Should the IRS be allowed to track business and personal transactions over $ 600?
This proposal was part of the Biden government’s current $ 3.5 billion bill, but has been removed.
That doesn’t mean it’s gone forever.
Biden wants the IRS to track transactions over $ 600
Under the existing currency transaction report, banks, credit unions, and other financial institutions are required to report transactions in excess of $ 10,000 to the IRS.
The Biden government wanted to lower that threshold to $ 600. Although this proposal has been removed from the current $ 3.5 trillion bill, the House Ways & Means Committee plans to reintroduce it – at a higher threshold.
But how high?
Small Business Impact
Another, but equally troubling, $ 600 threshold has already been put in place.
The American Rescue Plan Act of 2021, signed by Biden in March 2021, changed the IRS reporting requirement from $ 20,000 in total payments and 200 transactions to a threshold of $ 600 in total payments with no minimum transaction number. This new rule will take effect on January 1, 2022.
What does that mean? This means, among other things, that cash app users will receive a 1099 form if annual payments are over $ 600.
The new proposal puts responsibility on banks, credit unions, and other financial institutions that would be required to report transactions in excess of $ 600 to the IRS.
“While we appreciate the objective goal of tracking down more revenue from people who evade the tax system, this methodology is unproven, it is not sound and frankly in a world of data breaches where we see the IRS and other agencies, constantly dealing with cyber battles, the thought of all of our account information flowing into a single entity that cannot keep data safe should reasonably be something we are all deeply concerned about, ”said Jackson Hataway, executive director of Missouri Bankers Association vp of member services.
Advantages and disadvantages
The Biden government said in a letter distributed to members of Congress to gain support for the move that “it is a way of catching people moving money from unreported sources” and “exposing tax evasion by the rich.”
The list of disadvantages is longer. The US Chamber of Commerce and a group of 40 trade associations are pushing against a lower threshold.
The trade associations described such a measure in a letter to Congress as “intrusive,” saying it could violate privacy and jeopardize the financial information not only of small businesses but of all Americans. It would also increase tax preparation costs for small businesses, the letter said.
The IRS had a data breach in June 2021. The Biden government plans to allocate $ 80 billion to the IRS for testing.