(NEXSTAR) – A proposed tax reform from the Biden administration would require financial institutions to send the Internal Revenue Service more information about many Americans’ bank accounts – prompting a pushback from a number of Republican politicians.
In a bid to close an unpaid tax revenue gap estimated to be nearly $175 billion annually, Treasury Secretary Janet Yellen is urging Democrats to maintain the Biden administration’s complete proposal to give the Internal Revenue Service greater resources to identify tax scofflaws.
Along with $80 billion to expand staffing and enforcement efforts, the Biden administration proposal would require financial institutions to report more information on the total inflows and outflows of bank accounts.
With lawmakers continuing to work out the details, the proposed reporting rules did not make it into a draft of tax provisions from the House Ways and Means Committee, however.
In a letter to House Ways and Means Committee Chairman Richard Neal (D-Mass.), Yellen emphasized the importance of the measure.
“As you consider specific policy choices in designing an information reporting regime, it is important to ensure that the reporting regime is sufficiently comprehensive, so that tax evaders are not able to structure financial accounts to avoid it,” Yellen wrote. “Any suggestion that instead this reporting regime will be used to target enforcement efforts on ordinary Americans is wholly misguided.”
It’s not yet clear what the ultimate proposal may look like, but in written testimony from June 8, IRS Commissioner Charles P. Rettig described a reporting regimen that would require gross, annual inflows and outflows from “all business and personal accounts from financial institutions, including bank, loan, and investment accounts” containing at least $600. Unlike some have falsely reported, the plan does not call for monitoring individual transactions, but rather it focuses on the total, annual flow of funds.
The low threshold is designed to flag taxpayers who report little income but hide large amounts of money by moving it through different accounts, Chuck Marr, a senior director of federal tax policy at the Center on Budget and Policy Priorities, told Politico.
“It just helps the IRS get better at finding noncompliance, finding people who are cheating,” Marr said.
The current amount that triggers a report to the IRS is $10,000, per the Bank Secrecy Act.
According to the Treasury, the increased IRS enforcement proposed under the Biden’s Build Back Better agenda would not affect people with less than $400,000, but would focus on those with the highest incomes.
The proposal has been recently met with criticism from members of the Republican party.
Dozens of Republican lawmakers from nine states signed a letter Monday saying that the proposed IRS monitoring change wouldn’t be “necessary or helpful toward closing the ‘tax gap'” if the IRS didn’t have the resources to enforce the tax code.
The letter also claimed increased communication between the IRS and financial institutions could expose more Americans to a cyberattack and possibly raise privacy concerns with consumers who might forego opening an account.
Proponents of the measure say it is vital to keep the country from losing billions of dollars annually and being forced to raise taxes to offset the money owed by tax cheats.
The U.S. Department of the Treasury estimates that the difference between the taxes owed to the government and the taxes actually paid will total about $7 trillion over the next decade.
The IRS did not immediately respond to a request for comment.