As Congress negotiates the details of the reconciliation bill, a big question is how to pay for all the new spending.
One proposal would give the IRS a better chance to track down tax cheats.
It would require banks to report to the IRS all accounts with a balance of $600 or more or that have $600 or more in transactions. The IRS would then be able to compare the bank account information to the information on tax returns to see if there may be unreported income. The banks would not report the details on individual transactions.
like whether you went to Wawa or the liquor store, booked a massage or a vacation to Aruba — but instead report the total amounts going into and out of the accounts. <br>
The Biden Administration said the information would help the IRS find unreported income from rich individuals and businesses and help it close a tax gap of more than $160 billion — taxes owed on earnings that have never been paid.
Indeed, over the past decade, the IRS has been auditing fewer and fewer tax returns.
In 2010, the agency audited 1.11% of returns. In 2019, that number was down to 0.45%.
Treasury Secretary Janet Yellen told a Senate committee that the proposal would add two additional pieces of information onto the 1099-INT, a form that banks already file with the IRS.
“I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion over the next decade,” she said. “That is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive.”