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President Biden announced the American Families Plan today, which is designed to “grow the middle class and expand benefits of economic growth to all Americans.” The American Families Plan includes a lot to like, no matter what side of the aisle you are on. By any measure, the amount of benefits being proposed is staggering, which begs the question, how will we pay for all of this? By increasing IRS enforcement, by increasing reporting obligations for financial institutions, and by raising taxes on the wealthy. Each aspect of this plan is worthy of its own column. This column will focus what a senior administration official called one of the “significant steps” designed to make “sure that [ ] taxpayers are paying the taxes they already owe”: increased reporting obligations for financial institutions.
originally posted by: Quadrivium
My wife and I received a notice from our small town bank alerting us to the new federal proposal that would require banks, credit unions and apps like Venmo and Paypal to report any account with more than $600 in transactions in a year to the IRS.
Among the issues raised, ICBA says mandating new, broad bank account reporting to the IRS would infringe on the privacy of bank customers, push more people away from a banking relationship and overload the IRS with more personal information about American citizens than it can possibly process or keep safe from a data hack.
The ostensible reason for the proposal is to close the so-called “tax gap” wherein the government claims it is collecting around $500 to $600 billion less in taxes than is actually owed.
However, ICBA notes that adding more data to the equation won’t actually fix anything.
“The IRS already collects more data than it can process, including data reported under the Foreign Accounts Tax Compliance Act (FATCA),” their datasheet reads. “The IRS should begin by making better use of this data.
originally posted by: Mantiss2021
a reply to: Quadrivium
So, as you understand it, just how, specifically, will this $600 threshold requirement "destroy" the middle class?
I'm hearing a lot of fear, but no substance; lots of assumptions, but no examples.
As I understand it, these provisions are intended to help the IRS fight money laundering and underreported income transactions; Both of which harm the middle class by unfairly shifting more of the tax burden to their shoulders, while criminals get off scot, and tax, free with their unaccounted-for loot.
And, while I do agree that the wealthy have many advantages open to them to help them reduce their tax burdens, most of those same "loopholes" are available to anyone with similar types and/or sources of income willing to do the research necessary to discover those loopholes.
Don't go complaining that your neighbor's crops are healthier than yours if you aren't willing to work as hard as he does to raise them.
Buried inside the 600-page bill that's ostensibly meant to provide pandemic relief is a provision requiring gig economy platforms to report information to the IRS about all users who earn at least $600 in a year. Previously, platforms were only required to provide the IRS with information on users who made at least 200 transactions or earned at least $20,000.*
The tightening of the reporting requirements means a lot more paperwork and tax compliance requirements for platforms. It also means more tax headaches for anyone who might use those platforms to earn a little extra cash. Anyone earning a sizable income via rental properties on Airbnb was already covered by the old rules, meaning this change will only affect low earners. Now, even the sale of a single expensive piece of old furniture on eBay or running deliveries for Uber Eats in your spare time might trigger the new reporting requirements.
The big difference is that now the IRS will have their personal information and can go after them.
"Workers who are under-reporting their income now will become guilty of nonpayment next year and subject to penalties and actions by the agency," Olson told Roll Call, adding that an IRS collection action "can destroy a person's life."
Nevertheless, privacy rights advocates are concerned the provision encroaches on the Fourth Amendment, while banks are largely opposed to the measure because it imposes significant new reporting requirements, the Daily Mail noted. Also, opponents say such a measure would hurt poor Americans most while causing others who have the means to move their assets to offshore accounts.
Banks, too, are pushing back.
In a letter to the Senate Finance Committee’s Subcommittee on Taxation and IRS Oversight, the American Bankers Association countered that the “new reporting requirements for financial institutions would impose cost and complexity that are not justified by the potential, and highly uncertain, benefits.”
Banks already report a significant amount of information to the IRS that is not being used, ABA added. The additional reporting requirements would be “massive, unmanageable and of questionable relevance to the calculation of taxable income,” and would create a significant compliance burden for the nation’s community banks.
Has something changed???