If some of their customers’ incomes is mis/under-reported to the IRS, they may not want to look like enablers for the resulting audits. And if their customers end up paying higher tax because of it, that’s less potentially in deposits for the banks. On top of the hassle and cost of sending the extra information to the IRS.
Overall there’s nothing in this for the banks except higher compliance costs and potentially bad PR and lower deposits. No wonder they’re against it but it’s got nothing to do with your privacy and everything to do with their bottom line.
Which is why we should be against it, because the damage to their bottom line gets passed along to us in the form of account fees. And the prevalence of free checking will slowly become much less prevalent.
That also depends on the gains in terms of closing the tax gap.
I just hope that the compliance costs are not gonna be greater than the increased tax revenues from catching tax cheats (or deterring cheating in the first place). Maybe that’s also why they’re looking at raising the limit for reporting. It’d make sense to shrink a bit the number of accounts that’d get reported to the IRS and thus reduce compliance costs. But again I don’t remember seeing actual numbers for estimates for the compliance burden for banks. Did the CBO score this measure vs the projected tax gap closing amounts?
Have you ever been in a position in a business in which reporting requirements to the government changed and you were responsible for making sure those requirements were met? I’m guessing from this comment, the answer is “no.”
That’s hilarious. When the income tax was passed in 1913 it was suppose to soak the rich and only applied to high income. Now even minimum wage workers are having income tax taken out.
According to the 2019 CBD report, the average individual federal tax rate is currently -11% (11% credit) for the lowest quintile. It’s the lowest of any year from 1979-2007 according to this report.
So while I’m sure some single minimum wage workers in high COLA state, end up paying limited federal income tax, clearly they’re the exception but it’s not a recent thing either. Either way, these low-income workers would definitely not be the target for IRS enforcement. Too little to gain for the time invested so I would not worry the extra IRS reporting impacting them much.
There is no more intrusive entity than Chexsystems when it comes to accumulating data on one’s personal banking history and transactions. Obviously today this data is held at Chexsystems and is not shared with the government. However:
Given my personal banking transactions were sufficient to trigger concern to where I could not join a credit union, I wonder how that same banking record would be viewed by the government.
Would Biden’s enhanced scrutiny of bank transactions, if implemented, provide the government personal banking information similar to what Chexsystems has today? I don’t think that would be a good thing . . . . . at least not for me.
Just as a data point… could you share how many bank accounts do you have? I didn’t realize Chexsystems tracks that info; I thought they were concerned with negative reports only.
I don’t know the exact number . . . it’s well in excess of twenty.
But I am certain of the following:
Chexsystems concerns itself with a WHOLE LOT more than just negative aspects of a person’s banking.
That was part of my thinking in posting here. I don’t worry about the government becoming aware of negative stuff, cheating etc., related to my banking relationships. There is no negative stuff, quite frankly.
But importantly, the government does not know that any more than that credit union did. And my banking relationships are . . uh . . shall we say quite active.
Would the government, privy to all my banking information, maybe think where there’s smoke there is fire? This is not a prospect I would welcome, nor should anyone else in my view.
Chexsys doesn’t track accounts. He’s referring to inquiries, which they do track (like a credit report). And it’s often presumed that each inquiry represents an attempt to open a new account.
LOL. You must have not seen your Early Warning report . If you think Chex is intrusive, you’d better take some anxiety meds well in advance of reviewing EWS. In fact, I don’t remember seeing transactions in Chex, but I did see transactions in EWS. But I haven’t pulled those reports in 2-3 years.
Headline - “Democrats plan to scale back bank reporting limit” due to Republican opposition
After a backlash, the new proposal will instead require the provision of additional information for accounts with more than $10,000 in annual deposits or withdrawals, a measure Democrats have been considering for weeks but have not formally endorsed, the people said.
The revised version of the bank reporting proposal will also weaken its scope by exempting all wage income from counting toward the $10,000 threshold withdrawal, intending to ensure it applies to only larger account holders, the people said.
“I don’t know why they thought $600 would be a good number. $10,000 is definitely an improvement,” said John Koskinen, who served as commissioner of the IRS under both President Obama and President Trump. Koskinen said the threshold should be raised even higher to a number like $50,000. “The vast majority of people won’t be affected, but it will pick up more than just the idle rich.”
Democratic aides in both the House and Senate are still skeptical whether the bank reporting requirement will be included in the final version of Biden’s Build Back Better package, even with the changes.
But opposition to the measure is not limited to Wall Street, and has extended to community banks influential with much of the congressional Democratic caucus.
Republican attorneys general in more than a dozen states have written Biden and Yellen saying the plan is “unacceptable, illegal, and contrary to the well-founded constitutional principles against illegal searches and seizures.”
Moving limit to $10k cashflow sounds like a decent idea in terms of catch tax evasion that’s actually worth auditing. $600 was way too low. I also like the exclusion of wage income. That gets reported on W2s already, no sense in counting that. IMO they should also exclude other things like 1099-INT and 1099-DIV since the IRS gets that data already anyway. Since the idea is to catch under-reported or mis-reported income, just exclude things that are already reported by a employers, bank, brokerage, or other similar third parties. That’d makes sense to me.
Agreed on excluding reported 1099-INT income, but DIV could be problematic for the banks unless there is already a standard way that this is tracked. When I get divs and CGs deposited it’s a mishmash of descriptions, but I suppose it could be tracked by brokerage. Which means banks have to keep up with all the brokerages out there.
That’s a good point. Banks would have to figure out what deposits are a wage income or not. In freelance contracts I’m doing - for which I get W2 if it totals >$600 over the year, the amounts vary all the time based on the specific contract, the frequency is not fixed either. I don’t know how that gets coded.
But looking at how many bank sign-up offer requirements are met by ACH transfers between your accounts at different banks being mistaken for employer direct deposits, that may not be an easy ask to comply with.
. If you think Chex is intrusive, you’d better take some anxiety meds well in advance of reviewing EWS. In fact, I don’t remember seeing transactions in Chex, but I did see transactions in EWS. But I haven’t pulled those reports in 2-3 years.