GOP opens new line of attack on IRS

Congressional Republicans accused the IRS Wednesday of seizing the assets of innocent small businesses, adding to a steady stream of GOP criticism of the tax agency and its leadership.

Lawmakers made the assertions during a hearing before the House Ways and Means subcommittee on oversight, citing cases in which the IRS has accused small-business owners of illegally structuring funds and seizing business assets when there is no evidence of illegal activity.

{mosads}“How can you be guilty on a suspicion,” demanded Rep. Mike Kelly (R-Pa.), who often touts his own background as a small-business owner.

The Bank Secrecy Act of 1970 requires financial institutions to report cash transactions exceeding $10,000 in currency. The reports, according to the IRS, are used to uncover an array of illegal cash-generating activities like drug dealing.

To get around that reporting requirement, however, IRS Commissioner John Koskinen said criminals manipulate cash transactions to fall below the $10,000 threshold. This restructuring is a felony offense, and businesses that handle cash transactions under $10,000 have become a target of civil asset forfeiture cases.

Republicans cited cases they said point to overzealous federal actions, including a case of an Iowa woman who lost her cash-only Mexican restaurant after the IRS wrongfully seized her bank account for $33,000.

Subcommittee Chairman Peter Roskam (R-Ill.) said it took the woman a year and a half to get her money back. 

“The IRS grabbed these taxpayers by their throat and squeezed and squeezed and squeezed without mercy and nearly ruined them and made their lives miserable,” he said. “Would you be willing to apologize to those taxpayers who were so abused?

Following repeated calls from Roskam for an apology, Koskinen said he’s “sorry that mistakes happen.” 

“Anyone not engaged in illegal activity who got stuck in the system, I think, deserves an apology,” he said. “I would apologize to anyone who was not treated fairly under the code.” 

 Still Koskinen said the IRS is not solely responsible for determining which businesses to bring cases against. He said it takes a U.S. attorney and a federal judge to find probable cause.

He said the agency changed its civil asset forfeiture policy in October to better protect innocent taxpayers. He said the IRS is now focusing its resources solely on cases where evidence indicates that the structured funds are derived from illegal sources.

The exchanges reflect the latest in a string of issues at the IRS that have drawn Republican ire, including the high-profile investigation into the agency’s targeting of Tea Party groups and loosing emails from a former official at the center of the transgression.

Democrats, meanwhile, used their questioning to highlight the agency’s budgetary problems.

“I am deeply concerned,” said Rep. John Lewis (D-Ga.).

The IRS budget request for next year was just pared down by $346 million. This year, the agency will get $10.9 billion in funding, down more than $1 billion from the agency’s high watermark, in 2010.

Koskinen has repeatedly warned that the decrease would affect the agency’s operations this tax season.

Taxpayers who call the agency with questions about their filing, he said, have less than a 50 percent chance of speaking to a live representative.

“Because we have 13,000 fewer, and are headed toward having 15- or 16,000 fewer, we simply don’t have enough people to answer the phone,” Koskinen said. “That’s just a miserable level of service and one we don’t think the taxpayers deserve.”