Another IRS overreach

TPITTSBURGH POST-GAZETTE he Internal Revenue Service has seized millions of dollars from people who came by their money legally, just because of how they deposited it in banks. That’s not the worst finding of a recent government report on how the IRS used a structuring law to seize money.

That law is part of a system Congress set up to catch illegal enterprises, such as drug gangs, by monitoring large cash transactions. Banks must file reports on cash deposits of more than $10,000, and it’s illegal for their customers to divide— or “structure”—deposits in order to avoid triggering that requirement. The law says people who structure their deposits can be fined and imprisoned and may have to forfeit their money even if they’ve committed no other crime.

In at least 252 of the 306 cases randomly selected for study by the Treasury inspector general for tax administration, the cash actually did come from legal sources, not from crimes. Sometimes, the inspector general found, the government didn’t even consider the targets’ reasonable explanations for their depositing practices. For example, some businesses deposit less than $10,000 at a time because their insurance would not cover any more cash.

The IRS says it mended its ways in 2014 and won’t pursue the forfeiture of legally obtained money except in “exceptional” cases. But that shouldn’t be the IRS’ decision. Money Americans worked hard to earn should never be taken just because of how they deposit it. If lawmakers don’t want to repeal the structuring law altogether, they should at least modify it to protect innocent Americans.

A structuring law should be a tool for fighting money laundering, not a trap for hardworking people who happen to be capitalists.

Beyond that, we need to be wary when presumptive government rears its head. When the government presumes to redefine perfectly legal action as illegal, that is Big Brotherism at its worst. And when the IRS is left to police itself, especially after an abuse like this one, it means Congress is not doing quality oversight.