The complete outrage: IRS structuring laws

From 2007-2013, the IRS seized 43 million dollars from more than 600 individuals who were not charged with crimes. This makes our blood boil, and this is why we do what we do.


One of the victims of this injustice put it best. Carole Hinders, after having the IRS take almost $33,000 from her checking account asked "How can this happen? Who takes your money before they prove that you've done anything wrong with it?"


Her 'crime'? Making several cash deposits just under $10,000. Her business, a Mexican restaurant in Iowa that she's had for about 40 years was a cash only business, and she was sincerely trying to run a legitimate establishment. So what's the deal?


Catching criminals?

This all goes back to our favorite law to hate, The Bank Secrecy Act of 1970. The law was created to catch criminals; as far as we can tell this law has mainly caused trouble for the average Joe, and we can find no evidence of this law causing any ground breaking criminal catches. The law created a requirement for banks to report to the government any cash deposits, withdrawals or transfers of more than $10,000. This amount has never been changed to reflect inflation. If it had, the reporting requirement today would be $61,665.21.


Seeing as actual criminals are pretty good at avoiding following the law, the government also came up with a whole new set of rules against "structuring", or intentionally making smaller cash deposits to fly under the radar and get away with money laundering.


Here's the crappiest part — If the government decides someone is guilty of structuring, they can be charged with a felony punishable by a fine and/or up to five years in prison. And? They can swoop in and clean out your bank account. No questions asked, no trial, no proof that you are doing something wrong.


IRS – The heavy handed, long arm of the law

This is where the story starts to make our stomach turn. The IRS started swooping in and cleaning out bank accounts of those they suspected were structuring their deposits. Hard edged criminals? No. Mostly small business owners who can't afford to fight the IRS.


2012: Randy Sowers, a dairy farmer for 3 decades

  • IRS agents arrived at his farm to tell him the IRS seized the bank account of more than $60k
  • He didn’t even know that depositing cash into his bank could be a crime
  • Nobody from the bank warned him about it
  • A petition was filed 10 months ago to the IRS to get his money back. The government has not responded


2013: Andrew Clyde, business owner in Georgia and Navy vet who served in Iraq

  • He had an insurance policy that only protected his cash on hand up to $10k, so every time he got close to having that much money, he would deposit it
  • The IRS seized the entire account – $900,000


2014: Lyndon McLellan, convenience store owner in NC

  • IRS seized $108,000 – It had taken McLellan 13 years to save that money
  • He was not aware of structuring laws
  • He was never charged with a crime


2013: David Vocatura and his brother, family owned bakery in Norwich, CT

  • The family owned the business for nearly a century and until a few years ago they only accepted cash
  • Agents came to his store asking he and his brother if they were trafficking drugs or running prostitution ring
  • Someone at their bank said that each time they brought in more than $10,000, an employee had to fill out forms. They decided to make life easier for the bank and make smaller deposits
  • They have been co-operating with the IRS to prove there was no criminal wrongdoing
  • In February the US attorney for the District of CT offered them a deal: plead guilty to structuring. This is considered a felony. They would both potentially go to jail for 4 years, forfeit the $68k and an additional $160,000 of personal assets.
  • They rejected the offer. If they hadn't, there would be no story. The government would simply say "What? They're guilty. They said so themselves".
  • They eventually, after a lengthy fight, got their money back….but…
  • In May, the US attorney for the District of CT served them with a grand jury subpoena to get access to their financial records from 2007-2013….it looks like the IRS is going to get their assets one way or another


Listen to Anthony and Claudine discuss these atrocities in our podcast here. And if you have a story to share, or need assistance with a tax matter, learn about our services here, or contact us here.