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In yet another move to increase the federal government’s presence in your life, the Biden administration wants to sic the IRS on your bank account.
Biden has proposed $80 billion to fatten up the IRS to deploy legions of new agents who will hoover up massive quantities of personal information.
As noted in this WSJ excerpt:
Under the plan, banks and other payment providers would be required to tell the IRS how much money came into and out of individuals’ and businesses’ accounts each year, going far beyond the existing reporting of interest income.
At a time when Americans are already struggling, these new reporting rules would create unnecessary burdens. As noted in this excerpt from Forbes:
It may create problems, however, that should be considered and addressed as this plan works its way through Congress. For example, consider a young couple saving up to buy a home. All savings are put into the “dream home” savings account. Then, when it comes time to make the down payment, the $50,000 dream home savings goes into the regular checking account, which is then wired to the seller’s escrow account. Buying a home is not a taxable event (at least for federal income tax), selling one is. Will the IRS receive information from the financial institutions that leads to an audit?
Conversely, say the young couple receives the down payment as a gift from their parents. If the parents gifted $50,000 to the adult children to make a down payment, that must be reported on a gift tax return, even though no gift tax is due. This type of gift is frequently made, and in my practice as a tax controversy lawyer, rarely reported as it should be. The increased financial reporting obligation would likely increase compliance with gift tax reporting rules.
Paul Merski, vice president of congressional relations at Independent Community Bankers of America, voiced his criticism of the proposal:
Banks already report millions of transactions a day to the Financial Crimes Enforcement Network in the form of currency transaction reports, in addition to suspicious activity reports, which are required when potential illicit activity is detected by a bank. Banks are required to submit currency transaction reports when a deposit or withdrawal is $10,000 or more, a threshold that’s already very low, Merski said.
Merski said the proposal, as written, is akin to “sending your bank statement to the IRS every month,” which would be opposed by the banking industry because of the reporting burdens already required by federal regulators.
“The federal government can’t track all of that—any more requirements would be adding more hay to that haystack,” he said.
As also noted by the Wall Street Journal, the bank account snooping will give the IRS an “enormous” quantity of new data:
It would also create an enormous flow of information that the IRS would have to learn how to manage and use.