The Biden administration has revised a controversial plan that would require banks and other financial services institutions to report account data to the Internal Revenue Service (IRS) in an effort to crack down on tax cheats.
The original proposal—which sparked ire among banking trade groups, consumers, and even debt collectors—would have required financial firms to report aggregate data for all accounts with at least $600 flowing in and out annually. Under the revised plan, firms would still be required to report account data, but the threshold has been increased to $10,000, meaning accounts with less than that flowing in and out each year would not be subject to the rules.
The proposal would not, as some critics have said, allow the IRS to track individual transactions, and banks would not be required to report individual transactions to the IRS. Rather, according to a fact sheet supplied Tuesday by the U.S. Treasury, “banks would add two additional data points to the information that is already supplied to tax the IRS: how much money went into the account over the course of the year, and how much came out.”
The Treasury argues this data will help the IRS better focus its audits on wealthy people who are evading their tax responsibilities, as opposed to spending resources on audits of people who are tax compliant.
“Today’s Congressional tax compliance 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 who do,” Treasury Secretary Janet Yellen said in a tweet Tuesday.
Democrats are hoping to salvage a proposal they say is key to paying for the administration’s ambitious social and economic agenda. However, the scaled-back version does not seem to have appeased critics. “Every American should be wary of giving the IRS more power and more tentacles into private financial transactions,” tweeted Republican Senator Mike Crapo of Idaho.
Ryan Donovan, executive vice president of the Credit Union National Association, called the plan “a walking nightmare” in a statement. “Every time this proposal changes, it gets worse,” he said. “For the country’s minimum wage workforce, there is no fundamental difference between a $600 reporting threshold and a $10,000 reporting threshold.”
You can check out the full fact sheet for yourself here.
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