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The IRS Seizes An Awful Lot Of Money From Innocent People
By
Christopher Robbins
Published Oct 26, 2014
Modified Oct 27, 2014
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By
Christopher Robbins
Published Oct 26, 2014
Modified Oct 27, 2014
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In yet another infuriating example of the government abusing civil forfeiture, the Times reports that the IRS has been seizing thousands of dollars from small businesses and ordinary citizens without any proof of wrongdoing.
Banks must report any deposit above $10,000 to the federal government, but they must also report deposits slightly below $10,000 because they're seen as possible indicators of criminal activity. That possibility is enough for the IRS to legally take $33,000 from the owner of a Mexican restaurant in Iowa, or $447,000 from a family-run cigarette and candy distributor on Long Island. Once the IRS has the money, they offer the parties a choice: pay a settlement, or face the threat of legal action while your money stays in limbo.
“They’re going after people who are really not criminals,” David Smith, an attorney and legal expert on civil forfeiture, told the Times. “They’re middle-class citizens who have never had any trouble with the law.”
The IRS initiated 639 of these seizures in 2012, compared to 114 in 2005. One in five were actually prosecuted. The median amount seized last year was $34,000, and legal fees to claw back the money can exceed $20,000, according to the Institute for Justice.
Army Sgt. Jeff Cortazzo of Arlington, Va., began saving for his daughters’ college costs during the financial crisis, when many banks were failing. He stored cash first in his basement and then in a safe-deposit box. All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do.
“She said: ‘Oh, that’s easy. You just have to deposit less than $10,000.’”
The government seized $66,000; settling cost Sergeant Cortazzo $21,000. As a result, the eldest of his three daughters had to delay college by a year.
“Why didn’t the teller tell me that was illegal?” he said. “I would have just plopped the whole thing in the account and been done with it.”
After the Times began reporting on the practice, the IRS released a statement vowing to "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 and the case has been approved at the director of field operations (D.F.O.) level."
We spoke with Smith, the civil forfeiture expert, earlier this year for a series on how the the NYPD and the District Attorneys abuse the civil forfeiture practice here in New York City.
Tagged
abuse of power
civil asset forfeiture
civil forfeiture
corruption
irs
Christopher Robbins
Christopher Robbins is a New York City reporter covering transportation, affordable housing, local politics, and criminal justice. His work has also appeared in New York Magazine, The Village Voice and The New York Times. Chris is a graduate of Patrick Henry High School in Roanoke, Virginia, and enjoys biking to Fort Tilden in the summertime.
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