What You Should Know about Biden's Plan to Track Your Bank Transactions

President Joe Biden’s new tax bill that is currently being debated has many implications. Most of the guidelines are directed at individuals who earn in excess of $400,000. However, there is one tax law change which could affect anyone who has a US bank account.

Whether you have a commercial bank account, or have an account at a? small bank, credit union or online bank, they could potentially be forced to comply with a new reporting requirement for any account with a balance in excess of $600.

Now, before you fall out of your chair or scream, let’s try to understand exactly what this means.?

No, the IRS won’t get a report every time you spend money, they won’t get a report on how much you spent at the local bar, nor will they know how much you spend on fashion.

The IRS will simply get a report from each bank you do business with that indicates how much was deposited into the account as well as how much was withdrawn from the account. The report will also include how many physical cash transactions took place, if there were any foreign account transactions, and if you transferred money to any other accounts.?

The IRS won’t receive details on each transaction, one the bottom line amount for each category described above. It should be noted that the rumored $600 has pretty much has been grabbed out of thin air, and may be moved up or down, and keep in mind that this whole portion of the bill might be scrubbed out all together.

You may ask yourself, “but why?!”?

The answer is simple. . .? have you ever heard of the Tax Gap? The Tax Gap is the difference in what the IRS collects versus what the IRS estimates it should have been paid. Most US citizens receive a W-2 or other third party report for what they were paid during the year. The IRS also receives a copy of that tax form. If we assume that all of your income is reported to the government, then there really shouldn’t be a concern for the IRS receiving a confirmation for accuracy.?

However, there is a percentage of our population which doesn’t have a third party report, including people who illegally work off the books or simply don’t report everything they earn. This is for whom the bill is being targeted.? For example, if Mr. John Doe reports $45,000 in income, but deposited $1,000,000 in the same year, currently there aren’t any alarm bells being sounded to alert IRS to a discrepancy, but shouldn’t there be? This bill would accomplish that objective.?

If you get one takeaway from this article, it’s not to worry about this specific part of the new tax bill. Most likely you are paying all the taxes you should be and you are not hiding massive deposits. However, there are other parts of this tax bill that may affect you, keep an eye out for a new article soon.