Some of the initial outrage at the Treasury proposal was focused on the $600 threshold. It would also, however, flag people who report little income but have hundreds of thousands of dollars flowing through their bank accounts.Īs Treasury Secretary Janet Yellen told CBS Evening News' Norah O'Donnell recently: "If somebody reports an income of $10,000 and they had 3 million go out of their checking account, that tells the IRS that's an individual you might audit." A low cutoff
I would think that anyone of any political bent would want the wealthy to pay their fair share, not have an opportunity to evade tax."Ī senior Treasury official told CBS MoneyWatch that, for anyone who makes income through work, reporting bank account information would only confirm what the government already knows from seeing their W forms. "Middle-class and low-income taxpayers really suffer when there isn't tax compliance, particularly among high-net-worth people. "For higher-income people, the IRS doesn't have exact information of what they make, and it's harder to collect tax they owe." "If you earn wages, the IRS can see exactly what you make, and garnish your wages," said Megan Brackney, a partner at law firm Kostelanetz & Fink. A vast amount of those unpaid taxes belongs to the wealthiest 1% of taxpayers - by one estimate, $160 billion a year goes unpaid by this group. The proposal is part of a suite of laws that would close the so-called information gap - taxes that the government doesn't know to collect because of income that goes unreported. He added, "We are literally talking about enforcing the law that is already on the books." "This idea that you have some sort of right to not tell the IRS about income you have - there is no such right. "We are all supposed to pay income taxes on our income," said Steve Wamhoff, director of federal tax policy at the Institute for Taxation and Economic Policy.
Supporters of the proposal note that it doesn't actually require any new taxes - it merely allows the IRS to enforce the existing law.
"Banks will not share with the IRS any information to track individual transactions under this proposal, and the IRS will have no ability to track individual transactions," the Treasury said in a blog post. No individual spending data will be visible, the Treasury emphasizes - only total money going in or out. Banks already report interest income over $10 on Form 1099-INT this proposal would add a few lines to that tax document, supporters say.
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