A new proposal from the Biden Administration would force banks to turn over transactional data of most Americans for an IRS audit. It’s part of President Joe Biden’s pledge to increase staffing and audit power of the IRS.
The proposal would require banks to turn over account information for any and all accounts holding more than $600. Banks and countless trade associations have come out against the proposal.
“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” a letter from the group opposing the legislation said. “In addition to the significant privacy concerns, it would create tremendous liability for all affected parties by requiring the collection of financial information for nearly every American without proper explanation of how the IRS will store, protect, and use this enormous trove of personal financial information.”
While security at the IRS is one major concern. Another is how the agency would handle it – given the mass challenges associated with completing tax returns, or issuing stimulus and child tax credit payments. Millions of Americans are still waiting for tax refunds from 2020 – as the IRS struggles to keep pace with increased responsibilities.
President Biden proposed an extra $80 billion for the IRS to step up audit efforts. That hasn’t come to fruition yet.
“But the super wealthy who get their income from unreported sources are able to hide their income and avoid paying the tax they owe. In fact, each year the top 1 percent chooses not to pay more than $160 billion in taxes,” the Biden Administration argued in a fact sheet.
Would the rich or poor be scrutinized more under this proposal?
There has been ample reporting over the last decade highlighting the ways in which the IRS falls short on auditing the wealthy. In fact, a ProPublica report from 2019 found that poor Americans were audited at the same rate as the top 1% of earners.
It’s cheaper and easier. The problem for Democrats is that it has the reverse intended effect. As poor people are audited at a higher rate – it prevents them from claiming tax credits they’re entitled to receive.
This will be a major problem for Democrats as they attempt to navigate this new proposal, which would undoubtedly raise alarm about scrutizing transactions of those with smaller bank accounts, and less resources to fight it.
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