Could You Be the Next Innocent Victim of IRS Bank Account Raids?

Some of the Republicans who swept into victory in November vowed to hold hearings on IRS abuses. That’s an important step to take.

But beyond scolding the Internal Revenue Service for targeting conservatives for audits and enforcement actions, the new Congress must overhaul the tax code itself. Changing the culture of the IRS won’t do much to help the millions of individuals and small businesses who are struggling to comply with volumes of arcane regulations and petty rules.

The tax laws approved by previous Congresses give the IRS authoritarian powers that no agency under our Constitution should have – such as the power to seize assets on mere suspicion, without so much as charging anyone with a tax crime.Taxpayers can have their bank accounts raided by the IRS simply for making deposits. If the agency deems the deposit amounts suspicious, it can seize them under civil asset forfeiture laws.

The $10,000 Catch-22

The freedom-oriented Institute for Justice recently took up the case of a restaurant owner who does business in cash. She made multiple cash deposits just under $10,000 each (many small businesses won’t keep more than $10,000 in cash due to insurance limits and risk of theft). For that, IRS robber barons broke into her bank account and seized more than $30,000.

After the New York Times published a feature story about this and other victims of the IRS, the chastised agency did a public relations about-face. It put out a statement saying that it will “no longer pursue the seizure and forfeiture of funds associated solely with ‘legal source’ structuring cases unless there are exceptional circumstances justifying the seizure and forfeiture…”

In other words, the IRS won’t seize funds… unless the IRS director of field operations thinks there’s a good enough reason to do it. We are supposed to trust this agency (with a long track record of abuse) to use its discretion.

IRS agents continue to treat the ill-defined act of “structuring” as a crime, even if no underlying tax evasion or money laundering is involved. Basically, if you appear to have structured financial transactions in order to stay below legal reporting thresholds, then you are guilty of “structuring.” That’s right, implementing strategies to try to stay within the letter of the law is against the law!

In an article for Forbes, Rick Ungar wrote that “the civil asset forfeiture practice amounts to nothing short of grand larceny on the part of the Internal Revenue Service.” He noted that 80% of the bank accounts seized by the IRS involve individuals or businesses that are completely innocent.

Suspicious Activity Reports:
What You Need to Know

If you have a bank account where you so much as make any large or “unusual” transactions, your account will almost certainly be flagged by your bank and monitored by the IRS. That’s because banks must secretly file Currency Transaction Reports on customers. Under Patriot Act Section 301, banks must also file Suspicious Activity Reports on customers deemed to be engaging in unusual transactions.

Any cash transaction exceeding $10,000 can result in banks submitting secret reports to federal bureaucrats. Banks may also keep records for the government of purchases of money orders and cashier’s checks under the $10,000 threshold on the assumption that multiple transactions below the reporting limit may be evidence of illegal structuring.

Banks filed more than 700,000 Suspicious Activity Reports on customers last year. Questioning your bank about what it reports to the government will only encourage it to view you with suspicion and scrutinize your activities for anything that may be reportable. Bank privacy is illegal in the United States, so any transaction that you don’t want known to the government must be done outside the banking system.


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