IRS’s 90% error rate

A few years back Congress passed a law saying that if you engaged in money laundering activities, the government had the right to seize the assets involved. Just as with most criminal laws, it was up to the government to prove you were doing something wrong. To paraphrase, bad guys could have their money taken away. Seems like a valid law. It sure was a powerful law. Before too long millions of dollars a year were being seized under this law.

By the way, this seized money wasn’t just being sent off to Washington to spend. There was a policy called “equitable sharing” under which all police forces involved in the bust were able to share in the spoils. That means if the local sheriff was involved they could apply for up to 80% of the dirty money that was involved.

Another interesting twist was that there was an assumption that the dirty money was from criminal activity. This presumption was important in that the good guys didn’t have to give any of the money to the bad guys to hire attorneys. So if Ma and Pa Kettle had $30,000 seized by the good guys, Ma and PA better have some other money they could use to hire an attorney to fight the seizure.

I think you can already figure out what happened. Yep, it seems the good guys want a bit crazy with the enforcement. In fact according to an internal investigation of IRS numbers, its reported that of 278 seizures, 252 were “legal source funds”.

Oooops. It appears that over 90% of the seizures were incorrect.

Yes, we all like to believe the government is the good guys and sooner or later justice will be served. However at times this isn’t always true.

Here’s a link to the IRS internal report