Dems to scale back proposal asking banks to report balances to IRS

Washington: The Biden administration, bowing to an aggressive lobbying campaign by the banking industry and pushback from Republicans, has agreed to support a far more limited plan for the IRS to try to crack down on tax cheats, the New York Times reports.

Senate Democrats are expected to roll out a new proposal that would narrow the scope of information that banks must provide to the Internal Revenue Service about customer accounts. Under the new plan, banks would only be required to provide data on accounts with total annual deposits or withdrawals worth more than $10,000, rather than the $600 threshold that was initially proposed. The reporting requirement would not apply to payroll deposits for wage and salary earners or to beneficiaries of federal programs such as Social Security.

The narrowing of the plan comes after a steady lobbying campaign by banks and Republicans, who argued that the Biden administration’s desire to bolster the IRS to shrink the $7 trillion so-called “tax gap” amounts to an invasion of privacy and government overreach.

Critics of the proposal have incorrectly suggested that the I.R.S. would be tracking information about individual transactions. The administration has said the I.R.S. would not monitor specific customer transactions but would instead use the bank account information to spot discrepancies between what individuals report on their tax returns and what their bank accounts show.

The Biden administration insists that audit rates for those making less than $400,000 would not go up and that the program is focused on collecting unpaid taxes from the rich.

Image courtesy of thesatimes

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