The Department of the Treasury announced earlier this week that they would be reducing the scope of the plan forcing banks and other financial institutions to report cash inflows and outflows to the IRS. This plan has been touted as a way to force higher income taxpayers to pay their fair share of taxes.
Originally, the plan required any financial institution on accounts inside the U.S., having either a balance of or inflows and outflows above a $600 annual limit, to report those details to the government. That threshold has now been raised to $10,000.
The proposal excludes “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.” I believe this means they wouldn’t be required to report on Social Security and other government pension recipients.
How they would segregate that income from the rest is beyond imagination. Most Social Security recipients have several sources of income, not just one.
The banks are opposed to this new requirement, which is only reasonable. This increases the eporting requirements on an industry already beleaguered by a miriad on compliance issues. It also further makes U.S. based accounts less attractive to international investors.
There are several problems inherent in the proposal, which include
Invasion of Privacy
I was talking to a friend who organizes an annual two week fly fishing trip for him and a dozen of his friends. He collects thousands of dollars from them to pay for cabins and guides, disbursing it without earning a penny.
If bill this is enacted, will the IRS audit him because they think he’s operating a for-profit enterprise through his personal account? If a mid-level IRS examiner was just looking at the numbers, the data could certainly trigger an examination.
All Small Businesses Would Be Affected
This has been sold as a way for the new administration to collect additional taxes on the uber-rich, to pay for their new social agenda. With a $10,000 limit, everyone will be caught in their net.
What small business doesn’t do at least $10,000 annually.
Just About All Individual Taxpayers Would Also Be Affected
The average American has $61,000 going through their checking account annually. If you had less than $10,000 going through your account, do you really think that you would need to file an income tax return in the first place?
I’ll continue to write about this continuing story.
Let me leave you with this.
The United Kingdom is experiencing a surge in the Delta Virus second to none. The U.K.’s daily case rate is more than 2.5 times that of the U.S., four times that of the European Union, and five times that of Germany.
This is significant because Great Britain always previews the newest, unwelcomed phase of the pandemic.
Their case rate is up 35% in the past two weeks at more than 45,000 daily. It will soon surpass Delta’s initial surge peak of 47,000 daily cases that was set last July.
Many might ask why England is always the staging ground for this disease. If you’ve ever traveled there and experienced it’s wet, cold, and blustery weather, it isn’t much of a question.
The rose beds love the weather and so does the flu.
The truly frightening part of this is that 80% of the U.K.’s eligible population has been fully vaccinated. Illinois is still sitting in the high 50’s.
We’ve had unseasonably mild weather right up to this week. Does this mean that another major Delta surge is on the way?
If I had a crystal ball, I probably wouldn’t do accounting and tax work for a living. We’ll see.
Be prepared. It seems as if our public officials are resolute in their stance, trying to keep things open this time, but don’t kid yourselves for a minute. They may be put into a position where they don’t have a choice.
We only have so many ICU beds and ventilators.
Be ready for whatever contingencies might befall you or your business. It’s the curve balls we aren’t ready for, that hurt the most.
We’re all going to get through this. Let’s get through it together.
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