New law helps business owners avoid asset seizure by the IRS

Being a small business owner can be at once rewarding and challenging. Having the IRS overseeing financial transactions and facing the possibility of losing assets to IRS seizure only makes matters more difficult.

Under what rule does the IRS seize business assets?

As a general rule under the Bank Secrecy Act of 1970, banks are required to report any transaction over $10,000. For a variety of reasons, many small business owners choose to deliberately keep their transactions under the $10k limit, thereby keeping the transfer off the books. This may be for convenience, it may be because they do not make more than $10,000 at any one time, or it could be for more nefarious purposes.

Under the old law, the IRS is able to seize business assets for what is deemed structuring, or the intentional deposit or withdrawal of money in increments of less than $10,000 for the express purpose of not reporting the transaction. But many businesses have legitimate reasons for keeping their transactions below the $10,000 threshold. For those businesses that deal in mostly cash, such as the food and beverage industry, it is necessary to make multiple smaller transactions in order to keep cash off the premises, rather than in an office safe.

New litigation

This year, President Donald Trump has signed into effect the Taxpayer First Act. This act was created to protect those smaller businesses that are not in fact structuring their transactions deliberately but simply following the norms for their particular industry. Contained in the Taxpayer First Act is an Act called the RESPECT Act, which was created in response to two small business owners who had a collective $509,000 seized after the IRS accused them of structuring their transactions illegally. The pair had to proceed through  high profile cases and legal action to get their money back.

Seizures of money and property for structuring has seen a sharp down turn and the new legislation guarantees that  such cases are to be promptly reviewed and settled in order to protect the due process of those business owners. This also helps ensure that businesses need not alter their financial procedures in order to keep IRS attention off of their accounts.

What does this mean?

This legislation seeks to lower the number of people who have their property wrongfully seized, while providing a faster avenue for recovery of funds. In 2017 sample of 278 structuring cases reviewed by the Treasury Inspector General for Tax Administration, fewer than 10 percent were actually guilty of deliberate illegal activity. This means that an overwhelming 91 percent of business owners in those cases were being unlawfully persecuted.

This legislation is designed to protect those smaller businesses that do deal in a large number of transactions. It will also help to hold the IRS accountable so that if they do seize funds, the owners may request an appeal hearing within 30 days. The powers of the IRS have been far reaching for a very long time and these unlawful seizures have led to the destruction of many smaller businesses.

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