Is the new $600 dollar US reporting requirement an invasion of privacy.
Yes, it is. How else can you look at it? Under the proposals financial institutions wil have to report transactions above $600.
Few people enjoy paying income taxes.
But once new reporting rules come into effect you will be guuilty until proven innocent by the IRS, or so the story goes.
So, whether that’s for buying Xmas presents or simply selling a set of golf clubs on Gumtree – if a transaction is over $600 your bank will have to report it.
Worringly, it’s then up to you to ensure your tax return is correct and reports all reportable income for tax purposes.
Reporting is reporting is reporting as the most exciting bookeeper will yell – but how do you like the sound of all that explaining and comparing and number stuff?
Is IRS Reporting Requirement $600 Privacy Invasion?
Why? Why the need? Why the priavcy invasion?
There are many ways that people make an income on the ‘side’. Whether it’s restoring old furniture, flogging stuff on Vinted, ebay or gumtree or a variety of ‘cash in hand’ jobs.
But increasingly, it’s become much more difficult to work for cash.
It’s been tinged with dirt. Cash is a dirty word, just like bitcoin was a few years ago.
Mention cash these days and you must be up to something dodgy.
Need payment in cash – dodgy.
Holding cash – dodgy.
Withdrawing cash – dodgy.
Maybe we’re finally becoming cashless?
In the UK, HMRC can carry out random visits and demand all details of those working.
Likewise, in the US, the IRS can do the same.
But that’s just one (costly) deterrent.
It’s far easier to just get your bank to report you for any transaction above $600.
And this will inevitably be rolled out in the UK because whatever the Americans roll out the UK follows suit.
There are differences in opinion of Why the Biden administration are bringing in this lower threshold for reporting, but the official version is:
To claw back lost tax on those earning more than $400,000 a year!
Yet to sceptics setting the threshold at reporting to $600 means in practice a very ‘wide net’ will be cast over most of the population.
Maybe the rationale is that this uncollected revenue will be enough to limit focus on LLPs in Delaware or many of the structures and entities that render themselves untouchable in offhore jurisdictions.
Is IRS Reporting Requirement $600 Privacy Invasion?
How will such reporting requirements capture larger tax evaders earning more than $400,000 a year?
Well maybe the increased revenue collected from millions of minnows will mean the IRS can increase its technology funding (really, it’s possible).
This is essential to link foreign-held assets back to their beneficial owners and set strong systems in place to detect noncompliance.
(though you would think with the data collation and analysis tools this is already available)
So, whilst the trawling captures lots of revenue unreported from minnows a knock-on effect will be the capture of big tax evading sharks.
Sound a little flimsy?
How Will the Reporting Will Work?
Financial institutions will have to report the deposits and withdrawals of all accounts with over $600.
Will they be happily snitching on their loyal customer base? No, many lobby groups respresenting banks are fiercely opposed to the reporting requirements, so it won’t be happy snitching.
Thinking about it from the IRS point of view increase visibility translates into greater transparency.
Making the comparison between reported and unreported income is difficult if you don’t have the full picture.
Whilst a consequence of this is that everyone will have to provide more data, once this data is aggregated and analysed it will yield patterns of cash flows that enable the government to catch bigger evaders.
Still sound a littel hollow and flimsy?
A far bigger consequence will be as in the example above. All transactions above $600 reported and you treated as an individual will then have declared income compared.
Any surplus will be due for taxing.
The IRS have a good system of knowing what you earn but now they want a better system.
And that better system is one in which they know exactly how you spend your money.
Estimates of revenue lost to the ‘shadow’ economy, ‘under the table’, ‘black economy’ or ‘cash in hand’ run into billions.
Increasing collection of tax is necessary, especially to pay for President Biden’s ‘Building Back Better’ initiatives and Trillions of USD Infrastructure Bill.
But again, it doesn’t add up to helping with retrieval of lost revenue from higher paying tax dodgers, does it?
What are the Privacy concerns?
As mentioned above, representatives of financial groups have protested to congress that having to report on customers accounts will leave them with larger compliance burdens (and costs) and cause detriment to their relationships with customers.
How will they be able to market and sell additional services and products if a customer is suspicious that their bank will be ‘reporting’ or ‘dobbing’ in details of all their transactions?
Whilst earlier limits of $10,000 didn’t impact many ordinary citizens, the new much lower threshold will impact nearly everybody.
The IRS will have insights into many more transactions than is necessary and this clearly breaks both trust and privacy of between the individual and state.
How do You feel about the IRS knowing the details of all your transactions?
As we all know there has been an enormous shift to centralization of power and a logical part of that is to monitor all citizens (if we still use that term) financial transactions.
In the future you may have to attend an online Investigaton and the full details of most of your transactions will be visible to your interrogator.
Advanced technology make analysis and predicitions of large volumes of data very easy and quick.
Has the ‘shadow economy’ simply got too big? Is it just to easy to operate without regular banking product? Is this a pre-emptive move as decentralisation finally conquers the traditional finance models?