Banks escalate fight over IRS reporting in Biden budget plan

Banks escalate fight over IRS reporting in Biden budget plan

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Banks escalate fight over IRS reporting in Biden budget plan

WASHINGTON – The financial services sector is girding for an extended battle over a legislative proposal requiring banks and other institutions to report customer account data meant to bring in more federal tax dollars.

The measure is being considered by lawmakers as a source of revenue in the Biden administration’s proposed $ 3.5 trillion budget reconciliation plan. It could result in banks having to report transaction data for any account with at least $ 600 of inflows or outflows annually.

Bankers and even some consumer advocates have blasted the idea, which first garnered attention this past spring as part of the administration’s American Families Plan, as a compliance headache and a privacy nightmare for customers. Financial institutions say they already report reams of data to the Internal Revenue Service.

But the industry’s focus on the provision has intensified in recent days with Democratic lawmakers intent on passing one of President Biden’s key legislative priorities.

“From a bank perspective, the administrative challenges and complexities of having a $ 600 annual threshold may not achieve the policy goals of reducing tax avoidance,” said Scott Talbott, senior vice president of government relations at the Electronic Transactions Association.

“At $ 600, the squeeze may not be worth the juice,” Talbott added.

In search of revenue, the Biden administration has argued that a more robust reporting regime would narrow the so-called “tax gap” and help the IRS identify billions owed to the government by wealthy taxpayers that go unpaid.

Bloomberg News

The budget plan would enact a bevy of social policy objectives to accompany a separate looming infrastructure overhaul. In search of revenue, the Biden administration has argued that a more robust reporting regime would narrow the so-called tax gap and help the IRS identify billions owed to the government by wealthy taxpayers that go unpaid.