Dems soften their criticized IRS reporting proposal, lift annual threshold for required reports

In order to help pay for President Joe Biden’s insanely expensive domestic spending plans, Democrats and the Treasury Department proposed a new rule requiring all financial institutions to report to the Internal Revenue Service (IRS) information on any account with transactions totaling more than $600 annually.

That proposal drew fierce pushback from the American citizens, the banking industry, Republican state attorneys general, and Republican senators, prompting Democrats to back down and raise the proposed threshold to $10,000 annually, The Washington Post reported.

Yet, while that concession appears to be an improvement, it is unlikely that critics will be placated as the proposal, if enacted, would still constitute an invasion of privacy by the IRS that would likely violate the U.S. Constitution’s Fourth Amendment.

Walking it back

As noted, the initial proposal would have forced all financial institutions, including small community banks and credit unions, to provide reports to the IRS on any account with more than $600 in total transactions over the course of a year — which would cover virtually every single active financial account in the country.

According to The Post, the new proposal put forward by Democrats would not only increase the reporting threshold to $10,000 in cumulative annual transactions but would also exempt all wage income from counting toward that total.

The purported purpose of the proposed rule is to help the IRS crackdown on wealthy tax cheats, but with a reporting threshold as low as $600 or even $10,000 annually, millions of middle-class and working-class Americans, as well as most small businesses and farms, would be swept up in the mix and essentially spied upon by the IRS with the forced assistance of their own bank or credit union.

The pushback

While many Americans and the banking industry had already raised their voices in protest, so to did a group of 20 attorneys general from Republican states, according to Just the News, and their opposition carries the weight of the threat of litigation to block the proposed rule from ever taking effect.

In a letter dated Oct. 15 to President Biden and Treasury Sec. Janet Yellen, the group of attorneys general decried the IRS proposal as “wholly unacceptable,” adding that it is “at best overly burdensome and at worst it is illegal,” primarily in that it would be a substantial invasion of the privacy that Americans expect and deserve.

“The Federal Government combing through almost every American’s bank account without cause, or even suspicion, is unacceptable, illegal and contrary to the well-founded constitutional principles against illegal searches and seizures,” the group of AGs wrote.

“Your proposal seeks to leverage private transaction information by effectively transforming banks into large-scale data processors for the IRS, forcing the banks to provide private information regarding common transactions such as rent payments, paying for groceries, and other transactions that are part of everyday life of Americans who have done nothing wrong, are not under suspicion of having done anything illegal and for which the government has no evidence or reason to believe are guilty of civil or criminal violations.”

Senate GOP still opposed

Fox Business reported that Senate Republicans have been just as vocal in staunch opposition to the proposed IRS reporting requirement as well, both with the initial $600 threshold as well as the reportedly lifted cap of $10,000, which they argued would still ensnare many middle-class workers and small businesses instead of just the wealthy, even with the reported exemption of all wage income.

“The exclusion of payroll and federal program beneficiaries does not address millions of other taxpayers who will be impacted by this proposal,” Sen. Mike Crapo (R-ID) said Tuesday. “Not every nonwage worker is a millionaire. How about self-employed hairstylists, convenience store owners, and farmers, just to name a few?”

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