“The rights of some individuals and businesses were compromised,” the Treasury Inspector General for Tax Administration (TIGA) said of a bungled Internal Revenue Service effort to “dismantle criminal enterprises.”
Citing regulations under the Bank Secrecy Act, which requires reporting of bank transactions in excess of $10,000, IRS agents seized $17.1 million from Americans they believed were involved in criminal activity.
Just one problem…
According to a recent report from TIGA, agents were wrong 91 percent of the time based on investigations of 278 of the seizures conducted by the watchdog.
“Most people impacted by the program did not appear to be criminal enterprises engaged in other alleged illegal activity,” TIGTA said in a statement. “The report also concludes that the rights of some individuals and businesses were compromised in these investigations.”
Agents, it turns out, were simply seizing the funds of individuals they suspected of “structuring” deposits in amounts less than $10,000 without bothering to conduct proper investigations.
“In most instances, interviews with the property owners were conducted after the seizure to determine the reason for the pattern of banking transactions and if the property owner had knowledge of the banking law and had intent to structure,” the report said.
Individuals and businesses affected by the overreach often faced major financial difficulty as a result of the government ineptitude.
On top of that, they were forced to work with often unhelpful IRS officials in efforts to retrieve the wrongfully seized money.
“When property owners were interviewed after the seizure, agents did not always identify themselves properly, did not explain the purpose of the interviews, did not advise property owners of any rights they might have, and told property owners they had committed a crime at the conclusion of the interviews,” TIGA reported.
The Institute for Justice, in a 2015 report, provided a prime example of how the IRS abuses negatively affected the agency’s targets:
Lyndon McLellan runs a convenience store in Fairmont, N.C., and has done so without incident for more than a decade. All that changed in 2014, when the Internal Revenue Service used civil forfeiture to seize McLellan’s entire $107,000 bank account. He did not stand accused of selling drugs or even of cheating on his taxes; in fact, he was not charged with any crime at all. Rather, the IRS claimed that he had been “structuring” his deposits — that is, breaking them into amounts of less than $10,000 to evade federal reporting requirements for large transactions. McLellan, like most people, did not even know what “structuring” was, let alone that it was illegal. His niece, who handles the deposits, had been advised by a bank teller that smaller deposits meant less paperwork for the bank, so she kept deposits small.
The government finally returned McLellan’s funds after a legal battle and public outcry, but the small-business owner was still forced to wait nearly two years before the government compensated the thousands he spent battling the wrongful seizure in court.