Democrats to scale back Treasury’s IRS bank reporting plan amid GOP uproar

Senate Democrats on Tuesday will unveil a scaled-back version of a Biden administration proposal to crack down on wealthy tax cheats after conservative groups and the bank industry raised major privacy concerns, three people with knowledge of the coming announcement said. Initially, the Department of Treasury and Senate Democrats had proposed requiring financial institutions to provide the Internal Revenue Service with additional information on bank accounts with more than $600 in annual deposits or withdrawals. 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. The Biden administration has signed off on the changes and is expected to support the new plan, a potentially key source of new revenue to pay for Democrats’ multi-trillion-dollar economic package. The people spoke on the condition of anonymity to discuss a matter not yet made public. The weakening of the reporting requirements reflects Democrats’ sensitivity to the increasingly explosive politics of the issue as Republicans, conservative groups and industry lobbyists attempted to label the initial proposal as representing a major expansion of snooping by the IRS into taxpayers’ private information. Treasury Secretary Janet L. Yellen has adamantly rejected this criticism, arguing the new reporting rules amount to an essentially technical set of changes that will only impact wealthy tax evaders. But even many Democrats privately concede that the proposal gave Republicans an opening to attack them on the issue, provoking a fury of opposition among conservative groups. Banks already report to the IRS information for the interest earned in their customers’ accounts. (Stockbrokers also already report dividends and capital gains of their customers to the IRS.) Treasury’s proposal is aimed at requiring banks to also report total deposits and withdrawals to the IRS as well. The totals would be reported once a year — not every time a transaction above a certain number has occurred. The provision is aimed at giving the IRS more visibility into the cash flow of the bank’s customers, especially businesses. Wage earners, who represent the vast majority of the American public, already have their wages reported to the IRS on their W-2 forms. Treasury wants additional data for Americans earning business income as well, although exactly which accounts should be subject to the new rules has been the subject of a fierce debate.


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