Congressional Lawmakers Can Help Stop IRS’s Abuse of Small Businesses—But Will They?

Published August 8, 2017
One March morning in 2015, it all came crashing down. IRS agents seized the Thangsongcharoens’ store, Mii’s Bridal & Tuxedo, holding an impromptu fire sale and auctioning off the store’s designer goods to recover unpaid taxes allegedly owed to the government.

From the Thangsongcharoens’ point of view, as detailed in their lawsuit against the government, IRS agents sold the store to themselves, buying everything in sight for “pennies on the dollar” to cover a tax debt was wasn’t actually owed.

The lawsuit also claims one particularly cruel IRS agent treated the exercise as an impromptu “Take Your Children to Work Day,” showing his or her progeny the perks of being an armed IRS agent.

“Armed agents then seized the inventory from Mii’s owners, an elderly and feeble immigrant couple from Thailand, and sold and liquidated the entire stock within four hours,” the lawsuit claims. “The lead agent brought four children to join the armed agents and tag along during the entire process. Remarkably, seizing agents bid on and purchased property during the sale. They also knowingly seized a war veteran’s uniform hat that did not belong to Mii’s and numerous items that were clearly outside of the scope of the items in the wrongfully obtained order granting entry onto the premises.

“Unfortunately, the small tax debt at issue turned out not to even be owed in the first place,” the lawsuit claims.

The IRS is not known for its diligence or accountability. Congress cannot completely prevent such things from happening, but it can act now to create fewer opportunities for IRS abuses.

One of the IRS’s main tools for harassing small businesses is the use of “structuring” as a pretext for seizing and collecting small business owners’ assets and property. This was not the involved in the Thangsongcharoens’ case, but a bill under consideration in Congress could help reduce the agency’s mistreatment of small business owners like them.

On July 13, the U.S. House Ways and Means Committee approved House Resolution 1843, titled the “Clyde-Hirsch-Sowers-RESPECT Act.” It would prohibit the IRS from carrying out seizures relating to structuring transactions unless evidence of an actual crime is obtained and demonstrated at a post-seizure hearing.

Currently, simply depositing money can be treated as a crime. The IRS requires banks to file “suspicious activity reports” with the U.S. Treasury Department if someone is suspected of “structuring” deposits to avoid bank reporting rules. Because banks are required to report transactions larger than $10,000, law enforcement agents interpret depositing slightly less than $10,000 as intentionally avoiding detection — the money is the crime. Under this rule, frequent or large deposits of cash are evidence of criminal activity. Guilt is presumed until the individual proves otherwise.

Such reversals of the American concepts of due process and the presumption of innocence should not be allowed to stand another day. Just the thought of having to deal with such an injustice likely discourages potential entrepreneurs from starting a business. If the government can take away one’s entire livelihood for the “crime” of depositing cash, why even bother?

Small businesses, such as Mii’s Bridal & Tuxedo, are the backbone of local communities. The government should enact policies to encourage more people to start small businesses, not drive people out of business.

Justice for victims of the IRS’s bullying is justice for all Americans, and it must not be delayed another day.

[Originally Published at the Washington Examiner]