PPAI Joins Letter Calling For The Rejection Of A Treasury Department Tax Proposal
PPAI and the Small Business Legislative Council (SBLC), of which PPAI is a member, have signed onto a letter opposing the Treasury Department’s proposal that would require reporting to financial institutions on the withdrawals and deposits of all personal and business accounts, as well as transfers between accounts of the same owner.
The letter notes, “We support the goal of improving tax compliance to collect appropriate tax revenues due. We object to the broad, untargeted nature of the Treasury proposal. Collection of comprehensive financial account data to determine tax liability must be narrowly targeted. Treasury’s indiscriminate, blanket data collection would be unsupported by any reasonable suspicion of tax evasion. In the past, Congress has passed legislation to address concerns regarding unreasonable Treasury audit techniques. For example, Internal Revenue Code Section 7602(e) prevents the use of ‘financial status or economic reality examination techniques to determine the existence of unreported income… unless the Secretary has a reasonable indication that there is a likelihood of such unreported income.’ The concerns that motivated this statutory provision are as relevant today as they were when it was enacted in 1998. Any use of personal financial data should be rigorously justified.”
The letter also notes concerns about the IRS’ data security record, which may expose taxpayers’ data, compromise privacy and makes them vulnerable to identity theft. Also, new, intrusive account reporting would undermine the important policy goal of reducing the unbanked population, who often fall prey to predatory lenders and check cashers, incurring exorbitant interest rates and fees.
Finally, the letter’s signatories shared their concern that the Treasury proposal would create taxpayer complexity and confusion, as taxpayers would likely have to receive new or modified 1099s for every account they hold containing funds flow information that may not be relevant to their tax liability. Giving taxpayers more forms and more data to sort and evaluate will make tax compliance more difficult. Tax simplicity is an important goal that promotes tax compliance.