(Bloomberg) U.S. House members pressed the Internal Revenue Service to go easier on cash-dependent small businesses that are at risk of having assets seized by the tax agency.
Under U.S. law, it’s a crime to engage in what’s known as structuring, or organizing cash deposits to avoid reporting requirements that occur for transactions exceeding $10,000. The IRS —after getting a warrant from a judge—can seize those assets, a practice that has come under scrutiny in the past year.
“These small businesses keep getting caught in the snares largely because they are just that; they’re small,” Representative Peter Roskam, an Illinois Republican, said during a hearing Wednesday in Washington.
Roskam’s subcommittee is hearing testimony from three small businesses after questioning IRS Commissioner John Koskinen.
“We’re just hardworking farmers,” said Randy Sowers, owner of South Mountain Creamery in Middletown, Maryland. “We don’t have time to be criminals. We have 1,000 animals to take care of.”
Sowers said he and his wife split a deposit of $12,000 in extra cash from a festival into two parts on the advice of a bank teller. That triggered the IRS investigation, which resulted in more than $62,000 being seized.
He said the amount seized was later reduced to $29,500 in a settlement. He said government officials told him the fact that he spoke to a reporter led them to decide not to be more lenient.
Andrew Clyde, who sells guns in Georgia, said his insurance didn’t cover cash in excess of $10,000 so he always brought less than that amount to the bank.
Banks report to the government when they notice multiple transactions designed to avoid the $10,000 level.
The IRS reviewed its policy last year and changed it after media reports about asset seizures. The agency will now typically ignore cases where the money doesn’t come from illegal sourcing, such as drug dealing, instead of seizing assets only on evidence of structuring.
The changes didn’t satisfy some Republicans, including Mike Kelly of Pennsylvania, who compared hurting small businesses’ access to capital to torture of prisoners.
“This is waterboarding at its worst,” he said.
Representative Charles Rangel, a New York Democrat, said the IRS had been enforcing a “bad law” that violated common decency.
“The law doesn’t make any sense,” he said.
Last year, Representative Sander Levin of Michigan, the top Democrat on the Ways and Means Committee, and panel Chairman Dave Camp of Michigan, who has since retired, introduced a bill that would let people whose assets were seized request a hearing within 14 days.
Koskinen said he supported giving people the right to contest seizures. He said he wasn’t sure if the 14-day requirement was long enough, because he said people should be able to handle the issue administratively without hiring a lawyer.
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