What Is Structuring Deposits, And How Can It Get Me In Trouble?
Nonpayment of taxes is not a matter the Government takes lightly. The IRS has many options for enforcement, including wage garnishments and the ability to place liens on your real property. Another collection method often employed by IRS agents is to seize your bank account. Imagine going to the bank to withdraw funds, only to find out it has been frozen or completely depleted. The hardship a total lack of funds, or lack of access to funds, has on your life is unimaginable to most. If you are a small business owner, the problem is even more serious. Without working capital, it is near impossible to keep a business venture running smoothly. However, this is just what happened to one North Carolina man.
FoxNews reports on the story, referred to as an allegation of “structuring”. Here’s how it happened:
- The business owner made deposits totaling just under $10,000.00.
- The funds were deposited in more than one transaction, in a single day.
- The IRS refers to this type of deposit practice as “structuring”, which essentially means the depositor is trying to deposit close to $10,000.00 but avoid the bank reporting a deposit in this amount. Because banks are required to report a deposit of over this figure, the theory is that if you “structure” your deposits by making several smaller denomination transactions, you can avoid the requirement of reporting the infusion of cash into your account.
- The purpose of reporting a possible “structured” deposit is to crack down on profiting from criminal activity, such as drug related crimes.
In this case the IRS seized the entire balance in the man’s account, just over $100k. The backlash this business owner faced in his community caused him to lose not only his bank account, but also his business. This was last October, and the IRS has since tried to cut back on its forfeiture of accounts, thought to be funded by “structuring”, because errors have occurred with this procedure. The rub for the North Carolina man? He is still trying to get his money back from the IRS. Unfortunately, the burden for showing no wrongdoing has taken place falls on the account owner. This is true even if the IRS fails to file charges. This case shows the importance of having a skilled legal tax professional on your side when facing an investigation, questioning, audit, or other dealing with the IRS. If you have been questioned about any of your banking or tax practices, contact us prior to responding to the IRS or an agent.