Democrats increase IRS proposed bank reporting threshold to $ 10,000 from $ 600

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WASHINGTON, Oct. 19 (Reuters) – Top Democrats in Congress have agreed to raise their proposed tax reporting threshold for inflows and outflows from bank accounts to $ 10,000 per year, with exemptions for salary income, from a earlier $ 600 proposal that had drawn criticism for being too intrusive.

U.S. Senate Finance Committee Chairman Ron Wyden said Tuesday that the Internal Revenue Service’s new $ 10,000 reporting threshold, to be included in Democratic social spending and tax hike legislation, was chosen after consultation with the US Treasury as it is a level frequently used in other bank reporting requirements.

These include the requirement for banks to report daily aggregate cash transactions of $ 10,000 or more under anti-money laundering rules.

The Democrats’ initial proposal for banks to report inflows or outflows of more than $ 600 a year drew fierce criticism from Republicans for targeting tiny transactions and opposition from banks and banks. other pressure groups who accused him of raising financial confidentiality issues.

The proposal does not identify individual transactions, but gross annual inflows or outflows to help the IRS identify where wealthy taxpayers who are not dependent on regular “W2” wage income may hide an opaque source of business income or investment.

Wyden and Senator Elizabeth Warren said the revised proposal would exclude W2 salary income from the entry and exit data reporting requirement. Many Americans have their paychecks deposited automatically into their bank accounts.

Wyden said the revised proposal could potentially raise “hundreds of billions of dollars” by catching tax evaders, but declined to provide a precise estimate.

The word “taxes” is engraved at the Internal Revenue Service (IRS) headquarters in Washington, DC, United States, on May 10, 2021. REUTERS / Andrew Kelly

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“These are wealthy business owners at the top of the hierarchy. This is where the unpaid taxes are,” he told reporters on a conference call.

“TAX GAP”

U.S. Treasury Secretary Janet Yellen approved the proposal on Tuesday, saying it would be more difficult for wealthy Americans to hide their sources of income from tax, allowing the IRS to target them for audits.

The Treasury estimates that the cost of tax evasion among the richest 1% of taxpayers exceeds $ 160 billion per year, part of a “tax gap” between taxes owed and those collected estimated at over $ 7 trillion over a decade.

“Today’s new proposal reflects the administration’s strong belief that we should target those at the top of the income scale who are not paying the taxes they owe, while protecting workers. Americans by setting the bank account threshold at $ 10,000 and granting an exemption for employees like teachers and firefighters, ”Yellen said in a statement.

In a new statement on the tax compliance proposals, the Treasury said financial accounts with cash inflows and outflows that total less than $ 10,000 per year are not subject to any additional reporting.

“In addition, when calculating this threshold, the new tailor-made proposal excludes employees and beneficiaries from the federal program, so that only those who accumulate other forms of income in an opaque manner are part of the reporting regime”, said the Treasury.

The department also said financial services companies could report total aggregate entries and exits from accounts rounded to the nearest thousand dollars to further protect data privacy.

Reporting by David Lawder; Editing by Jonathan Oatis, Aurora Ellis and Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.


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