Our story so far: The Treasury Department wanted Congress to pass a bill that would require banks to report on all accounts with more than $600 in annual transactions. The idea was to collect data that would help catch high-end tax cheats, but Republicans cried foul. So the proposal is being changed:
Under the revised plan, which is backed by the Biden administration, banks would be required to provide data on accounts only with total annual deposits or withdrawals worth more than $10,000, rather than the $600 threshold that was initially proposed.
Fine. But Republicans aren't going to vote for it anyway, so why bother? I don't get it.
POSTSCRIPT: Why won't Republicans vote for it? Two reasons. First, it's a Democratic bill. Second, they will never do anything that might force rich people to pay all their taxes. They have demonstrated this endlessly over the years.
Forgive me for asking, but why is $600 threshold key to catching rich tax cheats?
I would also like to know this. Surely rich tax cheats don't just use thousands of $599 bank accounts, right?
The $10,000 threshold might be about right, although it's unclear whether it's deposits + withdrawals = $10,000+ or just one or just the other...
But it also seems like this kind of data would be more meta in nature, and not like... everybody's bank statements. More like looking for patterns of usage. To wit, it shouldn't be harmful to anybody so I don't see why a low threshold wouldn't be best - to make sure you catch all the activity you want to catch and you might learn some things about the patterns of people with lower balance bank accounts as well, so you could help them...
I don't get it.
What is the point of excluding wage income from deposits if you still count withdrawals?
How many ordinary working people do not withdraw at least $ 10,000 per year from the account they deposit their wages too? Just paying everyday bills? Is there an exclusion for withdrawals from amount of wage deposits?
If not , reporting on any account which has $10,000 of withdrawals basically means reporting for just about everyone, not just the " rich ". So then this " concession" that kevin is complaining about is meaningless. And just trying to make it appear they compromised when they did not.
The wage exemption is in addition to the $10K total. You're right, a lot of it is just politics.
If it's true that the $10K rule will still give the federal government access to everyone's bank transactions, then that should be removed from the bill as well.
As I state below, this is both bad policy and bad politics.
It is indeed bad policy as it creates a new reporting burden and thus cost. 10k is too low.
to wit, it shouldn't be harmful to anybody so I don't see why a low threshold wouldn't be best
Agreed. From a policy-perspective, the lower threshold is better.
But clearly it's politics. Policy-ignorant Americans (IOW the vast majority) are easily provoked into supporting the .1% ERGO the Biden administration has wisely decided to cave. You never know what's going to cost you a House seat.
That is inane idiocy, from a Policy perspective lower is not better unless one desires to create a government oversight of all bank transactions, regardless of cost.
From the stated policy goal of "high income tax cheats", a higher threshold targetting principally larger accounts with significant movements is better as it targets data to higher-probability accounts of interest, does not drown the receiving reporting department in long-tonnnes of irrelevant data, and further avoids the regulatory reporting cost burden on accounts for lower and middle income account owners who are at least ostensibly not the target. Regulatory cost is a real factor - such reporting mechanisms are not cost free.
A higher threshold targetting significant movements, say 100K USD would avoid burden on middle class and lower account holders (and while yes one can chunk transactions between many accounts to avoid limits, this involves significant labour and oversight on the part of the evader, and becomes prohibitively complex when real money comes into play (millions plus).
It's not clear that $100K avoids the middle class. The 80th percent top end of the middle class would deposit around $140K each year and withdraw about $140K each year.
Seems to be walking towards a warrantless search. But I suppose that old favorite of if you don’t have anything to hide why worry about it applies…
A counterpoint: elite liberals vastly underappreciate financial privacy. A lot of them think that spending is different than speech or thought (see also campaign finance cases, where they take the same sort of position) and just assume there's nothing wrong with the government knowing about every single monetary transaction (maybe to the exclusion of lemonade stands and such).
But financial privacy is actually important. It's quite true that it can be used, like any other sort of privacy, to protect criminals. But do you want, for instance, the state of Alabama to have access to whether people pay for sex toys with credit cards? Do you want a Republican-run government to be able to find out everyone who donated to Black Lives Matter?
The notion that any bank account that sees $600 in transactions should be accessed by the federal government is SCARY. I don't use this term very often (it's way overused), but there's something totalitarian about it. If the only way to collect taxes is to allow the federal government access to even the smallest exchanges of money, we probably should design a better tax system rather than eviscerating everyone's privacy.
And even if you don't agree with me on that, this is a political loser. The average Joe does not think the IRS should have access to his bank account, or buys that it needs that access to ensure Bill Gates pays all his taxes. This needed to go, and it needs to never come back.
The government already does know monetary transactions that involve banks. So "scary" is just fearmongering. Imagine claiming a tax credit for a donation to a church, or drawing a paycheck from the ACLU. Heaven forbid the government know that you're retired and claiming Social Security or reliant on Medicaid. Or if the government knows your address!
Next time, come up with an actual argument instead of putting SCARY in all caps as if that makes it work.
The government knows things that involve payments to the government, and it knows private financial transactions that are reportable on tax returns.
That's a far cry from knowing every single debit and credit from your bank account, and its incredibly dishonest of you to equate the two things.
Answer me straight out- do you believe the government should get to know if you donate to Black Lives Matter? I don't, and I don't even think that is a hard case.
Seems like an utterly minimal change considering the goal. He might well have "caved" in return for some other sort of support.
$600 is the legal threshold for when a 1099 needs to be issued by the business paying for a contractor. This is attempting to catch people running side gigs and getting paid via Venmo or Paypal and not reporting the income. This is NOT about catching rich tax cheats.
Bingo!!!!! It's about capturing all the side hustles as well as bigger fish who are trying to be under the radar.
You think the contractors aren't rich? LOL.
You're kind of an idiot, aren't you?
It seems indeed bizarre to call this "caving to Republicans" as opposed to more likely realising that USD 600 is an absurdly low threshold for reporting for high income, would end up drowning the receiving reporting department in irrellevant and unactionable reports. And such reporting burdens raise the cost of account maintenance, meaning that low volume accounts will become even more unattractive to banks (and imagine the burden on small institutions). Such things come at a cost.
USD 10k also appears rather low as a transaction threshold depending on definition, but at least is excluding what is certain to be a huge number of low-income bank accounts which would clearly be irrelevant, and at least partially reduce admin overhead burden with no use at all.
By rational analysis operations reporting really should be higher in the range of 100k USD (yes of course one can divvy up between many small accounts, but such behaviour already typically falls into money laundering flag rules and is quite a lot of tracking labour to engage in for the side doing it).
A higher level restricts the burden to higher-income accounts and that's quite appropriate. Lower levels make low-income low-volume accounts more expensive for banks (including credit unions) and does not carry real benefit.
"drowning" the receiver isn't actually a problem. We can handle big data. We know how to data mine.
I don't get this at all. $10,000 in annual deposits covers any employee or welfare recipient who gets paid by direct deposit, which I assume in America is most of them. What's it got to do with catching rich tax cheats?
As I understand the rule, wage income, presumably direct deposits, are not covered. That is reported on your W-2. It covers other deposits. What they're really looking for is undeclared business income.
That makes more sense. It's typical of the terrible way these things get reported. No doubt the media is partly to blame, but there hasn't exactly been a blizzard of 'We're determined to catch the tax cheats' tweets and speeches from Democrats lately.
I usually suppose the reasons aren't meant to be discernible. But someone will write a book one day. Maybe it's something Kyrsten Sinema needed to have.
They already have to report individual transactions of $10k+, or patterns of transactions close to 10k that are probably related (which is potentially a crime itself if the purpose was to avoid triggering the 10k reporting requirement.) 10k vs 600 for catching wealthy cheats probably doesn’t matter much.
No, my issue is that since this was proposed we’ll hear from Republicans for decades about how Democrats are watching every $700 rent payment in your account even though it’s not true. They still bitch about the “Cornhusker Kickback” even though it wasn’t in the final ACA bill.
KD-
$10,000 is caving?
Coming from a guy who lives in expensive CA, drives a Porsche, operates drones and has thousands of dollars in photo equipment?
Never mind Hopper, and Hilbert who are worth millions?
The key point, of course, is that this "issue" is highly demogogue-able. "The government is spying on your intimate financial details" etc etc. And I'm not making that up at all: https://www.washingtonpost.com/politics/2021/10/20/no-biden-isnt-proposing-that-irs-spy-bank-records/
Always remember: the IRS is the police for the rich. The GOP has been defunding the police for decades.
+1
$600 is the legal threshold for when a 1099 needs to be issued by the business paying for a contractor. This is attempting to catch people running side gigs and getting paid via Venmo or Paypal and not reporting the income. This is NOT about catching rich tax cheats.
This was boneheaded politics. I don't know if or how it detects rich tax cheats. But when people hear "The IRS is spying on accounts with $600 to catch rich tax cheats" they are going to think the Democrats are either idiots or want to "spy" on everyone.
Kevin,
This is not about catching "high end tax cheats", it's about catching people running gig businesses getting paid via paypal or the like and not reporting it as income.
Even gig business is a debt driven illusion. Biden is really dealing with morons running these committees. They need a overall.
Some gigs are more profitable than others. I could see say a Handyman with a good local rep making a nice living getting paid via Vemo and the like or even a music teacher.
If someone is only making 10K they won't be paying a lot of taxes on that. Of course it's possible guys like this might have multiple accounts to hide their income, but does anyone think that's likely?
I think the IRS thinks this. Yes I think it's possible that folks are attempting to keep a lot under the table that the IRS now wants to capture.
It depends. My wife only makes 10K. But she's married to me. So basically all of her income is taxable. Basically because she gets to pay the equivalent of the payroll tax for being self-employed. There's a loophole that allows her to dump most of her income into a retirement account to avoid the taxes.
I think the comments here give a better rational then the original post. As for affecting the wealthy--maybe it will catch them paying their household help under the table.
In a world of Bitcoin, international tax shelters, fancy tax accountants/lawyers lowing the IRS reporting to $600 is NOT designed to catch rich tax cheats. Rather, $600 is the 1099 reporting floor: the $600 limit was designed to surface unreported gig economy income....
Biden didn't cave to the GOP per se on this. It's an obnoxious proposal and was exceedingly obnoxious at the $600 threshold. It evinces a terrible reaction even when the accurate details are related. Senate Democrats who like the compliance idea generally needed it to be less obnoxious such that the side hustlers and cash appers and mutual aide societies in their base were going to get flagged for tax compliance letters at $600. They may still get flagged for audit at $10k if they have that cash flow and are not filing schedule Cs.
That's what this is directed at, the untaxed shadow economy generally such that its 10% of GDP and perhaps a little more specifically the modesty wealthy business class tax payer who can disburse themselves money from their companies without 1099ing. It's not really targeted at the super rich such that that's not where the macro big money is going to be found.
The notion is to use the big IRS data universe to match account holders to returns. If cash inflow is greater than reported W2s / 1099s above whatever arbitrary threshold the IRS deems too much, it would trigger a compliance letter or audit.
So at $600 they wanted to look at every bank account in the country, as a practical matter. That's a ridiculous, misanthropist Dem smarm-wonk overreach.
There's no real difference between a $600 threshold and a $10,000 threshold.
"... but Republicans cried foul. .."
Biden "caved" because some Democrats were objecting as well.
Yes. This post super credulous.
There are definitely more than zero pro-financial-what-should-be-crime democratic senators.
Need way bigger majority to get stuff like this through.
Two things:
1. Why does anybody spend any time thinking about this detail? The bill is dead in the water either way.
2. If one bothers to think I believe the Republicans are right here (for the wrong reason most likely). The $600 amount is so low that essentially every account will be reported, creating a huge and almost entirely useless set of data. A higher trigger amount reduces the set to those most likely to contain material for the IRS to work on, saving them trouble. So why would Biden not agree?
There's no real difference between $600 and $10,000.
10,000 is the existing limit right?
Didn't Denny Hastert get outted as a pedophile for doing regular withdrawals just under 10k which tipped off the feds to wonder why?
Anyhow because it probably wouldn't have passed through reconciliation because democrats are sabotaging him. Also he's from Delaware so his instinct is to please the finance industry and he doesn't always overcome it.
"Senate Democrats on Tuesday, bowing to an **aggressive lobbying campaign by the banking industry** and pushback from Republicans..."
Somehow I don't think Republican pushback was the deciding factor.
10,000 is the limit on a single transaction.
I think many of you are missing an important point in comparing the existing 10,000 limit to this new 600 or 10,000 limit .
The new threshold is cumulative, not per transaction. The old was per transaction. And note it covers the total of deposits and withdrawals.
At $600 cumulative, it thus required irs reporting for every account except essentially dormant unused ones where the total deposits plus withdrawals are under $600. And raising it to $10,000 and exempting wage deposits does very little to change that. How many accounts have less than $10,000 of withdrawals even if all deposits are wages? How are they supposed to live on wages while only withdrawing under $10,000 per year?
Nobody has yet explained if I am missing something there. If not , this supposed concession is just really cosmetic and still basically giving irs authority to invade private accounts of near everyone. Almost as if the initial $600 threshold was set deliberately insanely low to give something to appear to compromise on, and kevin fell for it.
You and some other people are confusing into the discussion some features of the Suspicious Activity Report, which has been around forever, with this new IRS inflow / outflow thing. They are different and not related except for the new $10k threshold being numerically identical to the SAR report threshold on cash.
The original bank inflow / outflow proposal threshold was $600 cumulative in a year. Now it's $10k with payroll and SS etc not counted in the $10k.
If you are referring to me, I do not think I am confusing the two. The point of my post was that they are not the same. And, yes, the fact the first $600 threshold was the same as the existing threshold for reporting payments by the payee, and the new $10,000 threshold is the same as the existing reporting threshold per transaction is somewhat suspicious to me. Seems designed to be confusing and obscure the new cumulative nature and that it is total of deposits and withdrawals. It appears that still want to basically give irs info on near every account while making it seem they are setting reasonable limits ( while those limits are basically fake).
And exempting wage deposits is quite meaningless if you do not also exempt withdrawals from those wages . Unless I have enough cash under the mattress to live on , or can live in less than 10,000, what are you to do?
And read up on some of the horror stories where people had money seized because they were supposedly illegally structuring under existing law ( when they were not ) and how hard it was for them to get justice.
I don't need to be persuaded on any of that. I hate it any threshold.
It's not designed to be confusing, such that its not superficially confusing on its face. At a $600 or a $10k cash inflow threshold they want insight into most personal bank accounts in the US. So when they say they are after "the rich", you just have to not be confounded by the low threshold and understand they're lying, end story. They're after the shadow economy broadly that is 10% of GDP. I just think collecting tax on that is making the perfect the enemy of the good, particularly with the civil liberties abuses that get brought along.
You are confusing Rational Thought with a figment of your imagination. Rational Thought didn't say what you claim s/he said.
I don't see this as "caving to the Republicans" as much as "demonstrating a bit of sense". I would have raised the threshold another digit, to $100,000. At that point, you're looking at enough money that it's worthwhile for the IRS to pay attention, and you're avoiding information overload by holding the number of reports down to something that might be sort of manageable.
$100,000 isn't that different from $10,000. You're still scooping up 40% of bank accounts.
Kevin is wrong when he writes: "a bill that would require banks to report on all accounts with more than $600 in annual transactions"
The initial Treasury proposal was to report gross transactions for the year for any account that had a fair market value of at least $600 AT ANY TIME OF THE YEAR.
https://home.treasury.gov/system/files/131/General-Explanations-FY2022.pdf
Page 88 (94 in the pdf):
This proposal would create a comprehensive financial account information reporting regime. Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.
That's practically every adult in America.
But set that aside. It's political insanity to have the IRS get any information from small depositors. Or even small-time crooks. Go after the big boys, not someone making money on the side selling used tires for cash.
As to Kevin's: "Republicans aren't going to vote for it anyway, so why bother? I don't get it."
Are you kidding me? When the news broke out, Democrats, realizing what a stink bomb the proposal was, set the threshold much higher so that it would exclude a lot of potential voters. Framing the change as an *unnecessary* retreat because Republicans aren't on board is, frankly, inexplicable.
This proposal came from the Treasury Department by a team that was clueless about politics. Elected Democratic officials immediately sensed that it was toxic.