A Message from Mike: Outraged at IRS Reporting Scheme

There is a proposal under consideration by the Administration and congressional allies, as part of their reckless tax-and-spending plan, to create a reporting scheme where financial intermediaries report to the Internal Revenue Service (IRS) on customer “inflows and outflows.”  Under this dragnet, local banks, credit unions and payment providers will essentially be turned into agents of the IRS, monitoring and reporting on inflows and outflows of deposits and withdrawals made in private accounts.

This proposal would create serious financial privacy concerns, increase tax preparation costs for individuals and small businesses, and create significant operational challenges for financial institutions, affecting virtually all taxpayers and Idahoans from all walks of life.

Americans are rightly concerned.

Americans are rightly concerned about this scheme, with recent polling showing that 67 percent of voters oppose the IRS reporting proposal.

Earlier this month, I joined Idaho leaders, concerned constituents, and business and financial leaders for a roundtable discussion on this proposal.  Privacy concerns were paramount among all participants.  Small business owners added that it is already difficult to comply with existing tax laws; community banks and credit unions highlighted concerns from data security at the IRS to increased complexity and compliance costs. 

In Washington, D.C., I led a press conference with members of the Senate Finance Committee and Senate Banking Committee to highlight this flawed proposal, and to share our constituents’ concerns.  In response to growing backlash, the Administration issued a “fact sheet” on an as yet unrevealed new version of their proposal, with two updates: increasing the reporting threshold to $10,000 from $600, and including carve-outs for wage and salary earners and federal program beneficiaries.  These updates do nothing to address privacy invasion, due process and/or data security concerns.  They just make things even more complex.

October 19: Press Conference with members of the Finance and Banking Committees to oppose the Democrats’ financial reporting proposal.

Most, if not all, Americans would be swept in.

Tracking annual inflows and outflows of $10,000 or more would still sweep in most Americans.  According to the most recent data available from the Bureau of Labor Statistics, the average taxpayer in America spends about $63,000 a year.  What do they spend it on?  The averages: housing, $20,679; transportation, $10,742; personal insurance and pensions, $7,165; health care, $5,193; groceries, $4,643; other meals, $3,526; entertainment, $3,090; cash contributions, $1,995; apparel and services, $1,883; education, $1,443; personal care, $786.  For a grand total of the average American running $63,036 through their accounts in a year.  So does raising the reporting threshold to $10,000 really stop the IRS from accessing very many accounts?  No.

Each proposed exemption creates more confusion and complexity for taxpayers, as well as complexity and costs to private reporting institutions.  What about non-wage workers, self-employed hair stylists, convenience store owners and farmers?  Not every non-wage worker is a “millionaire” or “billionaire.”

Fundamentally flawed proposal should be shelved for good.

The IRS has already proven it cannot keep the private data it already has safe.  It has also shown it will not avoid using the data it has for political purposes or weaponizing the data it collects to punish or try to diminish the influence of people with different political points of view or even religious beliefs.  We cannot trust it to take better care of the expanded private data it now wants to collect.

We cannot allow this to become law.  I introduced the Tax Gap Reform and IRS Enforcement Act to place important guardrails around IRS funding to protect taxpayer rights and privacy.  I joined Republican colleagues in introducing legislation to stop proposals like this in their tracks entirely.  As Ranking Member of the Senate Finance Committee, I have spoken about concerns with the financial dragnet on the Senate Floor to raise awareness about the need to stop the proposal.  I am also seeking details of Democrats’ reporting proposal so the public can see what exactly they are working on behind closed doors to move through Congress.

Making sure tax cheats pay the taxes they owe is important, but law-abiding Americans’ privacy must not be trampled to accomplish that goal.  The IRS does not need to have access to the accounts of every American.  It cannot be trusted with this private information, and I will continue to fight enabling this broadened authority.  This lazy and destructive proposal must be shelved for good.

Read more about the issue:

• Daily Signal: IRS Is Overstepping Its Boundaries with Lazy and Destructive Proposal
• ABC News: Biden admin backs down on tracking bank accounts with over $600 annual transactions
• Market Watch: Biden revises proposal to have IRS monitor bank accounts more closely. Here’s how it would work
• Washington Examiner: ‘Not good enough’: Democrats scale back $600 IRS disclosure after backlash
• Wall Street Journal: The $10,000 IRS Tax Dragnet

Learn more about Senator Crapo’s efforts:

• Sent a letter to U.S. Treasury Secretary Yellen asking for details of the proposal.
• Led an October 12 roundtable discussion with concerned Idahoans to discuss the reporting scheme.
• Delivered remarks on the Floor of the U.S. Senate calling on Americans to loudly reject the intrusive IRS reporting regime.
• Led a press conference with other Republican members of the Senate Banking and Senate Finance Committees to blast the IRS bank reporting dragnet.
• Introduced legislation with Senator Tim Scott to block Democrats’ IRS financial reporting proposal.
• Introduced the Tax Gap Reform and IRS Enforcement Act to add significant guardrails around IRS funding to protect taxpayer rights and privacy.