The Biden administration is proposing to monitor the financial account activity of $600 or more in order to fill the tax gap, a plan which is concerning members of the bank industry who said it causes burden and potential government overreach, according to AL.com.
This plan is part of the infrastructure bill currently being negotiated in D.C. The goal of the proposal is to collect taxes from wealthy individuals and businesses on income that is earned but goes unreported, according to the administration. However, those who are against the proposal said the requirements would cover the majority of bank, loan and investment accounts, AL.com reported.
“The administration’s proposal to require financial institutions to track and submit the vast majority of their banking customer information to the IRS risks major data breaches, infringes on financial privacy and overburdens the banking system with massive data collection responsibilities, all for a purpose that is not obviously served by the proposal,” Mitch Waycaster, president and CEO of Renasant said, according to the news outlet.
Still, the Biden administration is looking for a way to close a tax gap which is more than $160 billion, IRS says. The plan could help the IRS with enforcing tax policy, according to AL.com.
On the other hand, BNA Bank CEO Bo Collins said that the low amount of money, $600, undermines the purpose of the proposal.
“Six hundred dollars is an awfully small sum to set as the benchmark and could cause unnecessary burden and expense on the banking industry, not to mention the invasion of privacy on citizens, depending on whether they are proposing individual transactions or total sums of transactions to be reported,” he said, according to the news website.
BNA Bank President Mike Staten also weighed in to AL.com, saying that the proposal would be a burden for the banks and would raise the cost of tax preparation for small businesses.
“We would ask that everyone contact our lawmakers and express opposition to any new IRS reporting that leads to increased compliance costs, damages our customers relationships, and threatens customer privacy,” Staten said, according to the website.
Those who support the plan say that banks would not have to report details on each individual transaction, like how the money was spent. Banks would only have to report the total amount of money flowing in and out of the qualifying accounts, including direct deposits and payments from phones, AL.com reported.
Treasury Secretary Janet Yellen testified before the Senate Banking, Housing, and Urban Affairs Committee in a hearing last week saying proposal is not too much of a burden or too invasive.
“It is a proposal to add two additional pieces of easily ascertained information onto the 1099-INT Form that banks already file; namely, the aggregate inflows into the account during the year and the aggregate outflows,” Yellen said, according to AL.com. “And I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion over the next decade. That is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive.”
She added that part of the reason the tax gap exists is because the IRS has been “deprived of revenue to hire auditors,” according to the news outlet.