The proposal would require banks to report to the IRS every deposit and withdrawal from an account in order to target audits
The IRS estimates that compliance on taxes due on wages is 99% while compliance on ‘less visible’ sources of income is only 45%
The plan would most especially affect the self-employed, who self-report their income and deductions, and the wealthy
Banks are largely against the proposal, which they say would impose onerous reporting requirements on institutions for little benefit
One key prong of President Biden’s plan to bankroll Democrats’ $3.5 trillion budget plan is to monitor every inflow and outflow of an individual’s bank account.
The Biden administration says such surveillance would target audits and prevent tax evasion, but some are concerned that it might run up against the Fourth Amendment and those who can’t afford to fight tax audits or move their money into offshore accounts.
The proposal would require banks to report to the IRS every deposit and withdrawal from an account, including transactions from Venmo, PayPal, crypto exchanges and the like in an effort to fight tax evasion. The IRS would know how much money is in an individual’s bank account in a given year, whether the individual earned income on that account and exactly how much was going in an and out.
Biden, Treasury Secretary Janet Yellen, IRS chief Charles Rettig and a number of Democrats in the Senate, most especially Elizabeth Warren, are pushing for the deep dive into individual financial transactions as part of an $80 billion plan to enforce tax compliance.
Patrick Hedger, vice president of policy at the Taxpayers’ Protection Alliance, warned that such a proposal could violate the Fourth Amendment, which protects citizens from search and seizure without probably cause.
‘The IRS is first and foremost, a law enforcement agency, and the Fourth Amendment protects against unreasonable searches and seizures in pursuit of, of looking for wrongdoing and criminal actions, so I think this is going to run into severe Fourth Amendment headwinds,’ Hedger told DailyMail.com.
Other parts of the plan include setting up a global minimum corporate tax rate of 15% and a system that prevents multinational companies from registering profits in the lowest-tax jurisdictions and raising taxes on the rich.
A Treasury Department report from May claimed that the tax gap totaled nearly $600 billion in 2019 and would rise to $700 trillion over the next decade if left unchecked, roughly 15% of taxes owed.
The IRS estimates that compliance on taxes due on wages is 99% while compliance on ‘less visible’ sources of income is only 45%.