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Tue May 5, 2015, 02:44 PM

IRS Seizes Over $100,000 From Innocent Small Business Owner, Despite Promise To End Raids

Source: Forbes

Wielding a banking law intended to thwart drug trafficking and money laundering, the IRS has a new target in its sights: a rural convenience store that sells catfish sandwiches.

Lyndon McLellan lost over $107,000 in an IRS raid after the agency seized the bank account belonging to his small business, L&M Convenience Mart in Fairmont, North Carolina. “It took me 13 years to save that much money and it took fewer than 13 seconds for the government to take it away,” he said.


For over a decade, Lyndon has run his mart, an unassuming place where locals stock up on soft drinks and cigarettes. But last year, the IRS wiped out the shop’s bank account using the Bank Secrecy Act. Under this law, banks must report all cash transactions over $10,000. Federal law also prohibits “structuring” deposits in amounts under $10,000 to skirt the reporting requirement.

But making frequent cash deposits under $10,000 is only a crime if someone deliberately intends to evade filing those reports. Lyndon had no such intention. According to his niece, who usually made deposits, a bank teller told her that depositing less than $10,000 would avoid burdensome paperwork. Moreover, forfeiting Lyndon’s cash would violate his constitutional right to due process and the Eighth Amendment’s protection against “excessive fines.”



Read more: http://www.forbes.com/sites/instituteforjustice/2015/05/05/irs-seizes-over-100000-from-innocent-small-business-owner-despite-promise-to-end-raids/

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Reply IRS Seizes Over $100,000 From Innocent Small Business Owner, Despite Promise To End Raids (Original post)
azurnoir May 2015 OP
jtuck004 May 2015 #1
appal_jack May 2015 #4
Kelvin Mace May 2015 #6
jtuck004 May 2015 #7
Kelvin Mace May 2015 #8
greyl May 2015 #14
Kelvin Mace May 2015 #16
snooper2 May 2015 #20
A Simple Game May 2015 #10
jtuck004 May 2015 #12
Dr. Strange May 2015 #17
iscooterliberally May 2015 #2
jamzrockz May 2015 #21
iscooterliberally May 2015 #23
CanonRay May 2015 #3
LiberalArkie May 2015 #5
jmowreader May 2015 #9
HenryWallace May 2015 #11
muriel_volestrangler May 2015 #13
HenryWallace May 2015 #19
Jesus Malverde May 2015 #26
billhicks76 May 2015 #15
HenryWallace May 2015 #18
billhicks76 May 2015 #24
HenryWallace May 2015 #25
Jesus Malverde May 2015 #27
cbdo2007 May 2015 #22
Jesus Malverde May 2015 #28

Response to azurnoir (Original post)

Tue May 5, 2015, 02:48 PM

1. I had no idea selling sandwiches to catfish was that lucrative. n/t

 

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Response to jtuck004 (Reply #1)

Tue May 5, 2015, 03:04 PM

4. It's them 1%-er fat-catfish that pad the profits. nt

 

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Response to jtuck004 (Reply #1)

Tue May 5, 2015, 04:05 PM

6. Lucrative?

 

Your joking right?

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Response to Kelvin Mace (Reply #6)

Tue May 5, 2015, 04:36 PM

7. From the story...

 

" a rural convenience store that sells catfish sandwiches. "

So, yes. If you don't get it, perhaps it is because of the distance down from your saddle.

btw -

"Your joking right?" <- You meant to use the contraction "you're". Right?









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Response to jtuck004 (Reply #7)

Tue May 5, 2015, 04:53 PM

8. Yes,

 

you are correct, I meant "you're".

Since I wasn't pointing out a grammar mistake in your post, it is considered bad form to make an issue of my error (but certainly that is your prerogative). I would note, however, that if one makes a point of correcting every typo/grammar error one encounters in posts on the Internet, one will have little time to contribute meaningfully to the public discourse.

Given the ambiguity around here at times, I was simply clarifying your post. I had no intent of getting on my high horse, but would have pointed out that if you were serious, you needed to consider that while $107,000 is a lot of money in aggregate, it works out to mere $22.55 a day over 13 years. Not a lot of money, especially given the effort involved.

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Response to Kelvin Mace (Reply #8)

Tue May 5, 2015, 07:47 PM

14. "selling sandwiches to catfish"

To catfish. You just didn't spot the "to", so you missed the joke.

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Response to greyl (Reply #14)

Tue May 5, 2015, 09:45 PM

16. Ah,

 

Again, you are correct. It has been a very long day and I really need to get my glasses checked.

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Response to Kelvin Mace (Reply #8)

Wed May 6, 2015, 12:19 PM

20. Catfish aren't picky customers though, they will pretty much eat any sandwich you throw at them

 

easy money

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Response to jtuck004 (Reply #1)

Tue May 5, 2015, 05:26 PM

10. 107,000 in 13 years is lucrative? n/t

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Response to A Simple Game (Reply #10)

Tue May 5, 2015, 05:36 PM

12. I guess Sheldon isn't the only one. Take care. n/t

 

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Response to jtuck004 (Reply #1)

Tue May 5, 2015, 10:09 PM

17. It's not.

Catfish are lousy tippers.

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Response to azurnoir (Original post)

Tue May 5, 2015, 02:49 PM

2. Another terrible side effect of the drug war. n/t

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Response to iscooterliberally (Reply #2)

Wed May 6, 2015, 12:45 PM

21. Not the drug war this time

 

But the war on terror. I think these laws were passed after the 911 to prevent terrorists from moving money around. Either way, this should stop now.

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Response to jamzrockz (Reply #21)

Wed May 6, 2015, 01:02 PM

23. The Bank Secrecy Act is from 1970. What other law was introduced that year?

The Controlled Substances Act of 1970. This IS another side effect of the drug war. I would say that all the crap that has come after is also a side effect of the drug war. Even the war on terror. The drug war is about taking away our civil liberties one bite at a time. The war on terror just piles onto it. Civil asset forfeiture is because of the drug war, and started in the last century. In any regard, I agree with you that this all needs to end now.

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Response to azurnoir (Original post)

Tue May 5, 2015, 02:58 PM

3. This is why people hate IRS

They went after my waitress mother for $90 which was a lot to us then...I have never forgotten it. She had claimed me as a dependent, but I was working and going to school, and I made over half what she did.

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Response to azurnoir (Original post)

Tue May 5, 2015, 03:08 PM

5. A friend of mine who was an auditor for the IRS for many years

and retired about 5 years ago. He had told me that orders from on high was to never go after people with money for lawyers, go after those who can not defend themselves, in other words cheap to take to court. He said they really don't want to have to spend more in court than they can get back. They are profit driven like everything else is. Never go after a really rich person unless it is a given that the IRS can turn a profit on it.

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Response to azurnoir (Original post)

Tue May 5, 2015, 05:05 PM

9. I think I've seen this very story before

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Response to azurnoir (Original post)

Tue May 5, 2015, 05:34 PM

11. This is a "non-story!!!"

 

There is something else going on here!

$10,000 threshold is simply a bank reporting requirement not a "crime."

IRS deals with the collection of employment, income and excise tax owed to the federal government.

My guess is that poor "innocent-small-business-owner" Lyndon managed to accumulate $107,000 of cash (& possibly an expensive house, automobiles, convenience store building, etc.) over a 13 year period in which he reported consistent losses from his business (claiming the earned income credit, etc., etc., etc.).

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Response to HenryWallace (Reply #11)

Tue May 5, 2015, 05:49 PM

13. Why have you made such a guess as to his situation?

What makes you say this has anything to do with the earned income credit?

Did you see what the US attorney offered to do - keep half of McLellan's money if he'll shut up and go away?

In February 2015, during a hearing of the U.S. House of Representatives Ways & Means Oversight Subcommittee, North Carolina Congressman George Holding told IRS Commissioner John Koskinen that he’d reviewed Lyndon’s case—without specifically naming it—and that there was no allegation of the kind of illegal activity required by the IRS’s new policy. The IRS Commissioner responded, “If that cases exists, then it’s not following the policy.”

When news of the IRS Commissioner’s statement got back to the United States Attorney in charge of Lyndon’s case, he advised Lyndon’s attorney and accountant that he was “concerned” that Lyndon’s case document was provided to Congress, and that:

Whoever made (the document) public may serve their own interest but will not help this particular case. Your client needs to resolve this or litigate it. But publicity about it doesn’t help. It just ratchets up feelings in the agency. My offer is to return 50% of the money. The offer is good until March 30th COB
.
Under these new policies, the government should not be pursuing forfeiture of Lyndon’s bank account. But the government has refused to back down, and is actively pursuing the forfeiture of Lyndon’s money.

http://ij.org/north-carolina-civil-forfeiture

The poor agency and their hurt feelings! They fully deserve that $53,851.33 for the way the publicity has make them feel! That they have not charged him with anything must just show there is something else going on here - mustn't it?

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Response to muriel_volestrangler (Reply #13)

Wed May 6, 2015, 10:13 AM

19. I remain you humble servant!

 

Full disclosure: I haven’t read the linked article. I come to DU each day to escape my vocation for a few minutes.

My “guess” is informed by an intimate knowledge of the organization, its personnel and the internal controls and procedures they use to administer their charge: to keep all taxpayers on a level playing field.

Given their consistently dwindling resources, the care and professionalism which the organization exhibits is generally extraordinary.

As to the Earned Income Credit, its concept is great (provide matching income for certain low-income taxpayers who are employed in sub-standard jobs). However, a social program being implemented through a taxing system is fraught with problems:

• During the entirety of my professional career, the EIC has been at the top of the IRS’s fraud concerns, sucking up the organizations resources and manpower.
• Shady tax preparers, furniture stores, used car lots, etc., preying on this once-a-year tax refunds is, quite frankly, disgusting.
• The credit has no asset limitation, wealthy taxpayers transitioning to retirement or experiencing a random bad year can often qualify.

I’ll leave it to academics to determine overall whether to program is worthwhile.

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Response to muriel_volestrangler (Reply #13)

Thu May 7, 2015, 10:01 AM

26. boggles the mind.

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Response to HenryWallace (Reply #11)

Tue May 5, 2015, 07:48 PM

15. Henry Wallace!!!!

 

You are wrong. There is a law that says if you try to evade reporting requirement of cash deposits of $10,000 or more by depositing under that amount multiple times then that is called "structuring" and is a felony that carries 10 years in prison. It's used all the time.

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Response to billhicks76 (Reply #15)

Wed May 6, 2015, 10:10 AM

18. I remain you humble servant!

 

Full disclosure: See above.

I am generally “wrong” more than you can imagine!

However, my guess is that “structuring” is a felony only when it is coupled with …..a willful intent to evade taxes. If true, this would seem to me to be an important omission.

I’ll leave it to you to look up.

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Response to HenryWallace (Reply #18)

Wed May 6, 2015, 04:47 PM

24. No

 

People pay taxes on those deposits all the time. The governments claim usually isn't tax evasion but that the money was made illegally like drug trafficking. The problem is they don't always have to prove that although often they are correct. But it's being abused too because it's too vague.

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Response to billhicks76 (Reply #24)

Thu May 7, 2015, 09:34 AM

25. As always, I am your humble servant!

 

I believe you are conflating agencies.

The DEA (Drug Enforcement Administration, a branch of the Justice Department) often seizes assets. I am not familiar with the procedural requirement or operational controls of this agency.

The IRS’s only charge is the collection of taxes. Its only method of seizing assets is to go through a strict assessment and collection process; often taking a year or more (requiring multiple notices to the taxpayer).

Mr. McLellan had long known (or should have known) that his assets were at risk and why they were at risk.

If someone deposits 200,000 into their bank account and reports 100,000 of revenue on their income tax return there is a high likelihood of unreported income.

That they seized assets most likely indicates that he ignored the process (seizing the assessed tax was the only way to get him to respond). His explanation of this discrepancy was so weak that the Service decided that the case was worth litigating. The cost of litigating is certainly a multiple of the 107,000 seized.

PS: There are areas of the county that the IRS’s chances of winning court cases are very low (think Moonshine). Defense attorneys force civil court venues and choose trial by jury.

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Response to HenryWallace (Reply #25)

Thu May 7, 2015, 10:03 AM

27. Lulz

Then they would audit his returns. This is a case of stealing by the government.

If he owed back taxes they could prove it.

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Response to HenryWallace (Reply #11)

Wed May 6, 2015, 12:50 PM

22. Welcome to DU

Don't you know, at DU we're supposed to get riled up and say beligerent things whenever some small time shop owner has something questionable happen, lol *sarcasm*

Yeah, there has to be more to this story, but everyone here is reactionary and will be moved along on some other rage when the truth comes out here. Meh, it's a fun place to spend the afternoon though.

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Response to cbdo2007 (Reply #22)

Thu May 7, 2015, 10:07 AM

28. Truth?

It's all there in black and white. It's stealing plain and simple. Congress banned this practice, this small business is one that was caught up before the congressional change.

When HSBC gets a hand job I mean slap on the wrist for laundering billions for the Sinaloa cartel but they lay the smackdown on a hard working businessman you have to ask WTF is wrong with the system.

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