Hundreds of millions of dollars were seized by the Internal Revenue Service from bank accounts of law-abiding U.S. citizens over the past decade, often without evidence of any criminal wrongdoing, according to the group Institute for Justice.
From 2002 to 2012, the IRS practiced a "seize first, ask questions later" strategy when it seized $242 million from more than 2,500 individuals and businesses, according to a report by the Institute for Justice, which is "the nation's only libertarian, civil liberties, public interest law firm," according to its website.
If a transaction of more than $10,000 is made, it must be reported to the IRS. So an obscure rule exists to keep money launderers, terrorists and other criminals from making small deposits to evade federal bank reporting laws, The Washington Free Beacon reported.
But even though the IRS said the seizures over the past decade were made to "structure" violations for the obscure rule, civil liberties advocates have said the tax agency used the rule to instead target the bank accounts of Americans with no other evidence of a crime.
"The IRS's forfeiture activity exposes the rotten core of federal civil forfeiture law," Institute for Justice attorney Scott Bullock said in a statement. "Allowing law enforcement to take property from people without convicting them of a crime and then profit from the seizure will inevitably lead to abuse."
As a result, people have had their bank accounts drained without the IRS putting any effort into investigating the situation while property owners have been forced into difficult legal battles to reclaim their money, according to Institute for Justice.
In October, the tax agency seized $33,000 from a Mexican restaurant owner's bank account for structuring violations even though she was never accused of a crime. But after the New York Times highlighted the case two months later, federal prosecutors dropped the case quietly.
In the past decade, at least a third of the IRS's asset forfeiture cases have been based solely on a series of cash transactions under $10,000, with no other criminal activity alleged. And since a majority of the cases are civil, and not criminal, the tax agency is expected to meet a lower standard of evidence to secure a seizure.
The "surest way to prevent innocent people from losing money unjustly would be to end civil forfeiture and replace it with criminal forfeiture. Short of that, removing the financial incentive to seize, raising the standard of proof to forfeit and enacting other procedural reforms would help protect people from losing their bank accounts when the government has little or no proof of criminal wrongdoing," Institute for Justice stated.
The IRS told the Washington Post that it would no longer indiscriminately target bank accounts.
"We recognize that small businesses and other taxpayers often make deposits under $10,000 without any intent to avoid the reporting requirements," the IRS said in a statement. "After conducting a review of structuring cases, the IRS concluded that it will focus its limited resources on cases where evidence indicates that the structured funds are derived from illegal sources."
