The Biden administration agreed this week to cut back on a deeply controversial proposal that would require banks to hand over account information for most customers to the Tax service amid a deluge of criticism from industry groups and Republicans – but banks say the measure goes too far and poses a serious privacy issue.
Under the new plan that Senate Democrats unveiled on Tuesday, banks, credit unions and other financial institutions would be required to report annually on accounts with deposits and withdrawals worth more than 10,000. $, rather than the $ 600 threshold originally proposed by President Biden.
WHAT IS BIDEN’S PLAN FOR THE IRS TO MONITOR ALMOST ALL US BANK ACCOUNTS?
“Today’s new proposal reflects the administration’s strong belief that we should target those at the top of the income ladder who are not paying the taxes they owe, while protecting workers. Americans by setting the bank account threshold at $ 10,000 and granting an exemption for employees like teachers and firefighters, ”Treasury Secretary Janet Yellen said in a statement.
The tightening of the plan follows a constant lobbying campaign by banking groups and other industry organizations, in addition to a fierce pullback from Republican lawmakers who made it the worst kind of government overtake.
However, even with a narrower scope, banks and other industry groups argued that the policy poses potential risks to customer financial privacy while increasing compliance costs for banks and adding to the already existing burden. that the sector faces in passing information to the government.
“It has become very clear that Americans object to the IRS getting additional information about their financial accounts,” NAFCU chief executive officer Dan Berger said in a statement. “The updated plan is nothing more than a facade in an attempt to build support for a flawed proposal.”
The White House has championed the plan on several occasions, writing in a note to Congressional Democrats that require banks and financial institutions to provide “some high level information” to the IRS on cash flows. accounts gives the agency more information on the incomes of wealthy Americans. investments and commercial activity. Recipients of federal benefits like unemployment and Social Security would be exempt from the policy, which would also exclude any income received through a paycheck in which federal taxes are automatically deducted.
“This is a well-reasoned change: For American workers and retirees, the IRS already has information on the wage income and federal benefits they receive,” says a department fact sheet. of the Treasury on the changes.
Banks are already required to report any transaction over $ 10,000 to the Financial Crimes Enforcement Network as part of anti-money laundering requirements.
The Biden team stressed that banks will not have to report individual transactions to the IRS, but rather “high-level background information on account entries and exits” and that audit rates for Americans earning less than $ 400,000 a year would not increase.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
But Ryan Donovan, executive vice president of the Credit Union National Association, argued that raising the annual minimum reporting threshold from $ 600 to $ 10,000 had little noticeable effect on minimum wage workers, who would be probably still swept away by law.
“Every time this proposition changes, it gets worse,” Donovan said. “For the country’s minimum wage workforce, there is no fundamental difference between a reporting threshold of $ 600 and a reporting threshold of $ 10,000.”