Philip L. Liberatore, CPA Explains the Bill that Would Allow IRS to Look into Bank Transactions

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Under the original proposals tabled in May, financial institutions would have been required to provide the IRS with additional data

The Internal Revenue Service (IRS) has been in sharp focus recently due to the critical role it is expected to play in helping the U.S. administration implement its ambitious social and economic plans. A raft of sweeping measures under the Build Back Better framework “will set the United States on course to meet its climate goals, create millions of good-paying jobs, enable more Americans to join and remain in the labor force, and grow our economy from the bottom up and the middle out,” according to the White House.

“A critical factor in realizing these ambitions will be securing the funds to pay for the initiatives, which will cost trillions of dollars over the next decade,” says Philip L. Liberatore, CPA, a California-based company specializing in accounting, tax, and financial management services. “Tax rate changes for corporations and the richest Americans and substantially tougher enforcement are seen as vital for raising money for the government’s planned investments. This inevitably shines the spotlight on the IRS, which faces the daunting task of ensuring tax compliance and closing the tax gap. To support the agency in its critically important work, the Build Back Better bill includes provisions that would allow the IRS to make certain that all Americans pay their fair share of taxes. As things stand now, tax evasion by the top 1% of earners costs the Treasury over $160 billion annually. The bill contains proposals that would have banks share some additional information with the IRS, thus allowing the agency to identify tax evaders and improve tax fairness.”

Under the original proposals tabled in May, financial institutions would have been required to provide the IRS with additional data about any bank account with more than $600 in annual deposits or withdrawals, including breakdowns for overseas transactions and transfers to the same account holder. “This proposal met with significant opposition, ultimately prompting the administration to revise the bank reporting threshold from $600 to $10,000,” notes Philip Liberatore, founder and president of Philip L. Liberatore, CPA. “The new Treasury approach would exempt wage and salary earners as well as federal program beneficiaries, removing them completely from the reporting structure since the IRS already holds information about the income and benefits they collect.”

Seeking to allay the concerns of privacy advocates and other critics, the Treasury published a fact sheet in October, addressing various misconceptions about the bank reporting proposals. The department explained the mechanism as follows, “Financial institutions and banks will add just two additional numbers to the information that they already supply to taxpayers and the IRS: the total amount of funds deposited into the account and the total amount withdrawn over the course of a year. The scope of this information sharing is extremely limited. Banks will not share with the IRS any information to track individual transactions under this proposal, and the IRS will have no ability to track individual transactions.”

Responding to those who fear that the compliance proposals would result in increased IRS scrutiny of all U.S. citizens, the Treasury noted, “In reality, many financial accounts are already reported on to the IRS, including every bank account that earns at least $10 in interest. And for American workers, much more detailed information reporting exists on wage, salary, and investment income. There is nothing novel about the scope of the information reported to the IRS. The only difference is the group of taxpayers that it is extended to as this reporting would serve to eliminate the existing disparity between American workers, whose income is already reported on the IRS, and disproportionately wealthy individuals who earn income in ways not visible to the IRS, and thus, are easily able to evade.”

Philip L. Liberatore, CPA is based in La Miranda, California, and has been serving businesses and individuals across Southern California since 1988. Founded by veteran CPA and entrepreneur Philip Liberatore, the company provides accounting services and financial guidance to its clients, offering them personalized customer care and a comprehensive service portfolio.

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Name: Philip Liberatore
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Organization: Philip L. Liberatore, CPA