WASHINGTON, Oct. 19 Reuters - U.S. Senate Democrats unveiled a scaled-down version of a plan to crack down on wealthy tax cheats after intense bank lobbying, although the industry still called the plan onerous and problematic
The provision, part of a broader government spending package, would require banks to report to the Internal Revenue Service any accounts which see activity in excess of $10,000 a year, excluding wages. That is an increase from the original proposal, which would have flagged accounts with over $600 dollars in money going in or out.
Banks are not currently required to report such accounts to the IRS.
Democrats said the provision could give tax collectors valuable information for identifying individuals or companies that underreport their taxes.
For years, giant corporations and the wealthy have tried to rig the tax code, said Senator Elizabeth Warren, a Democrat and prominent bank critic. This means that the IRS can spot when a wealthy tax cheat has millions of dollars flowing into an account but isn t reporting that money on their tax return. The Biden administration threw its support behind the revamped proposal. U.S. Treasury Secretary Janet Yellen said in a statement that it reflects the Administration's strong belief that we shouldn zero in on those at the top of the income scale who don t pay the taxes they owe. Proponents of the measure had point words for critics, including the banking industry, they accused of inaccurately suggesting the policy would require banks to inform the IRS about specific bank transactions. Senator Ron Wyden, chairman of the Senate Finance Committee, said opponents had engaged in egregious lies and misrepresentations. The IRS would not know what each taxpayer is buying, and that is something I insisted on, he said.
Nevertheless, banks supporting conservative groups who intensely lobbied against the original provision continued to criticize the revamped plan. Rob Nichols, president and chief executive of the American Bankers Association called lawmakers to oppose the proposal.
If enacted, this new proposal would still raise the same privacy concerns, increase tax preparation costs for individuals and small businesses, and create significant operational challenges, especially for community banks, he said in a statement.
Even so, industry concerns are that the $10,000 threshold could still sweep into too many average Americans for potential audits.
Increase threshold from $10,000 to $10,000 sounds like a big increase, but it s not. It is fundamentally flawed at any threshold, said Ryan Donovan, a lobbyist for the Credit Union National Association.