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[Reason] Biden's Plan To Crack Down on Tax Cheating: Snooping on Everyone's Bank Accounts

Discussion in 'BBS Hangout: Debate & Discussion' started by Os Trigonum, Sep 17, 2021.

  1. Os Trigonum

    Os Trigonum gone fishing
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    https://www.forbes.com/sites/irswat...-to-irs-under-new-biden-plan/?sh=31e2d77712bf

    Apr 28, 2021,02:52pm EDT 533,752 views
    Under Biden Plan, The IRS Would Know A Lot More About Your Bank Accounts

    Guinevere Moore Contributor
    IRS Watch Contributor Group

    President Biden announced the American Families Plan today, which is designed to “grow the middle class and expand benefits of economic growth to all Americans.” The American Families Plan includes a lot to like, no matter what side of the aisle you are on. By any measure, the amount of benefits being proposed is staggering, which begs the question, how will we pay for all of this? By increasing IRS enforcement, by increasing reporting obligations for financial institutions, and by raising taxes on the wealthy. Each aspect of this plan is worthy of its own column. This column will focus what a senior administration official called one of the “significant steps” designed to make “sure that [ ] taxpayers are paying the taxes they already owe”: increased reporting obligations for financial institutions.

    Simply put, the American Families Plan calls for banks and other financial institutions to report more than just a taxpayer’s interest earned, capital gains and losses. Banks and other financial institutions would also be required to report “aggregate account outflows and inflows.” In other words, the IRS will know about all of your bank accounts, whether you earned income on that account or not, how much is in the account in a given year, and how much was transferred in and out of the account. It is unclear how this would work, but what is clear is that this new reporting obligation will create a massive compliance effort on the part of financial institutions, and eliminate a massive blindspot that the IRS is currently enduring.

    As things stand today, most taxpayers don’t have an obligation to report how much money they have in their bank accounts, how much they deposited, or how much they withdrew. Self-employed taxpayers who - like all Americans - self-report their income and deductions to the IRS are on the honor system. W-2 Wage earners, on the other hand, have their amount of wages reported to the IRS on their behalf. The IRS’s lack of information about the balance of the business bank account, how much was deposited, and how much was withdrawn allows the self-employed taxpayer to lie (or make an honest mistake) about gross receipts or gross revenue. For some self-employed taxpayers, this temptation is hard to resist. Cheating on taxes by taking outlandish deductions is likely to end up in an IRS audit, but under-reporting revenue is harder to track or identify. By requiring banks to report highest balances and aggregate deposits and withdrawals, the American Families Plan will effectively close off the option of underreporting gross receipts or revenues for businesses and self-employed taxpayers.

    It may create problems, however, that should be considered and addressed as this plan works its way through Congress. For example, consider a young couple saving up to buy a home. All savings are put into the “dream home” savings account. Then, when it comes time to make the down payment, the $50,000 dream home savings goes into the regular checking account, which is then wired to the seller’s escrow account. Buying a home is not a taxable event (at least for federal income tax), selling one is. Will the IRS receive information from the financial institutions that leads to an audit?

    Conversely, say the young couple receives the down payment as a gift from their parents. If the parents gifted $50,000 to the adult children to make a down payment, that must be reported on a gift tax return, even though no gift tax is due. This type of gift is frequently made, and in my practice as a tax controversy lawyer, rarely reported as it should be. The increased financial reporting obligation would likely increase compliance with gift tax reporting rules.

    If the proposal to require financial institutions to increase reporting to include account balances, inflows and outflows, is passed there is no question it will increase taxes collected. Both self-reporting and audit outcomes will likely be improved. However, defending against an IRS exam is stressful and can be costly. The Biden administration and Congress should work together to ensure that taxpayers who simply move funds between accounts are not audited solely as a result of the proposed increased financial reporting obligations for financial institutions.​
     
  2. edwardc

    edwardc Member

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    He is not close to what 45 was nor will he be 45 was the worst potus ever Biden is doing thing for America not just for the rich like 45 did.
     
  3. HardenVolumeOne

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  4. Rocket River

    Rocket River Member

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    It seems 90% of laws and such things
    fall heavily on the poor and defenseless
    soft and easy targets

    alot of flash . .. little substance

    Rocket River
     
    fchowd0311 likes this.
  5. fchowd0311

    fchowd0311 Contributing Member

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    Yes. If the current Democrat party truly cared about losing billions in tax revenue from tax avoidance they would properly fund IRS auditing so they have the man power and resources to audit the wealthy and powerful who have ultra complex tax filings because currently the IRS just routinely audits the common person because the common person has simple taxes that are easy to automate the auditing process for.
     
  6. Rocket River

    Rocket River Member

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    and they don't have the economic power to fight

    I often say . .the arm of the law is strong.. but lacks stamina
    IF you can drag it out over a long enough time. . .you can get off
    High powered lawyers can do that

    Rocket River
     
    fchowd0311 likes this.

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