Daily Law Group
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New protection for small business

Owning a small business can be unpredictable. You can be well-versed in your business, have a great strategy and still get blindsided with an event that devastates your business.

Until recently, one concern for small business owners was civil forfeiture. The federal government would permanently confiscate property with no criminal charges in place. While some businesses fought to get their assets back, others were not as lucky.

Lawmakers wrote the Taxpayer First Act (which includes the Clyde-Hirsch-Sowers RESPECT Act) to combat some of these issues. Here is what has changed for small businesses.

Cash made some companies a target

Electronic payments may be simpler when it comes to paperwork and taxes, but working with cash can delay the need for extra equipment and complicated technology. Working with cash also allows business owners to keep more of their profits since there are transaction fees associated with accepting credit card payments.

Before the new legislation, the standard was low for confiscating a business’s cash. There was no need to demonstrate that the business received the money illegally, operating primarily in cash was enough to raise suspicion and, in over 90 percent of cases, there was no evidence of criminal activity.

It took months or years of expensive litigation to get the money back if the business could get it back at all. Often, the process for getting the money back took so long that a company could go out of business trying.

More substance required

Part of the Taxpayer First Act means there are now requirements in place before government agents can seize your business’s assets. Now, the IRS can only seize money if it was structured to conceal criminal activity or it was derived illegally.

While there is still the possibility that small businesses could face civil forfeiture, the new legislation places more responsibility on the IRS to show that businesses obtained their money illegally.

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