Yellen Asks Congress to Make Banks Report Taxpayer Cash Flows to IRS

Treasury Secretary Janet Yellen and IRS commissioner Charles Rettig have been pressuring lawmakers to give the IRS more information on taxpayers’ bank accounts.

The Wall Street Journal (WSJ) reports that the Biden administration is trying to save the tax compliance proposal it put forward.

The administration officials have asked Congress to make it so banks have to report yearly inflows and outflows from bank accounts with at least $600 or $600 worth of transactions. That is intended to target audits more effectively and raise around $460 billion over a decade, working to cover the costs of Democrats’ planned expansion of the social safety net and climate change policies.

The idea has met opposition from Republicans and the bigger Democratic fiscal legislation thus far. Democrats cannot lose more than three votes if they want to pass the legislation for $3.5 trillion for a social welfare and climate bill without any GOP support.

House Democrats have therefore omitted the proposal from their list of tax policy changes this past week, showing it lacked the party’s support to go forward. A scaled-back version could raise about half as much money and could still come out of further talks, however.

The omission of the proposal was good news for the financial services industry, as experts have argued the proposal could be expensive and might put data from millions of customers at risk.

Treasury officials have tried to alleviate the concerns by saying that tax compliance has been higher when people know the IRS has independent sources of information such as W-2 wage reporting.

And Yellen has said compliant taxpayers could benefit because they’d have less risk of a troubling audit. According to her, compliance costs could be low because the IRS and banks would be expanding a current reporting structure for interest income.

Meanwhile, the Treasury has also advocated a close examination of stablecoins for potential risk. Yellen said the government hadn’t had the time to set up a proper framework for them.

Read more: US Treasury Eyes Probe of Stablecoins’ Financial Risk