Fact Finders: Does the IRS have more power to snoop in your bank account?
There is a proposal and it does involve your bank account.
SPRINGFIELD, Mo. (KY3) - Social media posts are flying around about new rules giving the IRS more power to invade your privacy. So, on Fact Finders, we asked, “Does the IRS have the right to review any activity in every American bank account greater than $600?”
The answer at this very moment -- is NO. But, there’s a lot more to this story.
There is a proposal and it does involve your bank account. The IRS commissioner in testimony before a U.S. Senate committee explained it this way.
“This proposal would create a comprehensive financial account information reporting regime. Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.”
Many banks are not excited about this proposal. The Missouri Bank even posted a consumer alert on the topic on Facebook.
A University of Missouri Economics professor says financial institutions are worried about the cost of the proposal.
“Somebody is going to have to write some computer code to be able to say anything $600 or more has to get identified into a pool of transactions that are then going to generate this report,” explained University of Missouri Economics Professor Joseph Haslag. “And computers are great and fairly low cost, I get that, but somebody’s got to review that report. And somebody in the bank has to verify that those numbers are reasonable and accurate before it goes to the Treasury. So, there is going to be some additional man-hours. We can use these machines all we want. But then they especially in terms of a computer, all it is is just a machine. Somebody has to interpret what that machine, what data that machine is giving us so. So yeah, it’ll raise that. It will raise the cost.”
A White House official told us, “President Biden’s plan will ensure that high-income Americans pay the tax they owe under the law, ending the unfair system of enforcement that collects almost all taxes due on wages, while regularly collecting a smaller share of business and capital income. This proposal does not mandate reporting of individual transactions to the IRS. The president’s proposal requires that banks report the most basic, high-level information on account inflows and outflows. Imagine a taxpayer who reports $10,000 of income but has $1 million of flows in and out of their bank account. Having this summary information will help flag for the IRS when high-income people under-report their income (and under-pay their tax obligations). This will help the IRS target its enforcement activities on those who are actually evading their tax obligations, decreasing costly and burdensome audits for the vast majority of taxpayers who pay what they owe.”
Meantime, a member of the U.S. Senate Finance Committee says this.
“(We) Support increasing IRS reporting requirements, so that the IRS is better equipped to know who is an honest taxpayer and who are the wealthy tax cheats it needs to audit. The Senate continues to debate the specifics.”
The Treasury Department believes this proposal and other proposed IRS reforms will generate $700 billion in tax revenue in the next decade.
Bottom line, it’s very early in the legislative process. The details of the proposal can and probably will change. We’ll update you as we learn more in the days and weeks ahead.
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