Millions of Americans could see their bank account information collected and reported to the Internal Revenue Service under a controversial proposal put forward by Democrats.
Top-ranking Democrats fashioned the plan earlier this year to require financial institutions and banks to disclose annual outflows and deposits of $10,000 in a move said to help the IRS crackdown on wealthier tax cheats.
Under the latest proposal, recipients of federal benefits of Social Security and unemployment will be exempt, along with income received through a paycheck that has already had federal taxes automatically deducted.
The Joint Committee on Taxation has estimated that Americans who earn less than $400,000 adjusted gross income, numbering 87 million Americans, will see account information reported to the IRS.
This number represents a little more than half, about 59%, of taxpayers in the United States earning less than $400,000.
House Democrats have already passed a version of the Build Back Better bill that omitted the IRS monitoring provision after Senator Joe Manchin (D-W.Va.) called it “screwed up” and opposed its inclusion.
Revenue from the account monitoring plan was intended to fund Biden’s economic spending measures. The provision faced fierce criticism from industry groups, Republicans, and banks.
The Biden administration has consistently and repeatedly defended the plan despite criticism from banks and others.
A memo from the White House to congressional Democrats explained that requiring financial institutions and banks to provide a “little bit of high-level information” to the IRS on flows in and out of accounts will give the agency valuable information about wealthier Americans’ earnings from business activity and investments.
The administration stresses that banks will not be required to report individual transactions but “basic, high-level information on account inflows and outflows.”
They also state that audit rates for Americans earning less than $400,000 will not increase or change. As part of anti-money laundering requirements, banks are already required to report any individual transactions that exceed $10,000 to the Financial Crimes Enforcement Network.
Senator Tim Scott, R-S.C., one of the leaders opposing the proposal, said the direct collection of any additional data from banks accounts is concerning.
“The Democrats’ plan to allow the IRS to spy on the bank accounts of nearly every person in this country, even those below the poverty line, should be deeply concerning to anyone who values privacy and economic inclusion.”
In response, Sen. Scott introduced a bill to prevent the IRS from moving ahead with the Senate Democrats’ and Treasury Department’s proposal.