IRS Seized Millions from Individuals and Small Businesses by Accusing Them of 'Structuring Violations' When Making Deposit Under $10,000
February 10, 2015
AP -
An Iowa widow is charged
with a crime and had nearly $19,000 seized from her bank after
depositing her late husband's legally earned money in a way that evaded
federal reporting requirements.
Janet Malone,
68, of Dubuque,
is facing civil and criminal proceedings under a law
intended to help investigators track large sums of cash tied to criminal
activity such as drug trafficking and terrorism. But some members of
Congress and libertarian groups have complained that the IRS and federal
prosecutors are unfairly using it against ordinary people who deposit
lawfully obtained money in increments below $10,000.
At
issue is a law requiring banks to report deposits of more than $10,000
cash to the federal government. Anyone who breaks deposits into
increments below that level to avoid the requirement is committing a
crime known as "structuring" — whether their money is legal or not.
The
IRS has increasingly used civil forfeiture proceedings to seize money
from individuals and small businesses suspected of structuring
violations, according to a review by the Institute for Justice, a
libertarian group. The agency seized $242 million in 2,500 cases from
2005 to 2012 — a third of which arose from nothing more than cash
transactions under $10,000. Nearly half was returned after owners
challenged the action, often a year later.
Some of the depositors
had broken up the deposits to save their bankers from having to submit
paperwork or because they mistakenly believed it was a way to avoid
unwarranted government scrutiny. The Treasury Department receives
millions of reports every year, and deposits above the $10,000 threshold
incur no additional fees or taxes.
Facing
criticism of the practice, the IRS announced in October that
investigators would no longer seize funds in cases involving legal
sources of money "unless there are exceptional circumstances" and would
focus on illegal sources. A U.S. House subcommittee is expected to hear
testimony about the practice Wednesday, at a hearing called, "Protecting
Small Businesses from IRS Abuse."
Larry
Salzman, an attorney with the Institute for Justice, criticized the
government's case against Malone given its declared shift in practice.
"This
is shocking because it demonstrates that prosecutors are not taking
seriously the IRS' alleged policy change not to prosecute legal source
structuring," he said.
After
the policy change, federal prosecutors in Iowa agreed to return money
the IRS seized from two people accused of structuring, including a
restaurant owner who had $33,000 taken and a doctor who fought to get
back $344,000 in earnings from his medical practice. But prosecutors
declined to drop the civil forfeiture case over $18,775 the IRS seized
from Malone.
Instead, they
added a misdemeanor criminal charge last week alleging she willfully
violated the law, after her husband had been warned about the practice
four years ago. Malone is expected to plead guilty next week and let the
government keep the money, under a plea agreement filed Monday. The
charge carries up to one year in jail and a $250,000 fine.
IRS
agent Jeff McGuire first went to Malone's home in 2011 to investigate
alleged structuring by Ronald Malone, who was dying of cancer, records
show. Ronald Malone admitted that bank deposits totaling $35,500 he'd
made could appear to be structured and signed a form acknowledging he'd
been warned about the law; no charges were filed. Janet Malone was
present for part of the meeting.
Shortly
before his death in October 2011, Ronald Malone told his wife about a
briefcase containing $180,000 cash from his job as a publishing
executive, gambling winnings and investment income. She deposited some
of it in increments between $5,800 and $9,000. The IRS obtained a
warrant to seize it based on suspicion that the transactions were meant
to avoid reporting requirements.
Janet
Malone was irate when she learned of the 2013 seizure, noting that she
didn't sign the form warning her husband and didn't remember details of
the earlier visit because "she was in a state of despair over her
husband's health," according to an IRS affidavit.
"You
won't prosecute a widow," Malone said, according to the affidavit.
McGuire responded that the family had been given a pass from the IRS
once.
Spokesmen for the IRS
and U.S. Attorney's Office declined to talk about how the case fits with
the new policy. Malone's attorney declined to comment.
No comments:
Post a Comment