Biden Proposes to Allow IRS to Watch Bank Accounts over $600
- President Joe Biden released a statement about the American Families Plan and outlined its goals over the next ten years.
- One of the American Families Plan’s goals is to allow the IRS to monitor transactions of bankers over $600 to ensure that people are not lying about their taxable income.
- Though this action intends to reduce tax cheating, the controversy of this action comes from the invasion of privacy.
On April 28, 2021, a fact sheet released by the White House stated President Biden announced a massive, long-term plan that is set to benefit the middle class and future generations. The program is to be in effect over the next ten years and will cost $1.8 trillion. Of the $1.8 trillion, $1 trillion will be used for investments to help make the living quality of the majority of the population better and the remaining $800 billion in tax cuts.
The plan has many different elements, and all are aimed to expand and maintain the middle class through rewriting the tax code, so it has fewer loopholes and tax increases on the rich. One part, especially, which may backfire is giving the IRS access to people’s bank accounts and the balance.
Overview of the American Families Plan
The massive plan unveiled by the Biden administration contained many parts, all aimed to improve the quality of life for lower and middle-income families. Here is an overview of some of the plans embedded in the American Families Plan.
Making Affordable Child Care
One of the key ways President Biden is trying to improve the lives of families is by making high-quality child care affordable to the average American. President Biden announced that the cost of child care would be applied on a sliding scale. This means the lower the family earnings, the lower amount of money they will pay for child care.
Fortunately, most families on the scale will have their child care costs covered. For example, the families earning 1.5 times their state’s median income will only have to use up to seven percent of their income to cover child care costs for their children under the age of five.
Extending Child Tax Credit
President Biden stated he has expanded Child Tax Credit until 2025 to help provide tax relief. Additionally, for every child under the age of six, a parent can receive tax relief of $3,600 per child and $3,000 for every child above the age of six. Though this credit was initially passed in the relief bill, President Biden wished to extend it and make it fully refundable to reduce the levels of child poverty. Parents who want to apply for this program can claim the monthly benefit of $300, or $250, for six months and the remaining half during their tax return.
Improving the Affordable Care Act
As the Affordable Care Act has already benefited many people, President Biden has said that he will be lowering prescription costs and medical insurance premiums with the American Families Plan. In hopes of doing so, this will help families who are struggling financially and allow them to cover their living expenses.
Making College Affordable for Those in Need
The fourth plan of action for President Biden is to invest in historically black colleges and universities (HBCUs), tribal colleges and universities (TCUs), and minority-serving institutions (MSIs). President Biden aims to make these programs more affordable and accessible to all. Through these programs, underrepresented communities can receive easier access to affordable post-secondary education.
Furthermore, as these students need access to funds when studying, they can apply for Pell grants and receive an additional $1,400. Therefore, it is important that students know how to effectively search for scholarships as these grants can help them lower their student loans.
Increased Funding to the IRS
Lastly, President Biden is spending $80 billion on improving the IRS and enforcing its rules on the one percent. It is estimated that the usage of federal tax loopholes and evasive tactics by the one percent has cost the government about $163 billion. Biden’s plans are to use this money to hire more people to effectively go after the high rollers and hold them accountable for the money that they owe to the government.
Effects on the IRS
It is essential to ensure that everyone is paying their respective tax amounts. With the IRS now getting access to bankers’ financial information, the chance of people trying to get away with tax cheating is more difficult. Thus, though this plan may conceptually benefit the government and the economy moving forward, it could also have negative repercussions.
It is vital to ensure those who are trying to get out paying taxes are held accountable, but the IRS may be given too much power to conduct these investigations and audits. Therefore, President Biden wishes to mandate the IRS to have access to people’s bank accounts, Venmo, and CashApp, alongside the banks showing an annual inflow and outflow of your yearly transactions. Furthermore, the IRS will be monitoring transactions that exceed $600.
These monitoring policies come at the price of privacy for the everyday American. His reasoning behind this action is that by monitoring these accounts, there is a lower chance people will be inclined to try and get out of paying taxes. However, the invasion of privacy is the major issue with this approach to prevent tax evasion.
With many people using their debit and credit cards daily, sometimes an odd transaction occurs that differs from their everyday transactions. Usually, these transactions would not be an issue as it happens to everyone. But, unfortunately, with the stricter enforcement, these unusual, once in a while transactions will now set off red flags and increase the chances of a person being audited.
The Money Wrap-Up
All in all, the American Families Plan has the potential to improve the economy and living quality for most Americans. With President Biden’s plans to make child care, healthcare, and tuition more affordable, it will be much easier for lower-income families to move towards the middle class. However, the plan may not have the intended effect with the IRS gaining additional access to personal banking information.