Taxes: Should the IRS check your bank balance?
The Biden administration has created an “uproar over a proposal to have banks tell the IRS about their customers’ annual cash flow,” said Andrew Keshner in MarketWatch.com. Democrats are nonetheless pressing ahead with the plan, which would let the tax agency know about the total money going in and out of bank accounts over a threshold of $10,000 a year. The idea is to better match up the income that wealthy earners and businesses report against what they have in the bank. The amount covered has been raised from an initial floor of just $600, and the rule would exclude payroll deposits, but some lawmakers say it still subjects too many people to financial oversight. “The average American runs $61,000 through their account,” said Sen. Mike Crapo (R-Idaho).
“As sure as night follows day, when politicians claim to want to go after ‘the rich,’ it is the middle and lower classes who should guard their pocketbooks,” said Mario Lopez in TheHill.com. The wealthy will still have “a plethora of legally permissible tax shelters and business structures for their assets.” Why must millions of working families be subject to government surveillance of their bank accounts? Democrats have “walked into a political ditch” with this plan, said The Wall Street Journal in an editorial. Nearly all Americans spend more than $10,000 a year, and so would be subjected to the new IRS reporting rules. Supporters of the plan disingenuously claim it doesn’t give the IRS immediate access to individual transactions. But “the real political goal here is to create a mechanism for triggering audits— probably through an algorithm—so that the IRS can rifle through all of a taxpayer’s business and other financial records.”
This is a distortion, said former IRS commissioner Charles Rossotti in Time. Banks are already required to send a 1099 to the IRS on any account that earns $10 in interest. The updated form “will contain only two additional numbers: total deposits and total withdrawals. That’s it.” This “modest change means the IRS will be less likely to audit honest taxpayers.” Democrats should still be clearer about whom they want to go after, said Alexis Leondis in Bloomberg.com. “They say they want billionaires and corporations to pay their fair share,” but increased bank reporting isn’t going to help with that. The true targets are “the well-to-do business owners who are outright lying on their tax returns.” The tax compliance on wages collected by employers is around 99 percent. But every year, $600 billion in taxes go uncollected—mostly from people who own small to medium-size businesses and don’t file a W2. Asking banks to be “an extra set of eyes” for the IRS is “actually one of the most straightforward and unobtrusive ways” to uncover the scofflaws.