FORT WAYNE, Ind. (WANE) – A proposed tax law by the Biden administration that would help pay for Congress’ $3.5 trillion reconciliation bill is coming under fire by critics who say the legislation is clearly a case of “overstepping” by the federal government.
The tax proposal could potentially impact anyone with a bank account.
The intention of the proposal is to help the Internal Revenue Service (IRS) close the gap when it comes to collecting billions of tax dollars that, in the past, have gone unpaid. The IRS estimates that there’s a gap of $166 billion between what is owed by businesses, not counting large corporations, and what is actually collected.
To do that, the proposal would require banks, credit unions, etc., to report to the IRS any account that has a minimum of $600 or over the course of a year has a total of $600 in combined debits and credits.
This idea is that the IRS would be better able to identify tax payers who might not be paying all they owe and audit those people or businesses.
“The bottom line is, if this does pass in it’s current form, not only will the IRS be looking at all of our aggregated transactions over the course of a calendar year, but in addition to that, all of our (banking) costs are going to go up dramatically,” said Greg Reynolds, Reynolds Wealth Management. “If you imagine how much expense that will add to your bank and your credit union or your online service.”
Reynolds said every American should be concerned because this seems to be a “significant intrusion.” He added that the proposal was supposed to be for billion dollar accounts. With the $600 limit, the lower class could potentially be impacted the most.
Jim Marcuccilli, Chairman and CEO of Star Financial Bank told WANE 15’s Briana Brownlee that his financial institution has received many phone calls from customers seeking clarity on the pending legislation. He stressed his bank believes customers have a right to privacy and information should not be shared.
The proposal is leaving him with a laundry list of questions.
“How would you rewrite all of the software? How do you find out how to do the reporting? Who’s going to secure the information?” Marcuccilli asked. “There are a lot of different entities that have been hacked, including the federal government. I don’t think you want your personal information out there. All of a sudden the federal government says ‘oh sorry, we got hacked’, and your name is floating with your social security number and all of your deposits and credits that went through your account.”
Marcuccilli is calling on the public to contact their congressional leaders to stop the legislation from passing into law.
Rep. Jim Banks (R-IN) was vocal about the bill and said it’s “dangerous.”
“To weaponize the IRS to go through people’s personal records and data – it’s excessive. It goes way too far. It will be a large burden on our local banks, credit unions and financial institutions,” Banks said. “The IRS shouldn’t be a federal agency that goes after people without any reason.”
Rep. Banks agreed the cost for consumers will spike. He said if someone breaks the law, they should be penalized but the IRS should not have the power to go through people’s accounts with no suspicions.
However the proposed $600 figure may not end up being in the final piece of legislation. The Hill reported Tuesday that Democratic lawmakers have reached a tentative agreement to raise the threshold from $600 to $10,000 and exclude regular wage payments.