 ICYMI: Democrats Still Want Your Bank to Report Transactions to the IRS In case you missed it, Congressional Democrats pared back earlier proposals to allow the IRS more insight into bank accounts with financial activity greater than $600, raising the required reporting threshold to $10,000.
Here's What it Means Banks would have to report yearly withdrawals and deposits of bank accounts that total more than $10,000 (not counting income, such as a wage-earner's direct deposit or a Social Security check).
While this doesn't mean your bank would report to the IRS each individual transaction in your account, the government would gain a clearer understanding about what goes in and out of it. Senate Finance Committee Chairman Ron Wyden, D-Ore., emphasized the IRS would not see details on transactions, and would only see the "two numbers once per year." The plan will also not create new surveillance of digital currency, like bitcoin.
Why Do They Want to Do This? The U.S. government wants to strengthen its ability to enforce tax law and increase efficiency in its audits. The current tax gap—the difference between what is owed in taxes and what is paid—costs the United States more than $600 billion annually, according to the Treasury Department. The figure for uncollected taxes could be as high as $1 trillion, IRS head Charles Reittig told lawmakers in April. The Treasury says reducing the tax gap could generate an additional $460 billion over the next ten years.
Where Does it Stand Now? Not surprisingly, the plan hasn't been popular with banks, or even among Democrats themselves. House Democrats left it out of a previous budget revision, while Republicans called the proposal "too intrusive." It remains to be seen if raising the threshold will increase its popularity.
- Kristin
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