More than $600 in the bank? Proposal would allow IRS a peek
Part of the proposed $3.5 trillion reconciliation bill includes a provision to report to the Internal Revenue Service the transactions of all bank accounts holding more than $600.
The proposal stipulates that if an account balance is above $600 at any given time, the financial institution will be required to track transactions and report them to the IRS using an enhanced annual IRS Form 1099-INT.
Opponents have called the change an invasion or privacy that would lead to higher tax burdens.
Independent Community Bankers of America has objected to the proposal, calling it "excessive government intrusion that could hurt small businesses by double-taxing their income."
In a statement, Sen. John Kennedy (R-La.) said the proposal would effectively mean almost every American bank account will have its transactions tracked and recorded by the government.
"Year after year the IRS collects record taxes. Unfortunately, Washington also spends a record amount year after year and always more than it collects in taxes. Simply put, we have a spending problem, not a taxation problem," Kennedy stated.
He also pointed out that IRS employees illegally leaked confidential tax information on private citizens earlier in the year without repercussions.
"Before we give the IRS more resources and authority over everyday taxpayers, we must ensure bureaucrats can be trusted with the powers they already have," Kennedy added.
Sen. Bill Cassidy (R-La.) echoed Kennedy's opposition in a Facebook post.
"The IRS does not have the right to spy on Americans' bank accounts," Cassidy's post stated.
As emphasized by the USA Today, the proposal is not a decision "set in stone."
Proponents of the proposal say the information would help the IRS flag under-reported income and target tax evasion.
The IRS estimates a tax gap of $166 billion per year between the tax owed by businesses (not counting large corporations) and the tax actually paid.
Comprehensive reporting on money flowing in and out of accounts would enhance the effectiveness of IRS enforcement measures and encourage voluntary compliance.