Democrats have been attempting to pass legislation that would require banks to report on inflows and outflows of accounts with over $600 or with at least $600 worth of transactions. The argument for this is that it would allow the IRS to target audits more effectively, therefore generating more funding for government spending. This proposal has seen high amounts of resistance since being brought to light.
New Developments
Recently Democrats re-introduced this reporting requirement, however, with edits following intense lobbying from banks. These updated provisions would require banks to report to the IRS any accounts that they see activity in excess of $10,000 a year. This is a step up from the original amount of only $600 to flag an account. On top of this, the updated proposal would narrow the scope of information that the IRS has access to by not applying to wages or beneficiaries of federal programs such as social security.
Other Relevant Information
Under current statutes, banks are not required to report on such accounts to the IRS; however, Democrats said this change would allow for tax collectors to gain valuable information for identifying individuals or companies who are underreporting their earnings. Elizabeth Warren has been quoted saying, “For years, giant corporations and the wealthy have worked to rig the tax code. This means the IRS can spot when a wealthy tax cheat has millions of dollars flowing into an account but isn’t reporting that money on their tax return.”
Potential Negative Impacts
Those opposing this provision have a few main arguments against it; that this reporting is an invasion of privacy, that it would increase tax preparation costs for individuals and businesses, and that it would essentially be an operational nightmare particularly for community banks. These are all valid points as the reporting would generate a lot more work needing to be done, however as far as privacy goes, the IRS would not be allowed to see what taxpayers were purchasing.
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