US Treasury and Congress Argue About Biden’s IRS Bank Account Reporting Bill

Oct 21, 2021 | Blog

The White House and the Treasury Department hotly debated Republicans in a sharp, back-and-forth dialogue concerning Democrats’ Internal Revenue Service bank-account reporting proposal, which is part of their still-to-be-written Reconciliation Bill. The reporting requirement is only one potential provision in the bill, but it was the one that led to Tuesday’s showdown on Capitol Hill. According to an IRS tax attorney, the reporting requirement would mandate banks to report deposits and withdrawals of certain accounts in an effort to uncover those who owe back taxes or have unreported taxable income. This money would then fund environmental and social programs.

Democrats Showcase New Proposed Threshold for Bill

On Tuesday, Democrats spoke about the new proposed threshold for the bill: rather than exempting those who only have $600 worth of bank account activity annually, they would raise this “activity threshold” to $10,000 in an effort to target wealthy individuals with tax enforcement. Republicans were quick to argue that the new plan would not just catch rich tax cheats, but sweep up many everyday Americans. At a press conference, Senator Mike Crapo (R-ID) was of the opinion that essentially every small business would be picked up by the new plan. The US Treasury, however, which backed the first reporting requirement of $600, contradicted Crapo’s statement about the adjusted proposal, claiming that expenditures would be exempt from counting toward the threshold of $10,000. According to the Treasury, wage earners, those who receive government benefits, and salaried employees would only be reported on if they spent $10,000 more than their annual income in any given year.

White House Press Secretary Responds to Republican Lawmakers

White House Press Secretary Jen Psaki weighed in on the proposal after Crapo and other Republicans voiced their objections. Psaki said that the bill would not be drafted for people who get W-2s, but rather rich individuals who are not paying appropriate taxes. She stated that the $10,000 threshold would not be applicable to those who receive W-2s. Senator Elizabeth Warren (D-MA) stated during a press call on Tuesday that the threshold should be based on the dollar amount coming into the account and the dollar amount going out, and would not include income from wage W-2s.

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New Bill May Sweep up Regular Americans 

IRS tax lawyers likely have their own opinion about the bill, but, according to available information, there is potential for many investors and other individuals who are far from millionaires to be lumped in under the new proposal. It would also send bank inflow and outflow data to the IRS on virtually every small business. On the Senate floor late Tuesday, Senator Crapo stated that merely excluding federal program beneficiaries and payroll workers does not address the millions of other filers who would be impacted by the proposal. He went on to say that not all non-wage workers are millionaires, and many individuals who are self-employed would be encompassed by the proposal. He gave examples such as farmers, convenience store owners, and hairstylists. He added that if the proposal is enacted, it would increase tax preparation costs for filers, present operational challenges, particularly for community banks, and raise privacy concerns for many citizens. Senator Chuck Grassley (R-IA) called the idea “stupid” and cited a recent leak of IRS data to ProPublica as evidence that the banking information of many Americans would not be safe once it is put in the hands of the IRS. An IRS tax attorney is the best person to speak to if someone owes back taxes or is concerned about how he or she would be impacted by the new proposal.