A new report from the Treasury Department shows the Internal Revenue Service seized millions of dollars from individuals and businesses whose income was legally obtained. The Treasury Inspector General for Tax Administration (TIGTA), the internal watchdog overseeing the IRS, reported earlier this week that the IRS had wrongfully taken action on hundreds of cases of suspected criminal activity from 2012 to 2015. According to the report, the IRS’s Criminal Investigation (CI) division seized cash from businesses and individuals suspected of avoiding federal reporting requirements for large bank deposits. Under the Bank Secrecy Act (BSA), financial institutions are required to report currency transactions in excess of $10,000, and individuals and businesses are prohibited from structuring currency transactions in order to avoid the reporting requirements. TIGTA found that in 91 percent of the 278 investigations in its sample, businesses and individuals had obtained funds legally. But the BSA does not distinguish between legal and illegal sources of funds; the purpose of the IRS forfeiture program is not just to prohibit criminal activity such as drug trafficking and money laundering, but to crack down on structuring violations. “Structuring violations are not required to be tied to illegal source funds,” said Richard Weber, chief of criminal investigations at the IRS, in response to the report. Most of the businesses impacted in these cases were legal businesses such as restaurants, gas stations, jewelry stores and others. Many of these business owners are unaware of the law, are covered by insurance policies that don’t cover cash losses greater than $10,000 or are advised by bank employees or colleagues to keep their deposits less than $10,000. The TIGTA report found that in most cases, CI relied on the pattern of currency transactions to support the seizure of funds rather than seeking information from the property owners. When property owners were interviewed after the seizure, agents did not always identify themselves properly, did not explain the purpose of the interviews, did not advise property owners of any rights they may have and told property owners they had committed a crime at the conclusion of the interview. “This is ridiculous,”said Karen Harned, chief litigator for the National Federation of Independent Business. The IRS reportedly stopped seizing funds based on structuring violations back in 2014, but the TIGTA report found eight cases of such seizures after the new rules went into effect. Legislation proposed in the Senate in 2015 and endorsed by Sen. Rand Paul would protect wrongfully-targeted small business owners by requiring the IRS to produce evidence of illegal activity prior to a forfeiture of funds.