(Photo by Avinash Kumar on Unsplash)
By Alexis Taylor, Special to the AFRO
Big banks are sounding the alarm on a proposed reporting requirement that would force financial institutions to give the Internal Revenue Service (IRS) data on every account with more than $600.
The measure is included in the text of the Biden Administration’s American Families Plan as a way to crack down on tax evasion and account for all tax dollars owed.
This month Rob Nichols, president and CEO of the American Bankers Association (ABA) sent a letter to members of both the House Committee on Ways and Means and the Senate Committee on Finance to denounce the proposal.
“ABA and its members firmly believe that Americans should honor their tax obligations, but it is far from clear that requiring banks to report on every single customer financial account with gross inflows and outflows above $600 – creating a mountain of new data – will lead to better tax compliance,” wrote Nichols. “The amount of information submitted would be massive, unmanageable, and of questionable relevance to the calculation of taxable income.”
Aside from concerns on how the data will be used, Nichols also questioned the IRS’ ability to protect the information they would receive on millions of customer accounts.
“The IRS is a constant target of cyber criminals and has recently suffered significant data breaches,” Nichols wrote. “It is impractical and ill-advised for the government to put this significant amount of additional sensitive financial data at risk, especially when the IRS does not have the capability to effectively utilize or protect that data.”
The Biden Administration’s American Families Plan is just one part of the “Build Back Better” campaign that includes the American Rescue Plan and the American Jobs Plan.
The initiative aims to help Americans recover from the pandemic and move forward with better jobs, and lower education, healthcare, housing and childcare costs. The proposed plan will not raise taxes on “those earning less than $400,000 in actual income.” However, to ensure that everyone is paying their due share of taxes, the IRS wants the ability to monitor accounts for less obvious streams of income.
The plan states that the proposed reporting measures will “increase the visibility of gross receipts and expenses to the IRS.” The accountability measure proposed is directly tied to the fact that wealthy tax evaders are more likely to have investments and other “non-labor” streams of income or the resources needed to illegally evade tax collection.
The Biden Administration says the accountability measure will ultimately help American families who see their needs and priorities on the chopping block each year as politicians vote to cut services or raise taxes on compliant taxpayers as a way to close deficits.
According to the U.S. Department of the Treasury, “while roughly 99 percent of taxes due on wages are paid to the Internal Revenue Service, compliance on less visible sources of income is estimated to be just 45 percent.”
The Treasury Department says the gap between taxes owed and taxes actually paid “totaled nearly $600 billion in 2019 and will rise to about $7 trillion over the course of the next decade if left unaddressed—roughly equal to 15% of taxes owed.”
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