BloodNGuts
Member
The IRS would get access to more data to improve how it selects potential tax evaders for audit under President Joe Biden’s plan to impose a new reporting requirement on financial institutions, such as banks.
Biden’s American Families Plan would require banks and other financial institutions to add information on aggregate account outflows and inflows to their annual reports to the IRS, the Treasury Department said in a news release Wednesday outlining the tax compliance components of the plan. The department said the extra information would “help improve audit selection so it can better target its enforcement activity on the most suspect evaders, avoiding unnecessary (and costly) audits of ordinary taxpayers.”
Former IRS Commissioners Fred Goldberg and Charles Rossotti previously put forth a similar proposal that would require banks to provide an annual summary of deposits and withdrawals to the top earning 25% of taxpayers with business income.
More reporting would allow the IRS to pinpoint tax avoidance by locating discrepancies between what banks are disclosing and what income is being included on tax returns. It would also likely prompt more people to voluntarily comply with the tax code. Together those changes could help close the tax gap that the IRS has said may exceed more than $1 trillion per year. The tax gap is the difference between what taxpayers owe and what they actually pay on time.
Rossotti told Bloomberg Tax Wednesday that he and Goldberg have been advising the administration on the tax administration reforms in the plan, including possible information reporting changes. A Treasury spokesperson confirmed the former commissioners were among the many tax compliance experts that the administration consulted.
The proposal is part of a broader plan to hike taxes on the wealthy to fund investments in childcare and education. The administration is counting on a bigger IRS budget significantly increasing enforcement revenue to help pay for the changes.
The reporting requirement would help the IRS gain visibility into the partnership and proprietorship income of high earners, where as much as 55% of taxes owed go unpaid, Treasury said.
https://news.bloombergtax.com/daily-tax-report/biden-bank-reporting-plan-seeks-to-expose-tax-evaders-for-audits?fbclid=IwAR3TxWuiM0wFjrYtmZK4obt47P0amRvPqQbARXtkNYPxOg15XKtKI8Xw8gs
Biden’s American Families Plan would require banks and other financial institutions to add information on aggregate account outflows and inflows to their annual reports to the IRS, the Treasury Department said in a news release Wednesday outlining the tax compliance components of the plan. The department said the extra information would “help improve audit selection so it can better target its enforcement activity on the most suspect evaders, avoiding unnecessary (and costly) audits of ordinary taxpayers.”
Former IRS Commissioners Fred Goldberg and Charles Rossotti previously put forth a similar proposal that would require banks to provide an annual summary of deposits and withdrawals to the top earning 25% of taxpayers with business income.
More reporting would allow the IRS to pinpoint tax avoidance by locating discrepancies between what banks are disclosing and what income is being included on tax returns. It would also likely prompt more people to voluntarily comply with the tax code. Together those changes could help close the tax gap that the IRS has said may exceed more than $1 trillion per year. The tax gap is the difference between what taxpayers owe and what they actually pay on time.
Rossotti told Bloomberg Tax Wednesday that he and Goldberg have been advising the administration on the tax administration reforms in the plan, including possible information reporting changes. A Treasury spokesperson confirmed the former commissioners were among the many tax compliance experts that the administration consulted.
The proposal is part of a broader plan to hike taxes on the wealthy to fund investments in childcare and education. The administration is counting on a bigger IRS budget significantly increasing enforcement revenue to help pay for the changes.
The reporting requirement would help the IRS gain visibility into the partnership and proprietorship income of high earners, where as much as 55% of taxes owed go unpaid, Treasury said.
https://news.bloombergtax.com/daily-tax-report/biden-bank-reporting-plan-seeks-to-expose-tax-evaders-for-audits?fbclid=IwAR3TxWuiM0wFjrYtmZK4obt47P0amRvPqQbARXtkNYPxOg15XKtKI8Xw8gs
