The U.S. House of Representatives on Thursday unveiled the text of the Build Back Better Act, and it includes a provision to require banks to turn account information over to the IRS on accounts with $600 or more in annual transactions.
If this provision is enacted into law, banks would be required to report annual totals of account inflows and outflows to the IRS. This account information would impact bank accounts with more than $600 in non-payroll income. The Democrats’ proposal would also extend to other financial institutions and peer-to-peer services like Cashapp or Venmo.
Biden’s Treasury Secretary Janet Yellen endorsed the proposal because it would help close the tax gap, which refers to the difference between taxes owed and taxes collected. This tax gap is estimated to exceed $160 billion annually.
Sens. Ron Wyden (D-OR) and Elizabeth Warren (D-MA) spearheaded this proposal last month but were met with significant backlash from Republican lawmakers, the financial industry, and business owners. According to the Wall Street Journal, critics “warn that the requirement would put taxpayer information at risk if IRS computer systems were breached and they have described the proposal as snooping and surveillance.”
After the criticism, Sen. Wyden announced that the reporting threshold would be increased from $600 to $10,000. The increased threshold still did not please the plan’s detractors. American Bankers Association president Rob Nichols said the plan “still goes too far by forcing financial institutions to share with the IRS private financial data from millions of customers not suspected of cheating on their taxes.”
However, it appears that the first $600 reporting requirement is back in play.
Rep. Pat Fallon (R-TX) pointed out that the 1,684-page bill contains the original $600 proposal.
The government DOES NOT belong in Americans' checking accounts. Clearly, Democrats believe otherwise.
Page 1673 – Section 3406 in the Build Back Better text.
— Rep. Pat Fallon (@RepPatFallon) October 28, 2021
The amount of money is not an issue for some lawmakers. Rather, they view it as a privacy concern. House Ways and Means Committee minority member Rep. Drew Ferguson (R-GA) told Fox News last week, “It does not matter if the amount is $1, $600 or $10,000, Americans don’t want the IRS snooping into their bank accounts.”