Here's When The IRS Can Check Out My Bank Account
Here's When The IRS Can Check Out My Bank Account
Rick Newman ·Senior Columnist Wed, October 13
Let’s say I hire a contractor to do a project on my house, and he asks for payment in cash. It would be cheaper than if I wrote a check, and we both know why: Cash leaves less of a paper trail and the contractor might not report it as income. If he doesn’t have to pay income tax on the money, he’ll share some of the savings with me.
This type of gray-market transaction happens all the time, every day. Parents pay babysitters and nannies in cash. Waiters earning tips report a fraction of what they take home as taxable income. People selling used cars slash hundreds or thousands off the agreed price on the bill of sale they submit to the state, so the buyer pays less in sales tax.
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The Biden administration wants Congress to give the IRS authority to look in people’s bank accounts as a tool for helping find tax cheats. The premise is solid: Massive tax avoidance robs the Treasury of as much as $280 billion per year, with wealthy evaders dodging the most in taxes. One recent study found the top 1% of earners underreport their income by 21%. Matching bank records with tax filings and other documents the IRS already has would help identify who’s hiding money, and where.
WASHINGTON, DC - JUNE 08: Sen. Rob Portman (R-OH) greets Charles P. Rettig, commissioner of the Internal Revenue Service during a Senate Finance Committee hearing June 8, 2021 on Capitol Hill in Washington, D.C. The committee is hearing testimony on the IRS budget request for 2022. (Photo by Tom Williams-Pool/Getty Images)
Sen. Rob Portman (R-OH) greets Charles P. Rettig, commissioner of the Internal Revenue Service during a Senate Finance Committee hearing June 8, 2021 on Capitol Hill in Washington, D.C. The committee is hearing testimony on the IRS budget request for 2022. (Photo by Tom Williams-Pool/Getty Images)
Reeling in more of the tax revenue evaders already owe might restore some sense of fairness to a system many think is rigged in favor of the wealthy. Democrats with slight majorities in both houses of Congress also need new revenue to pay for a broad package of social-welfare and green-energy programs they want to pass by the end of the year. President Biden says an extra $80 billion in enforcement funding over a decade could help the IRS collect an extra $700 billion in taxes Americans already owe. That would be 900% return on investment. If the return is only one-third that, it would still be a bargain.
In practice, however, the prospect of more IRS snooping into Americans’ finances is an off-the-shelf outrage generator. Anti-government sentiment is near historic highs. The spread of disinformation is too. Toss in a little demagoguery, and social-media trolls will have half the country thinking the IRS is stealing money from their bank accounts. The Treasury Department says IRS bank reviews would target the wealthy, not lower- or middle-income families. But the scaremongering practically whips itself up.
The original plan was for the IRS to monitor accounts with balances of more than $600, which is meant to filter out inactive accounts or those held by kids. That threshold is way too low. Democrats drafting legislation are considering raising the cutoff to $10,000, but $100,000 or even $1 million might be a better limit.
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https://finance.yahoo.com/news/heres-when-the-irs-can-check-out-my-bank-account-115143383.html