The Internal Revenue Service is arguably the most powerful collection agency. Is it more than that? The truth is that the IRS has powers that extend well beyond collecting on a tax liability. Did you know that the broad authority of the IRS is used in many criminal situations?
A good example involves tracking “unusual” deposits. All deposits $10,000 or above must be reported to the feds. A lot of taxpayers are aware of this little fact. A lesser-known fact is that the IRS has the authority to seize funds when numerous transactions are made just below that magical $10,000 number. A power granted by the Civil Asset Forfeiture Reform Act of 2000.
The legislation was enacted to give the IRS the power to seize funds when the agency suspects that they are related to terrorism, drug operations and other criminal activity. The reasoning is that those who are suspected of breaking the law are often aware of the $10,000 reporting requirement, and so they make deposits that won’t trigger it.
The caveat is that the IRS can seize the funds without a conviction or indictment or before any criminal charges have even been filed. This little loophole is causing some absolutely innocent business owners and individuals to have their funds seized. In some cases, these individuals don’t get the full amount back.
The lesson here is that even if you know that you are completely innocent but have found yourself caught up in a situation such as this, contact a tax lawyer immediately.
Source: Forbes, “A New IRS Horror Story That Makes Past Scandals Pale In Comparison,” Rick Ungar, Oct. 27, 2014