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Treasury Secretary Janet Yellen defends a proposal from the Biden administration that would require banks to report transaction data over $ 600 to the Internal Revenue Service, calling the collection of information “routine,” after having taken heat for the idea which is widely regarded as an unprecedented invasion. of privacy.
During an interview on CNBC’s “Squawk Box” on Tuesday, Yellen asked if the IRS had the “means” to collect more information on taxpayers and bank accounts, including cash flow, what many Republicans have called it invasive.
“Well of course they do,” Yellen said. “Right now, on every bank account that earns more than $ 10 a year in interest, the banks report the interest earned to the IRS. This is part of the information base which includes the W2 and dividend reports from other income that taxpayers have earned. The collection of information is therefore routine.
Yellen cited the “huge tax gap” in the United States as the reason for the proposed tax hikes and information gathering, attributing the gap to places where income information “can be hidden.”
“This is just some information on individual bank accounts, nothing at the transaction level that would violate privacy,” the secretary said.
The information gathered would ostensibly help the Treasury Department determine which high-income wealthy people may be concealing transactions and income, and “would be useful indicators of where it would be wise to conduct an audit,” he said. -she adds.
“So it’s not about reporting individual transactions or anything like that. And it would be a simple thing for banks and other payment providers to provide along with the other information they already provide.
Under the proposal, banks would be required to remit the total number of entries and exits to the IRS each year and would cover bank accounts with at least $ 600 or at least $ 600 in transactions, according to the Wall Street Journal. .
The proposal has been criticized by Republicans as an invasion of privacy. Last week, Senator Cynthia Lummis (R-Wyo).
“Are you so wary of the American people that you need to know when they bought a sofa?” Or a cow? asked the Republican senator.
“There are obvious privacy concerns for all Americans here and this represents a dramatic new regulatory burden for community banks and credit unions in Wyoming and elsewhere,” Lummis added.
“Bank customers are not subject to the federal government. Banks don’t work for the IRS.
Yellen defended the plan, telling the senator: “Banks already report directly to the IRS the interest they pay on accounts when it exceeds $ 10, and this is not a proposal to provide detailed data at the level of transactions by banks to the IRS.
“Well, the $ 600 threshold is usually not where you’re going to find the huge amount of tax revenue that you think Americans are cheating on you,” Lummis retorted.
“That’s okay,” Yellen admitted, “but it’s important to have complete information so that individuals can’t mess with the system and have multiple accounts.”
Several states also expressed concern over the proposal, including Nebraska, which called the collection of information a violation of Americans’ constitutional right to privacy and said the costs associated with banks, credit companies and others financial institutions complying with the requirement would be passed on. to consumers.
“It could lead to a huge invasion of privacy like our country has never seen. Millions of law-abiding Americans would suddenly have their bank accounts opened to federal investigators for nothing more than the purchase of a refrigerator. It is simply unacceptable. To make matters worse, according to this proposal, saving for college could put an American family on the IRS’s radar, costs that will most likely be passed on to the public, ”the Nebraska state treasurer said, John Murante, in a statement released last month.
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