IRS Wants To Monitor Your Bank Account To Catch Tax Dodgers

The Biden administration wants the Internal Revenue Service to look into ordinary account holders to monitor transactions as low as $600 to catch tax dodgers.

Treasury Secretary Janet Yellen is promoting the plan which, according to the Treasury Department, is intended to help monitor wealthy tax dodgers by requiring financial institutions to report aggregated “inflow” and “outflow” from bank, loan and investment accounts.

The plan would reveal “opaque income streams that disproportionately accrue to the top,” Yellen said in a letter to the House Ways and Means Committee, which is debating on including the plan in the administration’s $3.5 trillion spending bill.

Yellen also told CNBC on Tuesday that the plan to monitor account holders is “a simple way for the IRS to get a sense of where that might be is just a few pieces of information about individuals’ bank accounts, nothing at the transaction level that would violate privacy.”

If the rule is signed into law, it would affect all personal and business accounts and reporting would be done on an annual basis for transactions that surpass $600.

This means that every American could get looked over by the IRS, the Wall Street Journal noted.

However, the thought of being further monitored by the IRS has created plenty of backlash.

Many banks and advocates have been criticizing the plan, saying that this move will primarily target ordinary people.

“While policymakers insist this provision is aimed at high-income earners, it sweeps in almost any American with a bank account. This is bad public policy and should be rejected,” the American Bankers Association and state bankers associations said in a letter to congressional leaders last month.

There are also concerns that sharing more personal information could cause identity theft and data breaches that have dominated the virtual world in recent months, MarketWatch noted.

“We continue to believe this proposal jeopardizes the privacy and security of financial information for nearly every U.S. account holder,” John Kinsella, vice president of tax policy at the American Bankers Association, told MarketWatch. “It would trigger an unprecedented amount of taxpayer information, most of which will be irrelevant to calculating taxable income, with significant cost and data security risk to taxpayers.”

So far, 23 state treasurers and auditors signed a letter calling the plan “one of the largest infringements of data privacy in our nation’s history.”