NEW YORK (MainStreet) - When can the government empty your bank accounts, seize all your money and not give it back? If you answered "almost any time it wants to" then you would be, more or less, correct.

Iowa woman Carol Hinders discovered this, the New York Times recently reported, when the IRS seized her entire bank account, $33,000 in one fell swoop. She hasn't been accused of a crime and there's no evidence that Hinders cheated on her taxes. Instead Hinders, who owns a small, cash-only Mexican restaurant, has spent years depositing her money too little at a time. She kept her deposits below $10,000 apiece in order to avoid the associated paperwork with large deposits, and that sent up red flags over at the IRS.

The government has certain reporting requirements for deposits or withdrawals over $10,000 as part of anti-money laundering laws designed to catch drug dealers and terrorists. Since most criminals know that, the law also requires banks to submit "suspicious activity" reports for anyone who seems to be intentionally avoiding this cut-off point. Unfortunately, as the Times reported, this is being applied more and more often to people who have nothing to do with drugs or terror. Their crime, like Hinders, is simply trying to avoid the hassle that comes with five-figure transactions.

The IRS calls it structuring, and it is illegal if you're trying to evade reporting requirements to hide the source of illegal money. For your own money, however, small deposits are perfectly legal regardless of why you make them.

Civil forfeitures like this have become an increasingly reported-on issue as groups like the Institute for Justice have begun shining a light on the practice. Although asset seizures like Hinders's do technically require a warrant, those are generally issued on the basis of little or no evidence beyond an agent's affidavit swearing to a pattern of suspicious activity. Even more astonishing, once the money has been seized the burden shifts to the citizen to prove his or her innocence. (The criminal laws which protect the rights of an accused against even one day in prison are surprisingly lax when it comes to losing your life savings.)

With their assets in IRS custody, most people lack the resources to fight so they either give up or settle, effectively paying the agency a (generally large) percentage just to get their own money back.

The purpose behind civil forfeiture is in theory to avoid spoliation, a legal term for when criminals hide or destroy evidence to keep it away from the police. Often in cases of financial crimes the money itself is the evidence, not to mention a potential source of restitution for the victims, so authorities want to secure it before a suspect can whisk it away with the speed of online banking. In theory, when the evidence is sound and the authorities act in good faith, this system is both effective and necessary.

In practice it gets used as a dragnet and a revenue generator. Agencies like the IRS have to prove virtually nothing, just a pattern of behavior consistent with someone who wants to avoid paperwork. Since the IRS keeps its portion of any settlement, generally reached at figurative gunpoint with people who need their savings back, these seizures have proven quite profitable.

Just how bad is it? In response to questioning from the New York Times, the IRS announced that it would begin "focusing... on cases where the money is believed to have been acquired illegally or seizure is deemed justified by 'exceptional circumstances.'"

In other words, the IRS openly admits that up until now, it hasn't bothered with a good faith belief that its targets were acting illegally. But they're willing to start now that they've been caught.

As for Hinders, she's been getting by on credit cards and a second mortgage to keep the lights open in her restaurant while hoping to see some of that $33,000 back.

--Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.