Democrats in the House and Senate have decided to raise their proposed tax reporting threshold for bank account inflows and outflows to $10,000 per year, with wage income exemptions, from an earlier plan that attracted criticism for being overly intrusive.
The IRS has chosen the $10,000 Internal Revenue Service reporting threshold to be included in the sweeping “reconciliation” social spending and tax increase legislation, according to Senate Finance Committee Chairman Ron Wyden.
Other rules include demands that banks report aggregate daily cash transactions of $10,000 or more under anti-money laundering regulations.
Republicans slammed the party’s initial plan for banks to disclose inflows or outflows of bank accounts worth more than $600 annually, claiming it targets small transactions and violates individual privacy.
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Although the draft does not specify any particular transactions, it specifies gross annual inflow or outflow to assist the IRS in finding wealthy individuals who do not rely on typical “W2” wage income and maybe hiding the corrupt sources of business or investment profit.
Wyden and Warren declared that the revised proposal would leave out W2 wage income from inflows and withdrawals data reporting requirements. Many individuals have their paychecks deposited into their bank accounts automatically.
Wyden noted that the revised plan may collect hundreds of billions of dollars in tax evaded funds, but he denied sharing any estimated figure.
“This is about wealthy business owners at the tippy top of the top. That’s where the unpaid taxes are,” he told reporters on a conference call.
U.S. Treasury Secretary Janet Yellen said that the proposal would make it hard for wealthy Americans to hide where their money comes from, which means that the IRS can find out more about them and how much they really earn.
The Treasury estimates that the cost of tax evasion among the top 1% of taxpayers is more than $160 billion each year. The “tax gap” between taxes owed and those collected by the government over a decade is more than $7 trillion.
“Today’s new proposal reflects the Administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters,” Yellen said in a statement.
The Treasury has now stated that financial accounts with no money flowing in or out that total less than $10,000 per year are not required to be reported.
“Further, when computing this threshold, the new, tailored proposal carves out wage and salary earners and federal program beneficiaries, such that only those accruing other forms of income in opaque ways are a part of the reporting regime,” the Treasury said.
The department added that financial services companies could also disclose the total aggregate inflows and outflows from accounts to further safeguard data privacy.