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Seized Without a Crime: How the IRS Turned a Reporting Rule Into a Cash Machine
For nearly a decade, the Internal Revenue Service ran a program that let it walk into a small business owner's bank, freeze the account, and keep the money, without ever charging that person with a crime. The agency didn't need to prove drug trafficking. It didn't need to prove money laundering. It didn't even need a conviction. All it needed was a pattern of cash deposits that looked, on paper, like someone trying to stay under a $10,000 reporting threshold. That was enough to trigger a seizure, and once the money was gone, the burden fell on the citizen to prove their own innocence to get it back.
This is the story of "structuring" enforcement, one of the most quietly aggressive tools the federal government has ever pointed at ordinary Americans, and how it took a coalition of libertarian lawyers, a bipartisan group of lawmakers, a federal inspector general, and a New York Times investigation to force the IRS to admit what it had been doing.
The Law Behind the Weapon
The mechanism starts with the Bank Secrecy Act of 1970, which requires banks to report any cash transaction over $10,000 to the federal government. That reporting requirement exists for a legitimate reason: to make large-scale money laundering harder to hide. But Congress also criminalized the act of deliberately breaking transactions into smaller pieces specifically to dodge that report, a crime known as "structuring," codified at 31 U.S.C. § 5324. Critically, the statute does not require prosecutors to show the underlying money came from anywhere illegal. Depositing $9,500 repeatedly instead of one $10,500 deposit is, on its face, a federal violation, even if every dollar was earned legally.
That distinction, between how the money was earned and how it was deposited, is what the IRS's Criminal Investigation division exploited for years. Under civil forfeiture law, the government can seize property in a proceeding filed against the property itself, not its owner. No criminal charge is required. No conviction is required. The property owner has to fight in court, often for months or years, just to get their own money back.
The Numbers Behind the Program
The Institute for Justice, a public-interest law firm that became the leading watchdog on this issue, documented that between 2005 and 2012 the IRS seized more than $242 million across over 2,500 cases tied to alleged structuring violations. Roughly a third of those cases involved nothing more than a pattern of routine, sub-$10,000 transactions, with no other evidence of criminal activity of any kind.
The people on the receiving end were not cartel bosses. They were jewelry store owners, restaurant operators, gas station proprietors, scrap metal dealers, and farmers, the exact kind of cash-heavy small businesses that structure their banking activity for entirely mundane reasons, sometimes on the advice of their own banks, which encouraged them to keep deposits under $10,000 simply to avoid the paperwork burden of the reporting requirement itself.
The Inspector General Confirms It
In April 2017, the Treasury Inspector General for Tax Administration, the government's own internal watchdog, released a report that should have ended the program on its face. TIGTA examined a sample of 278 structuring investigations. In 91 percent of the cases where the source of funds could be determined, the money had come from an entirely legal source. IRS procedures state plainly that the purpose of the civil forfeiture program is to disrupt and dismantle criminal enterprises. The Inspector General's own data showed the opposite was happening: the agency was overwhelmingly targeting people who had committed no underlying crime at all.
The report went further. In 54 cases, property owners offered the IRS reasonable explanations for why their transactions fell under $10,000, and investigators frequently didn't bother to look into those explanations before moving to seize the funds. TIGTA also flagged a practice in which the government appeared to use the threat of criminal prosecution as leverage to pressure people into settling civil forfeiture cases, a tactic the Inspector General called potentially improper. And the report noted a motive behind the pattern: the Department of Justice had encouraged task forces to pursue "quick hits," structuring cases that could be resolved fast, rather than the far more labor-intensive work of building real money laundering or drug trafficking cases.
The Human Cost
Behind the statistics were people who lost their livelihoods waiting for the government to decide whether it would give their money back.
Andrew Clyde, a Navy veteran and owner of a gun store in Georgia, had nearly $950,000 seized from his business account in 2013. He was never charged with a crime. To get any of it back, he had to fight through federal court, ultimately forfeiting $50,000 to the IRS anyway and spending more than $100,000 in legal fees in the process, a settlement forced on him not because prosecutors proved wrongdoing, but because litigating the full amount would have cost him more than what remained.
Jeff Hirsch, who ran a Long Island convenience store distribution business with his brothers, and Randy Sowers, a Maryland dairy farmer, became the named plaintiffs in litigation and legislation that followed. Their cases, like Clyde's, involved no criminal charges and no proof of illicit funds, only a banking pattern the IRS treated as sufficient grounds to take their money and force them to prove a negative.
The Institute for Justice's broader analysis found the average IRS structuring-related forfeiture took nearly a year to resolve. In some cases, the government seized funds it later couldn't justify keeping. When Congress reviewed a batch of 454 petitions for returned property in 2016, the IRS itself recommended returning money in roughly 80 percent of cases. The Justice Department, which had final say over judicial forfeitures, approved returns in only 32 percent of those cases, a gap that suggests even the agency doing the seizing recognized how weak many of the underlying cases were.
Forced Into Reform
The program did not change because the IRS decided on its own that it had gone too far. It changed because it got caught.
A 2014 investigation and a front-page New York Times story, combined with lawsuits from the Institute for Justice, exposed the pattern publicly for the first time. Facing that pressure, the IRS announced in October 2014 that its Criminal Investigation division would no longer pursue forfeiture based solely on "legal source" structuring, meaning cases where the money itself wasn't tied to any other crime. The effect was immediate and dramatic: the value of assets seized for structuring collapsed from $31.8 million in 2014 to $6.2 million in 2015.
But a policy is not a law. It can be reversed by the next IRS commissioner or the next administration with a memo, and reform advocates knew it. That's why, in 2019, Congress passed the Clyde-Hirsch-Sowers RESPECT Act as part of the broader Taxpayer First Act, named for the very people whose cases had exposed the practice. Signed into law by President Trump, it did two things the policy change alone could not: it wrote into statute that the IRS can only pursue structuring forfeitures when the funds are tied to an illegal source or used to conceal other criminal activity, and it guaranteed property owners the right to a prompt court hearing, within 30 days of a request, rather than the months-long limbo they had faced before.
The results, based on the Institute for Justice's later analysis of internal IRS data, were stark. Structuring seizures fell from more than a quarter of all IRS forfeitures at their 2012 peak to roughly half a percent by 2019.
What the IRS Tried to Keep Hidden
Even after the legal reforms, the full record of what the agency had done remained largely invisible to the public. The IRS maintains an internal database called the Asset Forfeiture Tracking and Retrieval System, its own comprehensive log of forfeiture activity. Unlike the Justice Department's equivalent system, it was never made public. In 2015, the Institute for Justice filed a Freedom of Information Act request for the database. The IRS fought the disclosure for seven years, only turning it over in 2022 after IJ sued and won before the U.S. Court of Appeals for the D.C. Circuit.
That data, once finally extracted, allowed for the first truly comprehensive outside analysis of a decade of IRS forfeitures. It confirmed the broader pattern: the agency's forfeiture activity skewed heavily toward white-collar allegations rather than drug crimes, with over 70 percent of forfeited property tied to alleged money laundering and another 16 percent tied to structuring. It also showed the IRS seizing far more real estate, homes included, than is typical for other federal agencies, and that nearly half the forfeiture actions were civil rather than criminal, meaning no conviction, and in many cases no charge, was ever required to permanently take someone's property.
The Unfinished Reckoning
The reforms of 2014 and 2019 were real, and they worked, in the narrowest sense: the raw number of structuring seizures cratered. But the reforms only closed the specific loophole that became a public scandal. Civil forfeiture itself, the underlying legal mechanism that let this happen for over a decade with almost no judicial check, remains fully intact and is used by the IRS and dozens of other federal, state, and local agencies today. The Institute for Justice has continued pushing for broader reform, including ending the "equitable sharing" arrangements that let agencies profit directly from what they seize, changes that have gone nowhere in Congress despite both parties formally condemning civil forfeiture in their 2016 platforms.
What the structuring scandal ultimately reveals isn't a single rogue policy, but a structural incentive: a law enforcement agency empowered to seize first and let citizens litigate for their property afterward will, predictably, gravitate toward the easiest targets rather than the intended ones. It took a lawsuit, a public records fight that lasted seven years, an inspector general audit, and an act of Congress just to rein in one narrow slice of that power. The broader apparatus that made it possible is still standing.
The Law Behind the Weapon
The mechanism starts with the Bank Secrecy Act of 1970, which requires banks to report any cash transaction over $10,000 to the federal government. That reporting requirement exists for a legitimate reason: to make large-scale money laundering harder to hide. But Congress also criminalized the act of deliberately breaking transactions into smaller pieces specifically to dodge that report, a crime known as "structuring," codified at 31 U.S.C. § 5324. Critically, the statute does not require prosecutors to show the underlying money came from anywhere illegal. Depositing $9,500 repeatedly instead of one $10,500 deposit is, on its face, a federal violation, even if every dollar was earned legally.
That distinction, between how the money was earned and how it was deposited, is what the IRS's Criminal Investigation division exploited for years. Under civil forfeiture law, the government can seize property in a proceeding filed against the property itself, not its owner. No criminal charge is required. No conviction is required. The property owner has to fight in court, often for months or years, just to get their own money back.
The Numbers Behind the Program
The Institute for Justice, a public-interest law firm that became the leading watchdog on this issue, documented that between 2005 and 2012 the IRS seized more than $242 million across over 2,500 cases tied to alleged structuring violations. Roughly a third of those cases involved nothing more than a pattern of routine, sub-$10,000 transactions, with no other evidence of criminal activity of any kind.
The people on the receiving end were not cartel bosses. They were jewelry store owners, restaurant operators, gas station proprietors, scrap metal dealers, and farmers, the exact kind of cash-heavy small businesses that structure their banking activity for entirely mundane reasons, sometimes on the advice of their own banks, which encouraged them to keep deposits under $10,000 simply to avoid the paperwork burden of the reporting requirement itself.
The Inspector General Confirms It
In April 2017, the Treasury Inspector General for Tax Administration, the government's own internal watchdog, released a report that should have ended the program on its face. TIGTA examined a sample of 278 structuring investigations. In 91 percent of the cases where the source of funds could be determined, the money had come from an entirely legal source. IRS procedures state plainly that the purpose of the civil forfeiture program is to disrupt and dismantle criminal enterprises. The Inspector General's own data showed the opposite was happening: the agency was overwhelmingly targeting people who had committed no underlying crime at all.
The report went further. In 54 cases, property owners offered the IRS reasonable explanations for why their transactions fell under $10,000, and investigators frequently didn't bother to look into those explanations before moving to seize the funds. TIGTA also flagged a practice in which the government appeared to use the threat of criminal prosecution as leverage to pressure people into settling civil forfeiture cases, a tactic the Inspector General called potentially improper. And the report noted a motive behind the pattern: the Department of Justice had encouraged task forces to pursue "quick hits," structuring cases that could be resolved fast, rather than the far more labor-intensive work of building real money laundering or drug trafficking cases.
The Human Cost
Behind the statistics were people who lost their livelihoods waiting for the government to decide whether it would give their money back.
Andrew Clyde, a Navy veteran and owner of a gun store in Georgia, had nearly $950,000 seized from his business account in 2013. He was never charged with a crime. To get any of it back, he had to fight through federal court, ultimately forfeiting $50,000 to the IRS anyway and spending more than $100,000 in legal fees in the process, a settlement forced on him not because prosecutors proved wrongdoing, but because litigating the full amount would have cost him more than what remained.
Jeff Hirsch, who ran a Long Island convenience store distribution business with his brothers, and Randy Sowers, a Maryland dairy farmer, became the named plaintiffs in litigation and legislation that followed. Their cases, like Clyde's, involved no criminal charges and no proof of illicit funds, only a banking pattern the IRS treated as sufficient grounds to take their money and force them to prove a negative.
The Institute for Justice's broader analysis found the average IRS structuring-related forfeiture took nearly a year to resolve. In some cases, the government seized funds it later couldn't justify keeping. When Congress reviewed a batch of 454 petitions for returned property in 2016, the IRS itself recommended returning money in roughly 80 percent of cases. The Justice Department, which had final say over judicial forfeitures, approved returns in only 32 percent of those cases, a gap that suggests even the agency doing the seizing recognized how weak many of the underlying cases were.
Forced Into Reform
The program did not change because the IRS decided on its own that it had gone too far. It changed because it got caught.
A 2014 investigation and a front-page New York Times story, combined with lawsuits from the Institute for Justice, exposed the pattern publicly for the first time. Facing that pressure, the IRS announced in October 2014 that its Criminal Investigation division would no longer pursue forfeiture based solely on "legal source" structuring, meaning cases where the money itself wasn't tied to any other crime. The effect was immediate and dramatic: the value of assets seized for structuring collapsed from $31.8 million in 2014 to $6.2 million in 2015.
But a policy is not a law. It can be reversed by the next IRS commissioner or the next administration with a memo, and reform advocates knew it. That's why, in 2019, Congress passed the Clyde-Hirsch-Sowers RESPECT Act as part of the broader Taxpayer First Act, named for the very people whose cases had exposed the practice. Signed into law by President Trump, it did two things the policy change alone could not: it wrote into statute that the IRS can only pursue structuring forfeitures when the funds are tied to an illegal source or used to conceal other criminal activity, and it guaranteed property owners the right to a prompt court hearing, within 30 days of a request, rather than the months-long limbo they had faced before.
The results, based on the Institute for Justice's later analysis of internal IRS data, were stark. Structuring seizures fell from more than a quarter of all IRS forfeitures at their 2012 peak to roughly half a percent by 2019.
What the IRS Tried to Keep Hidden
Even after the legal reforms, the full record of what the agency had done remained largely invisible to the public. The IRS maintains an internal database called the Asset Forfeiture Tracking and Retrieval System, its own comprehensive log of forfeiture activity. Unlike the Justice Department's equivalent system, it was never made public. In 2015, the Institute for Justice filed a Freedom of Information Act request for the database. The IRS fought the disclosure for seven years, only turning it over in 2022 after IJ sued and won before the U.S. Court of Appeals for the D.C. Circuit.
That data, once finally extracted, allowed for the first truly comprehensive outside analysis of a decade of IRS forfeitures. It confirmed the broader pattern: the agency's forfeiture activity skewed heavily toward white-collar allegations rather than drug crimes, with over 70 percent of forfeited property tied to alleged money laundering and another 16 percent tied to structuring. It also showed the IRS seizing far more real estate, homes included, than is typical for other federal agencies, and that nearly half the forfeiture actions were civil rather than criminal, meaning no conviction, and in many cases no charge, was ever required to permanently take someone's property.
The Unfinished Reckoning
The reforms of 2014 and 2019 were real, and they worked, in the narrowest sense: the raw number of structuring seizures cratered. But the reforms only closed the specific loophole that became a public scandal. Civil forfeiture itself, the underlying legal mechanism that let this happen for over a decade with almost no judicial check, remains fully intact and is used by the IRS and dozens of other federal, state, and local agencies today. The Institute for Justice has continued pushing for broader reform, including ending the "equitable sharing" arrangements that let agencies profit directly from what they seize, changes that have gone nowhere in Congress despite both parties formally condemning civil forfeiture in their 2016 platforms.
What the structuring scandal ultimately reveals isn't a single rogue policy, but a structural incentive: a law enforcement agency empowered to seize first and let citizens litigate for their property afterward will, predictably, gravitate toward the easiest targets rather than the intended ones. It took a lawsuit, a public records fight that lasted seven years, an inspector general audit, and an act of Congress just to rein in one narrow slice of that power. The broader apparatus that made it possible is still standing.
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The following is a discussion of the above material on the IRS:
IRS archives:
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