So if you ever have the opportunity to deposit $10,000 or more in the bank, you must fill out some extra paperwork or in some way notify the government about the deposit. And don’t think you can just deposit $5,000 today and then come back tomorrow and deposit the other $5,000 as a way of getting around it — the prosecutors call this “structuring transactions” and it’s illegal.
But what if you just happen to be depositing $5,000 today and another $5,000 tomorrow? How do they know the difference?
Well, it turns out they play hunches… and they sometimes end up beating down some poor schmuck who wasn’t trying to get away with anything but just happened to be making a bunch of smaller deposits.
The IRS can and does seize bank accounts from people it suspects of structuring deposits, and then it’s an uphill fight to get the money returned.
This can ruin people who have done nothing wrong, as some recent cases have shown. Gas station owner Mark Zaniewski had $70,000 seized by the IRS, which forced him to close down his station. He was lucky enough to get some help from the legal team at Institute for Justice, since once all your money has been seized, it’s hard to afford a lawyer, and the courts won’t appoint one for you to fight a civil case. The IRS backed down once he got lawyered up.
In another case, supermarket owner Terry Dehko had $35,650 stolen from him by the IRS. He tried to explain: “My clerks routinely deposited cash earned at Schott’s at a bank right across the street. It’s never a good idea to risk letting too much money accumulate on-site. Like many other small businesses, my store’s insurance policy specifically limits coverage for cash losses to $10,000.” The IRS went through his books and found that he wasn’t trying to hide anything, but they tried to keep the money anyway. He got help from the Institute, and eventually got his money back too. But an Institute spokesperson complained:
“The IRS should not be raiding the bank accounts of innocent Americans, and it should not take a team of lawyers to put a stop to this behavior… Our constitutional lawsuit against the federal government seeks to rein in the shameful practice of civil forfeiture.”
In another recent case, the government was forced to return $136,000 it had seized from a Chinese restaurant because the IRS missed a court filing deadline (perhaps we can chalk this up to the effects of the government shutdown).