Facts around IRS proposal, some say, could ‘spy’ on Americans’ bank accounts

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But it’s not Biden officials or Democrats pushing the topic most aggressively on Twitter and other platforms. It is Republicans and the right-wing media that attack the proposal as a breach of privacy and argue that the IRS will inappropriately spy on ordinary Americans’ bank accounts.

In the last few days Senator Tom Cotton, Fox News host Sean hannity, sen. Chuck grassley, Rep. Jody Hice, GOP President Ronna McDaniel, Former US Ambassador Nikki haley and many prominent Republicans tweeted about the proposal, portraying it as a serious privacy breach by the government. This month, Mitch McConnell wrote an op-ed for the Courier-Journal warning people not to “let Joe Biden snoop on your bank account.”
The proposal, issued by the Treasury Department, would require banks to provide the IRS with more data on accounts that hit a small threshold of $ 600. Bloomberg reported last month that Democrats were considering raising that threshold, perhaps to $ 10,000.

Treasury Secretary Janet Yellen told CNBC on Tuesday that the information the proposal would provide would be essential to help close the $ 7 trillion tax gap.

But experts aren’t sure the information would be so useful for the IRS, an agency plagued by budget cuts and outdated technology. Even if Congress passes the proposal, the agency might not have the ability to make good use of all the new data to find tax evaders.

Proposal

In May, the Treasury Department proposed a plan to “create a comprehensive financial account reporting regime.”

Under this proposal, banks would be required to submit annual reports to the IRS on “gross inflows and outflows” on accounts – both business and personal – with at least $ 600 or with transactions of at least $ 600. less $ 600 per year. However, as Bloomberg reports suggest, Democrats on the Hill are still hammering out the details.

Until the legislation is passed by Congress, it is unclear how the authority of the IRS might expand, what the reporting threshold would be, and who would be affected.

What information would the IRS receive?

During a Senate hearing in late September, Yellen rebuffed claims that the proposal was a privacy breach.

“Banks already report directly to the IRS the interest they pay on accounts when it exceeds $ 10,” Yellen said. “And it is not a proposal to provide detailed data at the level of transactions by banks to the IRS.”

According to the Center on Budget and Policy Priorities, under the proposal “the IRS will only see two pieces of information: the annual gross inflows and outflows, without any details on individual transactions.”
Steve Johnson, a professor at Florida State University and specialist in tax procedure, noted that the Treasury proposal included providing the secretary “with broad authority to issue the regulations necessary to implement this proposal.” .

In theory, according to Johnson, the reporting requirement could be extended from the two pieces of information – annual gross inflows and outflows – “through the backdoor of regulation.”

Is it useful?

Several experts told CNN that it was currently unclear how useful the information would be for the IRS to detect tax fraud currently, but that it could be useful in encouraging tax compliance.

“Right now, the IRS clearly doesn’t have the human and financial resources to do anything significant with an influx of a lot of information,” Johnson said. “(A) Aside from recent budget problems, the biggest problem the IRS has had, historically, is its appalling information systems.”

The Biden administration wants to give the IRS an additional $ 80 billion over ten years to increase the agency’s workforce by 87,000 new employees during that time and invest in technology improvements.

Garrett Watson, senior policy analyst at the Tax Foundation, told CNN that it would take “years of software updates” for the IRS to effectively use the information it wants. “This is probably the place to prioritize first and revisit this (proposal) later, once they’ve actually deployed the software that should make it useful,” Watson said.



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