When The Taxman Freezes Your Bank Account

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following horror story is true. It’s my story.

If this can
happen to me, it can happen to you.

If this story
will not persuade you to buy some gold coins or to set up a gold
storage account
outside the United States, I don’t know what

Check the daily
price of gold here.

If owning gold
is more than you can handle, then you need to consider an off-shore
banking account. I’ll get to that at the end of this report.

A month ago,
I was planning a morning flight out of Memphis to Atlanta. I had
a 6:15 flight. So, at about 5 a.m., I went to my local bank. There,
I inserted my ATM debit card. I entered $100 to withdraw. I got
a note out of the machine, "Insufficient Funds."

I was convinced
that I had $500 in the account. I use it for my monthly bills. I
don’t keep much money in it because I worry about identity theft.

I had a plane
to catch, so I could not wait to find out what was wrong. When I
got to Atlanta, I called my wife. I told her about the problem.

She looked
into it. Here is what she found out. A bank employee in the bank’s
Alabama operation had frozen my account two weeks earlier. The bank
had not notified me of this freeze.

Why had she
done it? Because she was ordered to by a woman in the Texas Department
of Revenue.

What had that
to do with my account in Mississippi? I had not been living in Texas
since 1998.

My wife called
the woman who ordered my bank account frozen. She was told that
she had not paid taxes since 2003 on a solely owned corporation
operating in Texas. But she owed no taxes. That corporation had
ceased operating in Texas or anywhere else.

A corporation
is a legal entity. It is not a proprietorship. Why had they frozen
my account?

A month earlier,
I had added my wife to the account. Her name came up on a computer
operated by the woman in Texas. So, because of a corporate account
still on the books in Texas, my account in Mississippi was frozen.

My wife had
her accountant send a FAX to the woman in Texas, telling her that
the corporation no longer operated in Texas. The woman then contacted
the woman in Alabama, who removed the freeze.

Then, the next
day, someone in Alabama re-imposed it.

My wife’s accountant
contacted the woman in Texas. "Why did you put the freeze back
on?" The woman denied that she had. She blamed the office in
Alabama. "They must not have looked at the date on the original
freeze. They thought it was a new freeze order."

Again, she
contacted Alabama, and the second freeze was removed.

In the meantime,
every check I had written bounced. I was then assessed bounced-check
fees by every one of them.

how this worked:

  1. My wife’s
    corporation in Texas had not paid taxes because it no longer operated
    in Texas.
  2. It took
    two years for the Texas
    Department of Revenue to assess the tax retroactively.
  3. No one in
    that department contacted
    my wife about the money owed.
  4. My wife’s
    name then appeared up on my account.
  5. The lady
    in the Department of Revenue spotted this and ordered the bank
    office in Alabama to freeze my account.
  6. The bank
    sent me no warning, before or after the freeze.
  7. The account’s
    funds were frozen until the lady in Texas told the lady
    in Alabama to unfreeze my account.

The lady in
Texas told my wife that she freezes accounts all day long. That
is her job. Obviously, she is very good at it.

As for the
size of the tax said to be owed, she refused to disclose to my wife’s
accountant on what basis the tax was assessed.

She made it
clear to my wife that no money had been removed from my account.

My wife’s name
also appears on our joint account in Arkansas. But the money in
that account exceeded the amount of the tax said to be owed. Thus,
the account could not be frozen.

The lady in
Texas waited until a smaller account with my wife’s name on it appeared
on her screen. Thus, the freeze would shut down the account.

A frozen account
guarantees that someone will contact the lady in Texas.

Why no warnings — from
Texas or the bank? Because this tactic will not work if the account
holder has the opportunity to withdraw the funds.

So, here’s
the deal. A tax-collecting bureaucrat in Texas uses a data base
to identify every bank account in the country that has a person’s
name on it. Irrespective of the legal separation of a corporation
from the assets of that corporation’s officers — the so-called "veil
of the corporation" — the tax collector can freeze any bank
account in any bank in the country. She just contacts a low-level
bank employee — the freeze lady, I guess — to freeze an account,
and on the bureaucrat’s word, the account is immediately frozen.
The owner of the account is not informed of the freeze until the
checks start bounding or the ATM reports "Insufficient Funds."

you know this? My wife’s accountant didn’t.

1, 2006

North [send him mail] is the
author of Mises
on Money
. Visit http://www.garynorth.com.
He is also the author of a free 17-volume series, An
Economic Commentary on the Bible

North Archives

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