How Will Democrats’ Streamlined IRS Bank Supervisory Plan Work?

The Biden the administration this week approved a narrower version of its deeply controversial plan that would require banks to turn over more account information to the government. Tax service in order to fight against tax fraud.

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.

The Treasury Department is proposing two new data points – how much money went into the account during the year and how much went out – to an existing tax form that banks used to report other information to the IRS.

Federal Reserve Chairman Janet Yellen takes off her glasses as she testifies on Capitol Hill in Washington on Wednesday, July 12, 2017, before the House Financial Services Committee to deliver the semi-annual monetary policy report to Congress. (AP Photo / Ja (AP press room)

“Today’s new proposal reflects the administration’s strong belief that we should target those at the top of the income scale 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.

RICH AMERICANS PROTECT 20% OF THEIR REVENUES FROM THE IRS

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 posed potential risks to customer financial privacy while increasing compliance costs for banks and adding to the already existing burden. faced by industry in passing information to government.

“Even with the changes announced today, this proposal still goes too far in forcing financial institutions to share private financial data with the IRS of millions of customers not suspected of cheating on their taxes,” Rob Nichols, President and CEO of the American Bankers Association. , said in a statement.

He added: “If passed, this new proposal would still raise the same privacy concerns, increase tax preparation costs for individuals and small businesses and create significant operational challenges, especially for community banks. “, he added.

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.

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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. The proposal will also exempt large purchases, such as a down payment for a house, according to Senate Finance Chairman Ron Wyden, D-Ore.

IRS

A man walks into the Internal Revenue Service (IRS) building in Washington, DC, United States on Friday, May 7, 2010. (Andrew Harrer / Bloomberg via Getty Images) (Andrew Harrer / Bloomberg / Getty Images)

The Treasury Department said this exception is designed to ensure that “only those who accumulate other forms of income in an opaque manner are part of the reporting regime.”

“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 Treasury fact sheet. about 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.

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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.

The plan would help fund Biden’s social spending bill, generating up to $ 700 billion in new revenue that would be used to establish programs like universal preschool, expand medicare, and extend health insurance. one year child tax credit.


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