Americans are up in arms over a Biden administration proposal for banks to report transactions above 600 dollars to the IRS. Treasury Secretary Janet Yellen appeared on CNBC’s “Squawk Box” to defend the proposal.
Many are not in favor of what they see as an unprecedented invasion of privacy. However, Yellen insists that such reports are routine for the Internal Revenue Service.
Yellen Says Reporting Transactions Above 600 Dollars to the IRS is Routine
Many Republicans called the proposal another example of government overreach as well as an invasive course of action. Asked whether the IRS possesses the authority to collect more information on taxpayer bank accounts, Yellen said yes. “Well, of course, they do.
Right now, on every bank account that earns more than $10 a year in interest, the banks report the interest earned to the IRS. That’s part of the information base that includes W2’s and reports on dividends in other income that taxpayers earned. So the collection of information is routine,” she explained.
Yellen added that the “enormous: tax gap is the main reason behind proposed tax hikes and additional data collection. She blamed the tax gap on hidden income that doesn’t show up on records. “It’s just a few pieces of information about individual bank accounts, nothing at the transaction level that would violate privacy,” the secretary said.
Transactions Above 600 Dollars May Hold Clue About Concealed Income
If the proposal gets approval, the new information on transactions above 600 dollars can help the Treasury Department. These can determine which high-income wealthy Americans conceal transactions involving money they have. “These would be helpful indicators of where it would make sense for auditing to occur,” she added.
As a result, Yellen said the proposal doesn’t report individual transactions. Instead, the proposal will require banks to turn over the aggregate inflow and outflow reports to the IRS.
This covers bank accounts with at $600 and at least $600 worth of transactions. In addition, banks would have no problem complying as they already provide similar information.
Republicans Slam Proposal
Last week, Republicans slammed the proposal as an invasion of privacy. Senator Cynthia Lummis (WY) criticized the plan during a Senate Banking, Housing, and Urban Development Committee hearing, Lummis asked Yellen if she was aware of “how unnecessary this regulatory burden is?”
“Do you distrust the American people so much that you need to know when they bought a couch? Or a cow?” the senator asked.
“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 subjects of the federal government. Banks do not work for the IRS.”
Yellen Defends Plan
Yellen answered Lummis’ direct questioning. “Banks already report directly to the IRS the interest that they pay on accounts when it exceeds $10, and this is not a proposal to provide detailed transaction-level data by banks to the IRS,” she said.
Lummis contended that the “$600 threshold is not usually where you’re going to find the massive amount of tax revenue you think Americans are cheating you out of.”
“That’s correct,” Yellen admitted, “but it’s important to have comprehensive information so that individuals can’t game the system and have multiple accounts.”
Several States Also Showed Concern Over Proposal
Several states have also expressed concern over the proposal. This includes Nebraska, which criticized the plan as a direct violation of the constitutional right to privacy. State Treasurer John Murante believes that the costs associated with compliance will pass on to consumers.
“This could lead to a tremendous invasion of privacy the likes of which our country has never seen. Millions of law-abiding Americans would suddenly have their bank accounts opened to federal investigators for no more reason than buying a refrigerator. This is simply unconscionable.
To make matters worse, under this proposal, saving for college could put an American family on the IRS’s radar, costs that most likely will be passed on to the public,” Murante added.
Watch the Your News video reporting that Treasury Secretary Janet Yellen defends IRS rule requiring banks to report all transactions above 600 dollars:
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