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Is the Biden Administration trying to gain more information about taxpayers’ bank and credit union accounts, even if the transactions are routine? U.S. Rep. Bryan Steil, R-Janesville, says the answer is an unequivocal yes. I oppose Biden’s IRS data collection scheme, Steil said in a Sept. 24, 2021 tweet . It would require banks and credit unions to hand over private information about routine transactions to the IRS. This is a total invasion of Americans’ privacy. Is Steil right, that President Joe Biden's IRS reform proposals require banks and credit unions to hand over private information about routine transactions to the IRS? How the system works When asked for backup, Steil’s office pointed to a plan that would increase IRS reporting requirements for banks, credit unions, and other financial institutions regarding transactions by customers. The proposal was included in a spending bill that was sent to the House Ways and Means Committee, specifically Division I, Sec. 138402 of the measure. The measure, as introduced, which would require financial institutions to report gross inflows and outflows from business and personal accounts if the inflows and outflows total at least $600 in a year, or if the account has a fair market value of at least $600. Currently, IRS form Form 8300 is filed by individuals and entities who, in the course of that trade or business, receive more than $10,000 in cash in one transaction or in two or more related transactions, Chye-Ching Huang, executive director of the Tax Law Center at NYU Law, said in an email to PolitiFact Wisconsin. Huang said Steil’s statement is inaccurate and misleading. Secretary (Janet) Yellen and other administration officials have stated publicly that there would be ‘nothing at the transaction level’ in this provision, Huang said in an email. Instead, the proposal calls for an annual snapshot of two numbers for covered accounts: 1) The total amount that flowed into an account over a year, and 2) the total amount that flowed out. Huang offered an example of a person who receives $2 million of cash every month in their account. All the bank would report to the IRS is that the account had total inflows of $24 million during the year, Huang noted. No new transaction-level detail would be required. So, for example, the IRS would not know who paid in the $24 million each year, or in how many installments, or when, because the bank would not report that information. Similarly no detail on any payments made from the account would be reported, only the total amount. RELATED: PolitiFact: Biden plan to require more bank account reporting to IRS is still a proposal RELATED: Will the IRS track 'every' Venmo transaction? Fact-checking claims on new financial reporting plans The aim of the measure is to allow the IRS to more effectively assure compliance with tax laws. That, in turn was expected to generate an additional $460 billion in income-tax payments over 10 years, the Treasury Department says. Here is how Treasury Secretary Janet Yellen described it in a Sept. 14, 2021 letter to Richard E. Neal, chairman of the Committee on Ways and Means: These information reporting provisions will make use of information financial institutions already know to help shed light on taxpayers who evade their tax obligations. Today, compliance rates are under 50 percent for opaque sources of income-resulting in a disproportionate tax burden for complying taxpayers and a shortage of necessary funds for key national priorities. In other words, because some people are not reporting all of their income, others wind up picking up more of the load and there’s not enough money for key priorities. According to Yellen, for some categories of income, the IRS can easily cross check what taxpayers report on their tax returns with other sources. For instance, wage and salary income is reported by employers on W-2 forms, and taxes are automatically withheld, so compliance rates stand at 99 percent. It is clear that when taxpayers know that this information exchange exists, their voluntary compliance rises, Yellen wrote. But for certain income streams that accrue disproportionately to upper-income households, there is no information available to the IRS from third parties presently. As a result, underpayment is rampant. In an Oct. 4, 2021 statement emailed to PolitiFact Wisconsin, the Treasury Department gave this example: Imagine a taxpayer who reports $10,000 of income; but has $1 million of flows in and out of their bank account. Having this summary information will help flag for the IRS when high-income people under-report their income (and under-pay their tax obligations). This will help the IRS target its enforcement activities on those who are actually evading their tax obligations — decreasing costly and burdensome audits for the vast majority of taxpayers who pay what they owe. In any case, according to a Sept. 23, 2021 article from Bloomberg News , Biden’s fellow Democrats have said they will scale back the proposal, presumably by making the reporting threshold significantly higher. That brings us back to Steil’s claim. The proposal would put the reporting burden on the institution, so that’s one reason the banking industry opposes the change. And it would lower the current approach dramatically, from individual large transactions to overall money flowing in and out. By definition, the IRS wants to get more information on more accounts. But Steil’s phrasing of routine transactions is off the mark, in that it suggests every check -- whether for the cable bill or for nephew Billy’s birthday -- would, in many cases, have to be reported. The requirement is only for summary information. Our ruling Steil said Biden's IRS reform proposals would require banks and credit unions to hand over private information about routine transactions to the IRS. An initial proposal does include a $600 threshold, and shifted the burden to banks. That was dropped by Democrats amid outcry from banks -- something not acknowledged in Steil’s tweet. Likewise, the claim suggests every transaction will be reported, when the proposal calls for a higher-level summary. For a statement that contains an element of truth but ignores critical facts that would give a different impression our rating is Mostly False.
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