U.S. Treasury Secretary Janet Yellen said on Tuesday she welcomed a revised proposal from congressional Democrats to raise a bank account tax reporting threshold to $10,000 in annual transactions from a proposed $600 level, with an exemption for wage earners.
The change was made after major opposition from banking and other lobbying groups who charged that initial proposal would raise financial privacy concerns by requiring financial firms to track and submit to the Internal Revenue Service data on aggregate inflows and outflows from every bank account above a minimum threshold of $600 a year.
The Treasury has argued that the proposal, part of President Joe Biden's massive "reconciliation" social spending and tax hike package, would not track individual transactions but was aimed at making it harder for wealthy Americans to hide sources of income from taxation, allowing the IRS to target them for audits.
The Treasury estimates that the cost of tax evasion among the top 1% of taxpayers exceeds $160 billion annually, part of a "tax gap" between taxes owed and those collected estimated at more than $7 trillion over a decade.
"Today’s new proposal reflects the Administration’s strong belief that we should zero in on those at the top of the income scale who don’t pay the taxes they owe, while protecting American workers by setting the bank account threshold at $10,000 and providing an exemption for wage earners like teachers and firefighters," Yellen said in a statement.
In a new statement on tax compliance proposals the Treasury said financial accounts with money flowing in and out that totals less than $10,000 annually are not subject to any additional reporting.
"Further, when computing this threshold, the new, tailored proposal carves out wage and salary earners and federal program beneficiaries, such that only those accruing other forms of income in opaque ways are a part of the reporting regime," the Treasury said.
The department also said that financial services firms could report the total aggregate inflows and outflows from accounts rounded to the nearest $1,000 to further protect data privacy.
Yellen said she would continue to work with leaders in Congress to enact the IRS financial reporting requirement.
Spokespersons for House Ways and Means Committee Chairman Richard Neal and Senate Finance Committee Chairman Ron Wyden could not immediately be reached for comment on the revised proposal.
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