New IRS Reporting Proposal Raises Privacy Concerns
What is it?
When the Biden administration announced the American Families Plan, it was aimed to "grow the middle class and expand benefits of economic growth to all Americans."
According to the administration, this will be done by increasing IRS enforcement in the form of reporting obligations for financial institutions (i.e banks, credit unions, etc.)
Tax laws and budgets are not the easiest documents to understand, so we dug a bit deeper on this matter: How does letting the IRS have access to your bank account to see all your inflows and outflows sound?
What this means?
If passed, this new act would require banks and other financial institutions to report inflows and outflows of all business and personal accounts with a balance of 600 dollars or more. This includes transactions from Paypal, Cashapp, Venmo, and crypto exchanges to name a few to fight tax evasion.
This crackdown on unreported income is expected to generate $460 billion over the next decade, according to the office of tax analysis.
The proposal raises some serious privacy concerns among the public. Some financial institutions have pushed back in opposition stating the "new reporting requirements would raise questions about customers' right to privacy and would raise the cost of tax preparation for individuals and small businesses."
One taxpayer protection alliance stated that this act could violate the fourth amendment, which protects citizens from search and seizure without probable cause.
While this would affect all financial institutions, smaller community banks would hurt the most. With fewer, limited resources -- the new act would require an expensive compliance effort to track all the additional information.
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