September 23, 2021 By Emel Akan ~ [Second article added below]
A trade group calls the attempt an ‘overreach,’ saying it would make U.S. banks ‘police force for the IRS’.
WASHINGTON—Opposition is growing to a new proposal aimed at curbing tax evasion that would be part of the $3.5 trillion reconciliation package under consideration by Congress.
The proposal, which is being pushed by the Biden administration, would require banks and other financial institutions to report to the Internal Revenue Service (IRS) any deposits or withdrawals totaling more than $600 annually to or from all business and personal accounts.
The American Bankers Association (ABA), along with over 40 business and financial groups, sent a letter on Sept. 17 to House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.) objecting to the “ill-advised” reporting proposal. (To be included in the $3.5 trillion spending bill already passed by the House.)
“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” the letter stated.
“In addition to the significant privacy concerns, it would create tremendous liability for all affected parties by requiring the collection of financial information for nearly every American without proper explanation of how the IRS will store, protect, and use this enormous trove of personal financial information.”
The Biden administration has been pushing Democrats to include the proposal in the $3.5 trillion spending bill in an effort to address tax evasion, mainly by wealthy people.
With the new reporting rule, “the wealthy can no longer hide what they’re making,” President Joe Biden said on Sept. 16 during a speech on the economy.
“That isn’t about raising their taxes,” Biden added. “It’s about the super-wealthy finally beginning to pay what they owe.”
The reporting regime aims to close the tax gap, according to the Treasury Department, which is the difference between taxes owed to the government and what’s actually paid.
A report released by the Treasury in May stated that the new reporting rule would help “raise $460 billion over the next decade.”
Almost every banking transaction and even transfers between one’s accounts would be aggregated and reported to the IRS, according to Paul Merski, group executive vice president at the Independent Community Bankers of America (ICBA), which represents nearly 5,000 community banks in the United States.
“It’s a dragnet, it’s a collection of data in the scale that we’ve never seen before in the financial sector,” Merski told The Epoch Times.
ICBA is among the financial groups that strongly oppose Biden’s proposal, calling it an “overreach” by the federal government.
Banks already report a tremendous amount of data to the IRS. According to a U.S. Government Accountability Office report, more than 3.5 billion information returns were received by the IRS for tax year 2018. A large number of these come from banks, ABA says. These include reporting interest paid on bank accounts, dividend income, brokerage transactions, mortgage interest, and more.
Under the Bank Secrecy Act, U.S. financial institutions also report to the government all wire transfers over $10,000 as well as suspicious cash transactions to prevent criminal activities such as money laundering.
“Banks are already reporting billions of pieces of information and you’re getting to the point where the banks are becoming the police force for the IRS,” Merski said.
“I don’t think people, small business owners know about this profiling that the IRS wants to put together,” he added. “So, it’s basically a profiling; they want to see your transactions and create a profile on you, and if they don’t like what they see, then they can go after you.”
Treasury Secretary Janet Yellen sent a letter to House Ways and Means Committee Chairman Richard Neal (D-Mass.) last week, asking Democrats to include a “sufficiently comprehensive” reporting provision in the bill “so that tax evaders are not able to structure financial accounts to avoid it.”
It is unclear whether some version of the proposal will make it into the final bill, but the Ways and Means Committee left out the administration’s proposal in the legislation approved by the committee due to the growing backlash.
Neal, however, indicated that the committee is in discussions with the administration on various proposals to increase reporting requirements.
According to Merski, the provision could be added back to the budget reconciliation bill at any stage in the process, especially at the last minute. The bill only needs a simple majority to pass in the Senate.
“Our fear is that this is so onerous that they’re waiting to the last second to put this in, but they’re dead serious about putting this proposal in,” he said.
An ICBA poll conducted by Morning Consult found that 67 percent of voters oppose the new IRS reporting proposal.
“The provision is a violation of Americans’ privacy rights and would be a crushing burden on community banks and credit unions struggling in the midst of the pandemic,” John Berlau, a senior fellow at the Competitive Enterprise Institute, told The Epoch Times.
“The IRS already gets plenty of data on taxpayers through forms such as 1099s, and does not need instant access to these small transactions to go after tax cheats,” he said.
According to the Treasury Department, Biden’s proposal is “integral to addressing evasion.”
The tax gap disproportionately benefits wealthy people because their income mainly comes from “non-labor sources where misreporting is common,” the Treasury report stated.
“The tax gap totaled nearly $600 billion in 2019 and will rise to about $7 trillion over the course of the next decade if left unaddressed.”
GOP Senators Introduce Bill to Block Biden’s ‘Weaponization’ of IRS Bank Account Surveillance
September 24, 2021 By Mark Tapscott
President Joe Biden’s proposal for a radical expansion of IRS monitoring of Americans’ bank accounts would be stopped in its tracks under a proposal introduced by two Senate Republicans concerned about protecting privacy rights.
“What they’ve done is, they are weaponizing the IRS, they’re pushing many, many billions of dollars into that and they will be hiring tens of thousands of new agents,” Sen. John Boozman (R-Ariz.) told The Epoch Times late Thursday.
“So this is all about looking at everybody’s transactions and then hoping that perhaps they find something that’s not getting reported, so they can come after you and get that income,” Boozman said.
The Biden proposal would drop the dollar threshold for transactions at which federal tax agents would be allowed to examine an individual’s private bank account from the present $10,000 to only $600.
Biden also wants to double the IRS workforce by adding 87,000 new government agents under the President’s “The American Families Plan Tax Compliance Agenda.”
Biden and Democratic allies in Congress claim the actions are needed to close the “tax gap,” the difference between what current federal law requires to be collected by the government and how much actually goes into the Treasury.
Boozman said Biden’s unprecedented explosion of new federal spending is the major reason behind Biden’s push to double the size of the IRS and give it virtually unlimited power to monitor how much income Americans earn and where they spend it, said Boozman.
“They want this new authority to look at transactions of $600 or more rather than $10,000 or more because they have a $3.5 trillion, or some say up to a $5 trillion bill, depending on how you score it, so they desperately need pay-fors. This shows how desperate they are,” Boozman explained.
Boozman said the $10,000 threshold was approved decades ago to enable the IRS to assist federal law enforcement efforts against drug cartels, terrorist groups, and organized crime rings.
“Today, $600 is such a small amount of money. To put this in perspective, this law was passed several decades ago and when they did this, $10,000, if you tied inflation to it, it would be $50,000 today,” Boozman said.
“What they’ve done is taken what perhaps was a good idea at the time and weaponizing it such that they can get into your bank account,” he said.
The Biden proposal requires all financial institutions, including banks and savings & loans, to report to the IRS every time an individual or family has a transaction of at least $600, with a breakdown of how much of the transaction was in cash, whether any of it came from an account in a foreign country, and if it represented a transfer from another account.
The new reporting requirement, which would take effect in 2022, would apply to both private individual and commercial business accounts owned by a taxpayer. The Secretary of the Treasury would also receive broad new regulatory authority that would likely result in further expansion of invasive IRS actions.
In addition to his concerns about individual privacy rights, Boozman pointed to the likelihood of massive hacking of the mountain of new IRS records on millions of Americans’ finances and damaging compromises of account numbers and login information.
The IRS already has a major problem with maintaining the confidentiality of the tax records it now has. A fact sheet prepared by Boozman’s staff noted the recent leak from the federal tax agency of 15 years worth of the private tax records of thousands of wealthy Americans to Pro Publica, a liberal non-profit foundation.
“The ‘confidential tax records obtained by ProPublica’ were described, by the publication, as ‘a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years.’ The FBI is investigating the leak for personal income and tax data,” the fact sheet observed.
Boozman also pointed to the massive hack of retirement, personnel, and compensation records for millions of federal career civil servants maintained by the U.S. Office of Personnel Management in 2015.
“Right now, all of these deposits, everybody’s records are distributed all over the country, so its safer in that regard, it would be very difficult to get into everybody’s records,” Boozman said.
“But when you start pulling all of these records together and centralizing them, that’s also a recipe for a huge breach, which we have seen before, so there are all kinds of reasons to be adamantly opposed to this,” he said.
Boozman is co-sponsoring legislation with Sen. Mike Crapo (R-Idaho) known as the Tax Gap Reform and IRS Enforcement Act that would establish “guardrails” to prevent abuse by IRS employees of tax records. Rep. Kevin Brady (R-Texas) has introduced the proposal in the House of Representatives.
“Under the guise of closing the ‘tax gap,’ Democrats are seeking to increase IRS funding by a massive $80 billion over the next 10 years to expand ‘enforcement and compliance activities’ at the IRS, and to create a ‘comprehensive financial account information reporting regime,’ under which gross inflows and outflows of taxpayers’ financial accounts are reported by financial intermediaries to the IRS, effectively acting as IRS agents,” Crapo said in a statement.
“In light of recent proposals to massively expand the IRS, with unprecedented amounts of mandatory funding, and the IRS’s continued abuses of taxpayer rights and privacy, any additional IRS funding and monitoring of Americans’ private finances must come with guardrails to help protect against abuses,” Crapo said in the statement. “This legislation places important guardrails around IRS funding to protect taxpayers’ rights and privacy.”
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