The Internal Revenue Service (IRS) has come under scrutiny recently for seizing assets that the IRS claims were the subject of structuring violations. Structuring is the practice of consistently making cash deposits and/or withdrawals of less than $10,000 to avoid mandatory reporting requirements (filing a form 8300), a large part of which were put in place to prevent money laundering and tax evasion. Prior to a policy change in 2014, the IRS was seizing funds that they believed were the subject of structuring violations whether or not the IRS knew that the funds were coming from a legal or an illegal source.
Recent hearings conducted by the House Ways and Means Committee have shown that there are more than 600 cases of the government seizing legally sourced funds prior to the 2014 policy shift and frozen assets involved in these 600 cases yet to be returned to the taxpayers.
As a result of the Committee hearings, legislation has been introduced that would require the IRS to establish probable cause to show that the source of funds involved in a structuring scheme originated from an illegal source before the funds could be seized. Under the proposed legislation, the IRS would be required, in most cases, to give 30 days of pre-seizure notice and hold a post-seizure hearing within 30 days of the notice. Additionally, as a bonus, any interest that accrues on the wrongly seized funds will be exempt from income tax. The proposed legislation was scheduled for a mark up by the House Ways and Means Committee on July 7, 2016.
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