New plan to send more of your data to the IRS
The Build Back Better agenda would require banks to provide information to the IRS which would help catch tax cheats. The proposal would require banks to report aggregate deposit and withdrawal numbers of their customers to the IRS.
Unfortunately, bank lobbies are making false claims about this proposal. One example is a claim to Congress that the proposal would require reporting of all transactions of all business and personal accounts worth more than $600. The truth is that only the gross inflow and gross outflow would be provided to the IRS.
President and CEO of the Arkansas Bankers Association, Lorrie Trogden says that adding new data increases the risk of fraud by exposing more customer data. The change would require banks to build a new system to report this data. “Which will come at significant expense, time, resources and will really hit our Arkansas community banks the hardest. They often depend on third-party vendors to update their systems, so they would be a little bit at the mercy of those third-party vendors to get those updates done,” said Trogden.
Additionally, Trogden said “The reason people don’t open bank accounts is because they are very concerned about privacy and this really only compounds that fear and undermines the efforts our Arkansas banks have already made to reach this population, so we think it could have that unintended consequence.”
Senator Greg Leding says he doesn’t know enough of the details to know if this is the right policy.
“Certainly, I agree with the idea that everybody should pay their full share. No matter how you might feel about taxes, I don’t think anybody would disagree that people should be able to or should pay their full share and not find some sneaky way of getting out of taxes,” said Senator Leding.
Currently, a substantial amount of business income is invisible to the IRS. Requiring financial institutions to provide basic information would help the IRS find tax cheats.
It has been estimated that the country will lose $7 trillion over the next decade from people and corporations not paying the taxes they owe.
The Build Back Better agenda also includes a proposal to improve oversight of tax preparers. Unscrupulous and incompetent tax preparers often claim improper tax credits and deductions on behalf of their clients. The National Taxpayer Advocate has urged Congress to establish minimum competency standards.
The House Ways and Means Committee is considering the new legislation which is part of the Build Back Better agenda.
David Zubler is a tax accountant and Enrolled Agent in East Tennessee, providing tax strategies and representing clients before the IRS and has over 25 years of tax experience. He is the author of six tax books and has shared tax advice on national TV. He is the founder and president of Your Tax Care. The company provides business and tax education, including David’s one-minute tax tip radio recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or contacted by email at firstname.lastname@example.org.