Biden’s plan will give the IRS a huge amount of new information for management
Under the plan, banks and other financial institutions would be required to report customers’ account inflows and outflows of $600 or more to the IRS annually. The White House has estimated that the policy, which would apply to bank, loan and investment accounts, could generate about $463 billion in additional revenue over the next decade.
The measure, if Congress approves it to fund Biden’s comprehensive $3.5 trillion family and climate change plan, would give the IRS a vast amount of new information it will have to learn how to manage and use.
Bankers’ banks say the scheme will increase compliance costs and increase the already existing burden on the industry in reporting information to the government.
one in Letter Addressing House Speaker Nancy Pelosi and Minority Leader Kevin McCarthy, more than 40 banks urged lawmakers to vote against such a proposal, warning that it would require the collection of financial information for most Americans by all involved. can cause “tremendous liability”. without a proper explanation of how the IRS will store, protect and use this vast repository of personal financial information.”
“This proposal will create significant operational and reputational challenges for financial institutions, increase tax preparation costs for individuals and small businesses, and create serious financial privacy concerns,” they wrote. “We urge members to resist any attempt to advance this ill-advised new reporting regime.”
Banks already report millions of transactions a day to the Financial Crimes Enforcement Network for any transaction over $10,000 – which is part of banks’ anti-money laundering requirements.
“Privacy concerns are cited as one of the top reasons why individuals choose not to open financial accounts and participate in the financial system,” the banks wrote. “This proposal will certainly undermine efforts to reach vulnerable populations and unbanked households.”
The letter was signed by dozens of industry groups, including the Mortgage Bankers Association, the National Bankers Association, and the American Bankers Association.
The White House has defended the plans, saying that banks and financial institutions need to provide “little high-level information” on account flows to the IRS so that the agency can learn more about the earnings of wealthy Americans from investments and business. information can be found. activity.
It clarified that banks would not have to report individual transactions to the IRS, but “basic, high-level information on account inflows and outflows.”
“Imagine a taxpayer who reports income of $10,000, but $1 million flows into their bank account,” the administration said in a memo to congressional Democrats last week. “Having this summary information will help flag to the IRS when people with higher incomes tend to under-report their income (and overpay their tax obligations).”
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Nevertheless, a draft proposed tax increase released by House Democrats earlier in the month allocates an additional $78 billion for enforcement measures over the next decade, but does not specifically include any new bank reporting requirements that White House argues that is necessary to crack down on tax evasion by high-income earners and corporations.
Treasury Secretary Janet Yellen is urging Representative Richard Neal, chairman of the tax-writing House Ways and Means Committee, to include a full proposal to meet IRS enforcement as it prepares a $3.5 trillion spending package. She argued that additional resources as well as increased powers are needed to reduce the tax gap – the shortfall between what is owed and what has been paid.
Yellen wrote, “As you consider specific policy options in designing the information reporting regime, it is important to ensure that the reporting regime is sufficiently comprehensive so that tax evaders are able to structure financial accounts to avoid this.” don’t be able to.” “Any suggestion that this reporting regime would instead be used to target enforcement efforts at ordinary Americans is completely misguided.”