A new IRS proposal’s goal is to catch wealthy people not paying their taxes through a massive crackdown on those who aren’t paying, so it wants banks to give the IRS details on all accounts with balances as low as $600.
However, critics say this is an invasion of privacy.
Recently, the IRS received backlash on this plan, which seeks to recover some of the estimated $600 billion per year in unpaid taxes, to help pay for President Joe Biden’s Build Back Better social spending program. House and Senate Democrats are currently debating the measure as part of the budget reconciliation bill.
The Independent Community Bankers of America (ICBA) warned that requiring financial institutions to report the deposits and withdrawals of all accounts with over $600 would be “an unwarranted infringement on the privacy of bank customers.”
In an interview with CBS News Tuesday, Treasury Secretary Janet Yellen was asked whether the government was trying to “peek into [Americans’] pocketbooks.”
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Yellen says the IRS would not get specific information on purchases, just total money going in and out of the account. That’s not good enough for opponents, who say this is an invasion of privacy.
“I think this proposal has been seriously mischaracterized. The proposal involves no reporting of individual transactions of any individual,” Yellen says.
Banks are already required to submit information on account deposits in excess of $10,000. They also have to report interest paid on customer accounts in excess of $10.
The new proposal would give the agency even more visibility to compare the income reported by an individual or a business to what they have in their bank account and investigate whether any of that money is unreported income.
According to the Treasury Department, the additional information would help close a massive tax gap over the next decade that would otherwise cost the United States $7 trillion in owed taxes that are never collected.
The administration estimates that the reporting requirements could allow the IRS to recover about 6.5% of the lost revenue or $460 billion over a decade.
Congress must still approve the proposal, and there’s word it could be changed before a vote even takes place.
Now, CNBC reports Democrats are talking about raising the threshold from $600 to $10,000.
Keep up with more finance news here with us at the East County GAzette.
