Tuesday Talk*: The $600 Snitch Law

The two obvious problems with astoundingly broad omnibus laws is that they’re so big that it’s essentially impossible to know everything shoved in there, and only later do people realize that the law with the cool and lofty name includes some really awful stuff that nobody knew about. The other problem is that you can love some pieces and hate others, but since they’re all part of the same huge omnibus law rather than presented as separate matters to be considered on their individual merits, it’s all or nothing.

But did you know about the $600?

When the Biden administration looked for ways to pay for the president’s expansive social policy bill, it proposed raising revenue by cracking down on $7 trillion in unpaid taxes, mostly from wealthy Americans and businesses.

Is there really $7 trillion at issue in tax evasion? It’s an estimate, even if the New York Times lacks sufficient space to include the word, but it’s possible. Do wealthy Americans and businesses evade $7 trillion in taxes? That’s a different issue. Sure, they pay as little as the law allows, but that’s not evasion and gaming the law doesn’t mean taxes are unpaid.

The government can raise taxes, but that’s entirely different than claiming that there is $7 trillion in unpaid taxes by wealthy Americans being hidden somewhere. And where are these wealthy American and businesses hiding their loot?

To help find those funds, the administration wants banks to give the Internal Revenue Service new details on their customers and provide data for accounts with total annual deposits or withdrawals worth more than $600.

A threshold of $600 pretty much means every back account. Does Biden suspect that those billionaires and trillionaires are squirreling away their tax-unpaid lucre in thousands of bank accounts where they deposit or withdraw $600? Why $600 is a bit of a mystery, but that aside, this seems to clearly not be limited to the wealth and business in any event. Some wags might even surmise that this is intended to cover everybody, from the paper boy to Bezos.

That has sparked an uproar among banks and Republican lawmakers, who say giving the I.R.S. such power would be an enormous breach of privacy and government overreach.

Privacy is a curious concern, given that people willingly give Zuck, et al., their every life detail without the slightest concern. And the government has long been at war with the cash economy, which makes it far harder to gather evidence against you as opposed to credit and debit cards, where your every transaction falls under the Third Party Doctrine so that they can get it at will, even if it’s not mandatory that it be affirmatively reported.

But while privacy might be the most obvious concern, is it the most serious concern? The IRS has powers that shock those people who end up on its radar. It makes assessments for reasons that only it knows and then sends you a letter in an official envelope that informs the recipient that there is a fine if it’s not used for government purposes. Within the envelope is a dictate from government to pay or else.

What does the nice family with more than $600 in deposits or withdrawals do if they get this love note from the IRS? It’s not as if they can call up the local office, have a nice chat with a rep and straighten this mess out. How the IRS will reach its conclusion is a mystery at the moment. Will an auditor review accounts that raise a red flag? What constitutes a red flag?

Will it be an algo searching millions of bank accounts daily for anomalies based on whoever wrote it? Did you get a birthday present from grandma or sell heroin on the street corner without the required tax stamps? It will be left to the recipient of the letter to dispute, and prove, perhaps in court and likely with a CPA and lawyer at their own expense, to challenge the IRS.

And let’s not even talk about jeopardy assessments.

Did you know this was in that sweet, sweet, build back better bill that promises, on the one hand, to give free stuff to everybody who has suffered the indignity of victimhood by not having as much money as somebody else? Will the IRS only direct its attention at the wealthy and businesses (just like civil forfeiture would only be directed at mobsters and drug kingpins?), or will the letter come to a mailbox near you? Is this the way you reimagined America?

*Tuesday Talk rules apply.


25 thoughts on “Tuesday Talk*: The $600 Snitch Law

  1. Mike

    As with all done laws similar to this, I have no doubt it will be selectively enforced, and more than likely disproportionately against minorities, in the name of getting drugs off the streets. I hope the thought of somehow combining this with civil forfeiture hasn’t crossed their mind.

    1. SHG Post author

      The IRS doesn’t need civil forfeiture. If you think the DEA has mad forfeiture power, you’re in for a rude awakening.

  2. B. McLeod

    They can’t keep up with the $10,000 rule that has been in place for years. They are flooded with the informational reports.

    Now, with the proposed $600 rule, it’s going to be a report for substantially every deposit I make. For no real purpose. Several of the institutions where I have accounts are urging customers to pitch a fit about this. They don’t want to do this burdensome reporting, which is pointless idiocy from their perspective.

    1. Quinn Martindale

      The current proposal isn’t for every $600 transaction but just the annual aggregate inflow and outflow for accounts for accounts over that threshold on a 1099-Int, essentially every account as Scott said. It will still require tens of millions of new 1099-ints.

    1. Guitardave

      …and I’m absolutely 100% certain that its a totally random cowinkydink, that every poor dumb fuck in America got a $600 check or two a while back. Right? Nothin’ to see here folks…move along.

  3. Mike V.

    Yes, I had already heard and have wrote to my Senators and Congresswoman. Thing is they all have an R after their names so they will have exactly ZERO input on the bill; since it is the Democrats’ way or bust.

  4. Jake

    Why $600 is an interesting question. After removing my foil hat my best guess is the IRS would love to get every transaction but the total count of transactions below some number, which is apparently $600, for a given account increases the signal-to-noise ratio in the statistical models identifying suspicious anomalies such that they are rendered ineffective. Or, at least, too numerous to follow up on.

    1. PseudonymousKid

      $601 is obviously superior and the law is terrible for not acknowledging that fact. Don’t listen to those heretics who would have it be $599. They know nothing.

      This law sucks not because of privacy or overreach but because there isn’t a sufficient justification for it as of yet. The real questions are who we call “wealthy” and how much more we want them to pay than what they actually pay now, not how they got away with not paying taxes in the past. While I’m generally in favor of the haves paying more taxes than the have nots, this law isn’t it. You shouldn’t have to guess, in other words.

      Whatever it takes to be “wealthy” is always $1 more than what I have at any given time. You should all be very, very worried.

      1. Jake

        PK, I’m a little sad you are shadowboxing too. The New York Times article is short on information and long on ‘expert analysis’ so I will refer to the Treasury press release, which says nothing about analyzing the past to understand how “how they got away with not paying taxes”. It says they know the rich and corporations are getting away with more shenanigans and it says they are going to implement new technology and methodology to improve enforcement of existing tax codes.

        Surely you can see that?

        1. rxc

          People ask me why I defend the corrupt practices of the rich and object to commonsense actions to ensure that they pay their fair share. I tell them that I may not be rich, yet, but eventually the people who want these policies will consider me to be so.

          1. Rengit

            The experience of countries in Latin America and Southern Europe is that tax laws designed to go after the rich, and only the rich, end up failing because (no surprise) the rich have the ability to pay small platoons of tax lawyers, financial planners, and accountants, and can work political and regulatory connections. And since the coffers are not quite as full as had been planned for, the burden and intrusion of tax collection gets shifted by politicos downward to the broader middle class. If you’re middle class, to a poor person and the politicians representing them, you’re rich.

        2. PseudonymousKid

          I’m sorry you’re sad, but I’m happy you’re making an effort at saying something cogent and addressing the topic or what I said about it directly rather than talking about the EU or dinosaurs or whatever.

          Yes. I’m saying that even with my bias for taxing the rich far more, I don’t see enough justification for collecting information on everyone. Yes, even after I give you the assumption that the rich and corporations are indeed cheating by not paying all their taxes. Yes, I can see what you’re saying. No, I haven’t changed my mind. I have many inventive places I could tell the IRS to go instead of into my bank accounts, measly as they are.

          I could box with you instead, but I’m trying to be nicer, and I’d rather try to punch up than down anyway. It’s all a work in progress.

  5. RTM

    A friend told me recently that when someone sent her money through PayPal recently, PayPal put a hold on the money and said she had to provide her tax payer number because a new proposed IRS rule required that transactions over $600 had to be reported and a 1099 issued. They also demanded proof of what the underlying transaction was about. Anticipation of the rule was enough to trigger PayPal’s action. Ultimately, she was able to obtain the money without having to provide any information based on the sender changing the transaction to payment to a friend (which it was) rather than payment for goods and services (for which PayPal extracts a fee). No wonder people prefer cash.

  6. Elpey P.

    “‘This is about making sure the top 1 percent can’t evade $160 billion per year in taxes,’ said Alexandra LaManna, a Treasury Department spokeswoman.”

    You never know, people in the 1 percent might be funneling their income through eight thousand separate bank accounts. They are The ExPerTs so I suppose they know what they are doing and we should trust them.

  7. qcexaminer

    When my lawyer husband shut down his solo practice in IL so we could move, the IRS challenged his claim that the tax was for a 1/2 year rather than a full year. It was for a l/2 year. After much back and forth our glorious IRS sent him a bill for 10 cents. Yes, 10 cents, with no explanation. Who’s gonna fight 10 cents? He paid it and we moved on,

  8. rxc

    This should be almost trivially easy to do. Right now, we have automatic systems to send notifications about every credit card purchase, and every bank deposit or withdrawal. They happen, right now, all the time. Just add the IRS to the cc list, with a SSN identifier, which all the financial organizations already have. They could do the same thing for every trade of every security, as well.

    The IRS is also supposed to get a bunch of additional money from this bill, to do “enforcement”. What that would mean is hiring a bunch of new bureaucrats who would to the contracting for a bunch of new contractors to run the new computers to process all this data. And the contractors would have performance standards to “Identify potential tax avoiders” for the IRS. Which they would do, in order to meet their performance standards. To our eternal joy.

    In France, it has been illegal to purchase, for cash, anything costing over 1000 euros, for a long time. This is coming, here.

  9. ExpatNJ

    Got a CD or IRA? Is the account $600.00 or more? Could the goal of this edict be to identify your meager life savings, so it can be reeled-in by FedGov to pay its federal deficit? You’re a little fish. You can’t fight this.

  10. Earl Wertheimer

    If you think they will stop at $600 , I have a big pile of backup tapes and a hard drive labelled ‘Lois Lerner’ for sale…
    Lookup “Structuring”. If you deposit $600 or more, they want the details. If you transact less than $600, they can claim you are guilty of “Structuring”.
    This just gives them the ‘authority’ to put your life under a microscope…

    [Ed. Note: Look up “structuring”? You said that to criminal defense lawyers? smh.]

  11. Dave Landers

    I’m pretty mad about this. I’m not on any social media besides Simple Justice. I’m a simple restaurant manager in Philadelphia who has been working six or seven days each week during this pandemic (now maybe an endemic).

    I’m not going to start allowing to have this boot drop onto my neck.

    1. Lee J Stonum

      Congrats, Scott. Social Justice is now Social Media. I expect to see you at the next hearing on the Hill with Zuck and your cabal.

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