WARNING: If You Have More than $600 in Your Bank Account, the IRS Wants to Know!

The Big Picture

A Biden administration proposal, now being considered as a “revenue raiser” in the $3.5+ trillion congressional budget legislation, would require banks and other financial institutions to report deposits and withdrawals for all accounts–business and personal–to the IRS. The reporting requirement would extend to services such as Venmo and PayPal. There is an exception for accounts totaling less than $600.

The justification is to catch more people cheating on their taxes–closing the “tax gap”–to bring in more money to pay for a portion of the Democrats’ socialist spending spree.

The Details

  • This proposal, impacting more than 100 million Americans, would funnel unprecedented amounts of our personal information into the IRS–far more than the IRS can analyze.
  • Proponents of this invasion of Americans’ privacy have offered no evidence that it will facilitate tax compliance or enable the IRS to catch more “cheats.”
  • Banks and other financial institutions are already required to report reams of information to the IRS and other federal agencies. Expanding the reporting requirements so drastically will hit small community banks especially hard–they will have to spend tremendous amounts of money on systems and personnel to report all account deposits and withdrawals of more than $600 for every customer.

Why It Matters

Ensuring taxpayers pay what they owe is important, but this proposal is Big Government overreach at its worst. It poses an unprecedented intrusion into the smallest details of Americans’ personal finances. It enhances the IRS’s power despite the agency’s history of unfairly targeting taxpayers based on their political views. It will exacerbate the mistrust some Americans have toward the banking system–not to mention toward the IRS.

It also exponentially increases risks to bank security and taxpayers’ exposure to identity theft, given that the IRS has suffered significant breaches of data security in cyber attacks. Moreover, the high compliance costs may force many small financial institutions that focus on serving their communities out of business. And ultimately, it will help only marginally–if at all–in catching tax avoiders.