Reconciliation Bill Beefs Up IRS Scrutiny of Bank Transactions

 

Giving the IRS sweeping new authority to monitor Americans’ bank transactions, a provision in the $3.5 trillion reconciliation bill is intended to catch tax evaders.  But it’s also triggering a strong response from states, including Utah.

In an effort to raise revenue and ensure compliance with the bill’s tax hikes on corporations and top earners, the bill provides a $79 billion IRS budget infusion.  The Biden Administration cites the need to ramp up tax code enforcement, expand auditing capacity, and modernize outdated technology.

But the provision requiring banks to report all transactions for accounts over $600 has been controversial, with states and privacy advocates vowing to fight the measure.

Calling it the largest data mining exercise in US history, a coalition of twenty-two state treasurers, auditors, and financial officers warn the measure threatens privacy, jeopardizes data security, and invites political abuse.

Utah State Treasurer Marlo Oaks and State Auditor John Dougal are both among those who signed a coalition letter opposing the measure.  The letter warns, “there are no guardrails in place to prevent any abuse of this information by the IRS or other government actors.”

Nebraska State Treasurer John Murante has committed to fight for his constituents’ privacy all the way to the Supreme Court, if necessary, saying Nebraska will not comply.

Dougall questions whether this level of surveillance will actually catch any tax evaders. Oaks warns the provision will create mountains of private data for IRS agents to sift through.  He warns that increased reporting requirements could overwhelm community banks and credit unions.

But the White House sees the new authority as the best way to detect unreported income that should rightfully be taxed. The top 1 percent of earners fails to pay more than $160 billion in taxes each year, according to a White House fact sheet. The provision is intended to target the “super wealthy who get their income from unreported sources and are able to hide their income and avoid paying taxes on what they owe.”