broken the law. Nothing changed, in spite of the fact that a Bank Secrecy Act examination stated "no violations were identified," and the IRS learned that the Dehkos had never failed to pay their taxes.
In September 2013, the Dehkos took the unrepentant IRS bull by the horns, filing a constitutional lawsuit against the government with the help of the Institute for Justice. In the lawsuit:
- The Dehkos asked for the return of their money and for the federal court to declare that property owners are entitled to a prompt hearing either before or immediately following the seizure of their property.
- They also asked the court to affirm that law-abiding businesses that make frequent cash deposits for legitimate reasons are not breaking the law.
The suit named US Attorney General Eric Holder, Acting IRS Commissioner Daniel Werfel, and US Attorney for the Eastern District of Michigan Barbara McQuade.
A federal judge granted the Dekhos a hearing, scheduled for December 4, nearly one year after their assets were seized. But in mid-November, the IRS filed a motion to voluntarily dismiss its actions against the Dekhos and agreed to return the funds.
In a similar case, Mark Zaniewski of Serling Heights, Michigan, is also represented by the Institute for Justice. His case has also been dismissed.
The attorney for both cases, Institute for Justice Senior Attorney Clark Neily, said, "The IRS should not be raiding the bank accounts of innocent Americans, and it should not take a team of lawyers to put a stop to this behavior. We are thrilled that Terry, Sandy, and Mark will finally get their money back, but their fight does not end today. Our constitutional lawsuit against the federal government seeks to rein in the shameful practice of civil forfeiture."
An account of the situation in the Institute for Justice website calls civil forfeiture "one of the greatest threats to property rights in America today." The article goes on to say "the proceeds of civil forfeiture are used to pad the budgets of the very agencies that seize the property" and affords the taxpayers no prompt way to get a court review of the situation.
You can read a report issued by the Institute for Justice in 2010, called "Policing for Profit: The Abuse of Civil Asset Forfeiture," which adds more detail to how the federal government can, seemingly without consequence, make innocent property owners vulnerable to abuse.
You may like these other stories...
Lois Lerner isn’t a Superwoman, but she’s showing at least as much resilience as Lois Lane.A new report released on March 11 by the House Committee on Oversight and Government Reform, one of several government...
Each tax-filing season poses different challenges for small business owners – from understanding the new tax laws and regulations to preparing new forms and disclosures.But according to Kevin Anderson and Doug Bekker,...
In Denver, state legislators are probably thinking, "Why didn't we think of this earlier?" The state of Colorado's retail marijuana sales (separate from medical marijuana sales) in January alone generated...
Upcoming CPE Webinars
BAR is an acronym for: Boundaries, Authority and Role. This simple tool will provide participants with a solid understanding of leadership essentials to improve their performance.
This material is designed to provide a start-to-finish overview of how to plan and complete high-quality small audits efficiently.
In this session Excel expert David H. Ringstrom, CPA shares numerous techniques that you can use to work with charts more efficiently.
Key Accounting and Reporting Issues for Nonprofits No. 1: Overview and Statement of Financial Position
This material focuses on non-profit organizations organization, accounting and reporting.