IRS push for more info about taxpayers would ‘kill’ community banks: Florida Bankers Association CEO
Florida Bankers Association CEO Alex Sanchez on the IRS looking to get more information and data about Americans’ financial activities from banks.
The Biden administration defended its plan to increase funding for the IRS by nearly $80 billion, arguing in a memo to congressional Democrats the additional money could help the agency crack down on wealthy tax dodgers and recover billions in lost revenue.
"President Biden’s plan will give the IRS the resources and information it needs to increase enforcement against the highest income tax cheats, while protecting Americans earning less than $400,000 per year," the White House said.
The memo comes after House Democrats on Monday released a draft of proposed tax increases, including providing the IRS with an extra $78 billion in funding for enforcement measures. But the White House also wants to give the agency more power over the next decade to crack down on tax evasion by high-earners and corporations – a move that has prompted a swish backlash from Republicans.
WEALTHY AMERICANS SHIELD 20% OF THEIR INCOME FROM THE IRS
The tax-writing Ways and Means Committee did not include any new bank reporting requirements in the revenue blueprint.
The administration said in the memo that Biden's plan includes requiring banks and financial institutions to provide a "little bit of high-level information" to the IRS on account flows in order to give the agency more information about wealthy Americans' earnings from investments and business activity.
It caveated that banks will not have to report individual transactions to the IRS, but rather "basic, high-level information on account inflows and outflows."
"Imagine a taxpayer who reports $10,000 of income; but has $1 million of flows in and out of their bank account," the memo said. "Having this summary information will help flag for the IRS when high-income people under-report their income (and under-pay their tax obligations)."
Money generated from the plan would be used to fund Democrats' sweeping $3.5 trillion spending package, which would dramatically expand the social safety net.
In fiscal 2019, the IRS audited just 0.45% of individual tax returns, according to a recent Treasury Department report, or roughly 1 out of every 225 individual returns. That figure is down from 0.59% in 2018 and 1.11% in 2010. The data shows that out of more than 199 million tax returns in 2019, the IRS only examined 771,095 returns. That's a decline of 44% from fiscal year 2015.
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In all, the IRS collected about $57.5 billion in enforcement revenue in fiscal 2019, which ended on Sept. 30, 2019. That's below the $59.4 billion it raked in during fiscal year 2018, according to Treasury figures.
The decline in audits is largely due to dwindling funding and enforcement staff: The IRS has 20,000 fewer staff than it did in 2010, and its budget is roughly $11.4 billion – 20% less than it was in 2010, when adjusted for inflation, according to the Congressional Budget Office.
About $1 trillion in federal taxes may be going unpaid each year because of errors, fraud and a lack of resources to adequately enforce collections, IRS Commissioner Chuck Rettig previously said.
That's up significantly from the last time the IRS formally published data on the so-called tax gap; at the time, between 2011 to 2013, the agency reported an annual loss of roughly $441 billion.
If the changes were implemented, Rettig estimated that IRS employment would grow to about 167,000 (compared to about 81,000 in 2020), while the agency would have the necessary resources to "invest in critical technology to improve the taxpayer experience and use additional information reporting to increase compliance in areas where we currently lack information."
"The new data will provide the IRS with a lens into otherwise opaque sources of income with historically lower levels of reporting accuracy," Rettig added.
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