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Politics Over 100 Groups Urge Biden Admin to Drop Plans to Let IRS Monitor Bank Accounts

13:32  17 october  2021
13:32  17 october  2021 Source:   newsweek.com

The facts around an IRS proposal some claim would allow 'spying' on Americans' bank accounts

  The facts around an IRS proposal some claim would allow 'spying' on Americans' bank accounts Recently, the Internal Revenue Service has gotten a lot of attention on social media -- specifically, an obscure proposal by the Biden administration to widen the authority to root out tax evasion by allowing the IRS to get annual, aggregated reports of flows from bank accounts with a minimum of $600. © Al Drago/Pool/AFP/Getty Images US Treasury Secretary Janet Yellen testifies before the House Oversight And Government Reform Committee hearings on oversight of the Treasury Department's and Federal Reserve's Pandemic Response, on Capitol Hill in Washington, DC, September 30, 2021.

Federal credit unions have joined dozens of industry groups in urging Congress to reject a proposal to allow the IRS to monitor customers' bank accounts.

Stock image: U.S. dollars, a bank account book and calculator on a table. The National Association of Federally-Insured Credit Unions (NAFCU) has criticized plans to give the IRS more data to tackle tax evasion. © iStock Stock image: U.S. dollars, a bank account book and calculator on a table. The National Association of Federally-Insured Credit Unions (NAFCU) has criticized plans to give the IRS more data to tackle tax evasion.

The proposal, under consideration in the budget reconciliation bill, aims to clamp down on tax fraud by wealthy individuals and businesses. It would involve banks handing the IRS data on accounts with total annual deposits or withdrawals worth more than $600.

Why is the Biden administration seeking to make banks a tool of the IRS?

  Why is the Biden administration seeking to make banks a tool of the IRS? Those who care about the increasingly tight relationship between banks and the government should oppose this proposal.It's also cumbersome, unlikely to achieve whatever legitimate goal the administration may have, and even a threat to the public's respect for the rule of law - something that may further erode what market discipline exists in banking. In other words, it's a bad idea.

In a letter addressed to Senate and House leaders on Thursday, the National Association of Federally-Insured Credit Unions (NAFCU) called it an "overly broad proposal" that "will directly impact almost every American and small business with an account."

More than 100 signatories to the letter included the Agricultural Retailers Association, the Mortgage Bankers Association and the Small Business Council of America.

The letter called the proposal "costly for all parties" and "not fit for purpose."

It added that such a reporting system would create serious financial privacy concerns, increase tax preparation costs for both small businesses and individuals as well as, "create significant operational challenges for financial institutions."

Democrats face growing storm over IRS reporting provision

  Democrats face growing storm over IRS reporting provision Democrats are facing a firestorm of criticism over a proposal to increase the amount of bank account information reported to the IRS, posing a challenge as they craft their wide-ranging social spending bill.The proposal is a top priority of the Biden administration, which argues it will help the IRS go after wealthy tax cheats. But it has come under a barrage of attacks from banks and Republicans, who say it raises significant privacy concerns. Financial institutions have been mobilizing their customers to speak out against the proposal to lawmakers.

Republicans and other business groups have also been outspoken about the proposal, suggesting it was overly burdensome and was effectively snooping on Americans.

In light of the criticism, there has been talk on Capitol Hill of raising the threshold from $600 to $10,000, and exempting some payment processors.

But such measures "will not significantly reduce the scale of this new IRS program," according to the new letter.

It also said that said "the privacy concerns for Americans are real" given that the IRS is "not impervious to being hacked and has suffered massive data breaches" in the past.

Citing the Treasury Department, it said "they only plan to use the data to increase the audits for those who make over $400,000 a year.

"The likely question of any American taxpayer making less than that is: Why does the IRS need my account information if they aren't going to use it?"

Senate Dems to propose narrowing scope of IRS reporting rule amid backlash

  Senate Dems to propose narrowing scope of IRS reporting rule amid backlash Senate Democrats on Tuesday are expected to roll out an IRS enforcement proposal that is narrower in scope than a version unveiled earlier this year by the Biden administration, following criticism from Republicans and banking groups.The Biden administration had proposed requiring financial institutions to report more information about bank accounts to the IRS, in cases where the accounts had more than $600 in withdrawals and deposits in a year. Senate Democrats are planning to increase that threshold to $10,000 and exempt wage income, a Democratic aide told The Hill.

Newsweek has contacted the U.S. Department of the Treasury for comment.

The letter follows a similar missive sent on September 8 by NACTA vice president of legislative affairs, Brad Thaler, to the House Ways and Means Committee which urged the proposal be dropped from the fiscal year 2022 Budget Resolution.

House Democrats excluded the idea from their version of the tax-and-spending bill they wrote last month, Bloomberg reported, but Democratic leaders continue to work on the plan which could raise hundreds of billions of dollars to pay for social programs.

Treasury Secretary Janet Yellen has repeatedly defended the proposal and outlined how it would raise significant tax revenues by targeting the rich who were not paying their fair share.

She told CBS News on Wednesday that the U.S. government faced a tax gap of $7 trillion in the next decade "due to a failure of individuals to report the income that they have earned."

She said the proposal "has been seriously mischaracterized" and involved "no reporting of individual transactions of any individual."

Democrats to announce narrowing IRS bank reporting proposal to $10,000 transactions

  Democrats to announce narrowing IRS bank reporting proposal to $10,000 transactions Democrats under pressure from the GOP and the banking industry have agreed to raise the cap to $10,000 on a proposal that all bank transactions of more than $600 be reported to the IRS. © Provided by Washington Examiner Sens. Ron Wyden of Oregon, who heads the Finance Committee, and Elizabeth Warren of Massachusetts are set to lead the party in announcing the change on Tuesday afternoon, just hours after the proposal was endorsed by Treasury Secretary Janet Yellen.

Meanwhile, Natasha Sarin, a Treasury deputy assistant secretary for economic policy, wrote in a blogpost on Thursday that the proposal had been "marred by misinformation" as well as "the pernicious myth that banks will have to report all individual customers' transactions to the IRS."

She said the proposal "would direct banks to report basic, high-level information on aggregate account inflows and outflows."

"Banks would add just a bit of additional data to information that they already supply to taxpayers and the IRS," she wrote, "how much money went into the account over the course of the year, and how much came out."

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Controversial Democratic IRS bank reporting proposal is likely dead, Manchin says .
A controversial proposal to have banks report account information to the IRS is likely dead, Sen. Joe Manchin said Tuesday. © Provided by Washington Examiner The centrist and key swing vote on the partisan legislation said on Tuesday that he spoke to President Joe Biden about the proposal, which envisioned banks reporting all account inflows and outflows of over $10,000 to the IRS to crack down on tax fraud. After the meeting, he noted it would probably not be in the plan. Manchin said he told Biden the idea was “screwed up” and that the president concurred.

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