Biden’s proposal would turn all financial accounts into open books for the IRS.
Biden's proposal would turn all financial accounts into open books for the IRS.
T he Treasury Department recently released its “General Explanations of the Administration’s FY 2022 Revenue Proposals.” This is the so-called Treasury “Green Book.” Dated May 2021, the Green Book explains exactly how various elements of the Biden administration’s tax plan will operate.
In addition to the tax increases that have been discussed at length, the administration would set up a comprehensive financial spying operation that would impact every American. The proposal is to establish a “comprehensive financial account information reporting regime.” The purpose is to track activities in all financial accounts and report them to the federal government. The law would require an annual report to the government showing “gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner.”
To say that this is a system of “comprehensive” spying is not hyperbole. The Green Book states:
This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts, with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.
What we’re talking about here is the requirement that details on every bank account in America be reported to the IRS on an annual basis. The only exceptions will be those that showed less than $600 of in-and-out transactions, or which have a total value of under $600. How many millions of bank accounts are there in the U.S.? What kind of compliance burden will this impose on America’s financial sector?
The footnote to the above paragraph reads:
Current income reporting by financial institutions would be expanded to all entities, including certain corporations. Interest payments would be included in the loan account reporting. Transferee information would be reported for all real estate transactions on Form 1099-S.
Moreover, we are not talking about just garden-variety bank accounts. The Green Book goes on to explain that the requirements would apply to “[o]ther accounts with characteristics similar to financial institution accounts.” This would include the likes of PayPal and similar accounts. The rules would likewise apply to “payment settlement entities,” such as credit and debit card processing companies. They will be required to report “not only gross receipts but also gross purchases, physical cash, as well as payments to and from foreign accounts, and transfer inflows and outflows.”
This doesn’t end with financial institutions or payment-processing companies. The reporting requirements also extend to “crypto asset exchanges and custodians.” The crypto rules would apply on three different levels.
First, reports will be required of all crypto exchanges and custodians on the status of accounts owned by U.S. citizens. Second, reports will be required “in cases in which taxpayers buy crypto assets from one broker and then transfer the crypto assets to another broker.” Finally, all businesses (regardless of whether they are financial institutions) that receive “crypto assets in transactions with a fair market value of more than $10,000 will have to report such transactions.”
Under the proposal, the IRS is to be given “broad authority” to write regulations sufficient to implement and carry out this plan. There is little doubt in my mind that the agency has the framework for such regulations already queued up and ready to go. I say that because the IRS has been working for decades to build new and far-reaching information-reporting requirements into the tax code. It seems that no legislative session passes without some new reporting requirement added to the law.
For example, a little-known provision in the Affordable Care Act, passed in 2010, imposed an egregious information-reporting burden on all businesses. The requirement was that businesses report total payments made to any person or to any other business, if the total amount of payments over the calendar year exceeded $600. This would have caused a literal explosion in the number of information returns filed with the IRS every year, which already exceeds 3.5 billion (that’s billion).
Because of pressure I and others put on Congress regarding that measure, it was repealed before it could take effect. But that never deterred the IRS from pressing for more reporting. The mantra of the agency is, “Where there is information, there is compliance.” As such, as far as the IRS is concerned, there is no amount of data that is too much; there is no level of reporting that is too invasive; and there is no point at which the invasion of personal privacy has gone too far. The IRS will never stop its demands for more data unless and until it has real-time access to every single detail of the financial dealings of every person and business in America.