Could The Biden Tax Plan Make Increased Spending Juice Not Worth The Squeeze?
The Wall Street Journal posted an article yesterday (thanks to Derrick from Travel on Point(s) for sending it to me) about some alarming details in the Biden tax plan. It should perk the ears of anyone that takes advantage of increased spending avenues. Even though there is now precedent that many forms of increased spending are not taxable this proposal could sure add another layer of scrutiny and hassle to the process. Let’s take a look at what I am talking about.
Biden Tax Plan Details
As a part of Biden’s $1.8 trillion American Families Plan there is a proposal to ratchet up scrutiny on bank account transactions. The goal is to have the IRS locate unreported or misreported income. Here is an excerpt from The Wall Street Journal article:
The proposal would require banks to report annual account inflows and outflows to the Internal Revenue Service. The requirement would also extend to peer-to-peer payment services such as Venmo but wouldn’t require individuals and businesses to report any additional information to the government, according to people familiar with the plan. Financial institutions already must report interest, dividend and investment income, and the IRS can get bank information during audits.
Why This Scares Me For Miles & Points
While this is obviously aimed at wealthy business owners it could trickle down to small business owners as well. Once pandora’s box is opened you never know how far this slippery slope could go. While buying gift cards to turn into money orders may not be taxable, per the case earlier this year, buying and selling merchandise or 3rd party gift cards is. And if you use the same bank account for both transactions it could look really strange to anyone getting that data.
That would look an awful lot like unreported income even if it isn’t. Do you keep good enough documentation should you get audited because of the extra information being sent out by the bank? Would that potential hassle reduce your desire to chase the miles and points in the first place?
Those are potential issues I could see coming if this is passed. It would give me second thoughts on pursuing some of the things we do even if we are in the right. I don’t know if it would ever make it to our level but if it did I don’t know if the juice would be worth the squeeze anymore.
Final Thoughts
While this has a long way to go before it can become a reality it still gives me some pause. I imagine the banks will use all of their lobbying power and might to kill this because of the increased burden and cost that would fall on them. There are also privacy issues to consider etc. The cost required to implement this program would be another factor, as well as, if the IRS could even pull it off.
While it is aimed at wealthy business owners for the time being who knows where it would go from there. It is something we will want to stay on top of though going forward.
Let me know your thoughts below. Does this concern you? Would it change the way you do things?
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The bottom line is that for those of us that can still flip tens of thousands of gift cards to money orders via our bank accounts……..this will send up a false flag of “income”. It will be tough to explain to the IRS that one was simply flipping gift cards. We would need to keep a file of all our receipts of gift cards to prove that to be the case.
Exactly but already do for the wife who asks far more questions and gives far more grief. IRS is cake.
Every time when a liberal is elected. Success is punished. How much more taxes can they squeeze out of a demographic that is already carrying the biggest tax burden (middle class). Maybe it really is time to look at properties outside of the US.
knock off the politics. if you think anyone, including the conservative Republicans ever look out for the little guy…..you need to think again. the biggest tax cheats and evaders are the ultra rich and the largest companies in the country. they pay zero or near zero in taxes. what they don’t cheat on, they have tons of lawyers and accountants working for them. who do we middle and lower class folks have? nobody. so cut the political crap……this miles to memories post had nothing to do with politics at all.
Always enjoy the “logic” of a rebuttal to a post with some political tone by posting the opposition’s political narrative while trying to cancel the conservative’s view. Well done. Classic. Given the enacted and additional measures all come from the new savior in his first 100 days this M2M story has everything to do with politics.
Long term capital gains taxed at 56% is very worrisome or should be.
What would really be nice is zero capital gains tax maybe if they allow an IRA type account but nit for retirement. Individual investment account…..buy stocks or real estate and you can sell and no tax on the capital gains if you keep the money in the account. Only withdrawals to buy stuff is taxed.
Of course this is a huge problem, not only intrusive, just imagine how many false positive flags will be triggered as the IRS learns how to use transactional data; this is a Democrat sponsored horror that stacks on top of the already increased reporting burden from the already passed, Biden signed, American Rescue Plan Act of 2021 (the “ARPA”).
The ARPA is already law and includes a number of tax provisions that may have implications for taxpayers in 2020 and beyond. The ARPA reduced the reporting threshold for third-party settlement organizations from $20,000 and 200 transactions per payee to $600 per payee without any minimum number of transactions required. This provision will be applicable for calendar quarters beginning after December 31, 2021.
Given a majority voted for this, likely you have no right to cry as this plays out.
Excellent post!
I make so many in/out transactions, transfers, withdrawals, payments to myself or others, across half a dozen bank accounts, to dozens of outside accounts, simply to be able to leave breadcrumbs on what we are doing with our money, where funds came from, where they went, and why, and to keep non-business separated from business. I cannot fathom not being flagged. If this transactional reporting becomes reality, I am going to have to seriously figure out how to dump everything into a single account and maintain the details outside of banking records. This is a far cry from impacting only those making $400k and above.