An outdated IRS policy caused a small business owner to turn over nearly $150,000 in his business bank account because of an audit. Prior to October 2014, IRS monitored “structuring” activity, in which some businesses break up banking transactions to curtail suspicion. Transaction over $10,000 are flagged and tip off the IRS to target and investigate potential criminal operations and cash-only businesses.
The small business owner, because he made made several regular withdrawals under the $10,000 limit, triggered a review of his account. The business owner signed documentation turning over his bank account funds to the IRS. The IRS, however, did not make any clear accusation of the business owner’s alleged illicit activities that warranted the seizure.
In October 2014, the IRS changed its policy regarding structuring and restricted asset forfeiture to owners suspected of criminal activity. Finally, in March 2015, the US Department of Justice issued a policy statement to recommend seizures be directly only to the most serious illegal banking transactions.
IRS Approves Non-Retroactive Repayments os Seized Funds
The changes, however, were not retroactive. The Institute for Justice, on behalf of the business owner, filed for a petition to mitigate their case. On February 18th, 2015, the IRS approved the petition for full repayment of the funds seized by the IRS.
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