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Does The IRS Have Access to Your Bank Account

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    Does The IRS Have Access to Your Bank Account

    In a speech the president gave last week, he said something that really caught me off guard. He stated that if you file a W2 with your taxes, the IRS already has access to your bank account.

    I would have thought our fourth amendment rights would have required a warrant. Or does providing the IRS with your account number for direct deposit of refunds give them the ability to look further into your account?

    Is his statement accurate or did I misunderstand him?


    #2
    I do not believe they have the ability to check your account(s) or do anything with them other than direct deposit funds, and you'd have to give them that ability.
    Anytime we've ever gotten a refund, and with the past stimulus payments it came via check.

    Comment


      #3
      Originally posted by Fishindude77 View Post
      with the past stimulus payments it came via check
      Previously I have received paper checks for tax refunds. Over the past probably 8 years I have consistently done direct deposit. This past year I owed roughly $1,200 and that was taken directly from my checking account.

      For the stimulus check, I have received both paper checks and direct deposit over the last two years.

      Comment


        #4
        Originally posted by myrdale View Post
        In a speech the president gave last week, he said something that really caught me off guard. He stated that if you file a W2 with your taxes, the IRS already has access to your bank account.

        I would have thought our fourth amendment rights would have required a warrant. Or does providing the IRS with your account number for direct deposit of refunds give them the ability to look further into your account?

        Is his statement accurate or did I misunderstand him?
        Myrdale, you are correct in being uncomfortable with this bill. The proposed legislation is on its face unconstitutional. This legislation is saying that the IRS can search your accounts at their leisure, without any evidence of guilt or wrongdoing. Its a clear violation of the 4th Amendment. For those who aren't familiar with the 4th Amendment, here is what it says:

        The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

        Basically the 4th Amendment says the government can only search your accounts if they solid evidence that's been taken before a judge. What Biden wants to do is give the IRS carte blanche to search your bank accounts anytime they feel like it.

        Its the product of a demented decision making process that prioritizes state investigative power over individual freedom. It also carries with it the assumption that Americans are serfs whose only role is to feed the tax coffers of the administrative state, rather than a free people with rights granted by God. Not only is this an issue, these kinds of bills undermine social trust and discourage innovation - people behave differently if their finances are under surveillance. They don't innovate or save as much. After the last two years of division, rioting, inflation, loss in Afghanistan and ongoing covid issues - we just don't need this kind of twisted thinking in our financial policies.
        james.c.hendrickson@gmail.com
        202.468.6043

        Comment


          #5
          You're talking about two different things.

          If you've ever given the IRS authorization to direct-deposit funds into one of your bank accounts, then, yes, they already have that information. And a lot of people do their taxes this way, both for amounts owed and refunds. Stimulus checks are distributed both ways. Those who have direct deposit generally get funds deposited automatically. Those who did paper on their last return, they generally get a paper check.

          The other thing you're talking about is a proposal to require banks to report deposit/withdrawal information on personal and business accounts.

          A 2-second internet search provided heavy slant on both sides, including this article which tells you what it is, and what it isn't.

          https://www.politifact.com/factcheck...reporting-irs/

          Comment


            #6
            When you open a bank account, you provide your SSN number. The bank then reports your account number & SSN to the federal government. The only way to keep your bank account number a secret from the federal government is to not have a bank account.

            Comment


              #7
              I don't like the proposal.

              A long time ago I read a book on tax audits. One of the types of audits was called a compliance audit. They randomly pick a small percentage of returns and they go through every detail of the return. You think--I'm a W2 worker and I only take the standard deduction, so this shouldn't be a big deal..... But, they go through your checking account and every deposit you make into your account. You have to provide proof that a $10.00 deposit was a rebate check from XYZ store. Or, the $300.00 check you received from your sister was reimbursement for picking up a random ticket for them (and hopefully, it was a check instead of cash you deposited which is harder to prove). Etc, etc. (Kind of like folks found with a large amount of cash are assumed to have obtained it by illegal means--guilty until proven innocent. )

              After reading that book, I have always tried to keep good records in my check book register. (But, I think even a copy of the deposited check for tickets might require a copy of the order form for the event 3 years or so ago because as you know, audits are from previous tax years.) The book said that failing to provide evidence, the deposit would be considered income... It sounded like fun times...

              Here is an explanation from a law firm:
              "4) Taxpayer Compliance Measurement Program (TCMP) Audit
              The fourth type of audit is a Taxpayer Compliance Measurement Program (TCMP) Audit. The primary purpose of this type audit is to update the data for the IRS’ DIF scores. DIF scores are developed from analyzing a large group (involving up to 50,000 randomly selected returns) of intensive audits, conducted every few years. In a TCMP audit, the IRS will analyze every item on the tax return and every part of the return must be substantiated by documentation. A standard audit is time consuming in that a taxpayer must find checks, invoices, contracts, bank statements, etc. for the items selected for audit. In a TCMP audit, every line of the tax return is audited therefore you have to provide documentation for all deductions not a selected few items.

              Whichever audit you may be confronted with, it is always best to get organized and stay calm. For instance, pull all your canceled checks, receipts, and other information related to the items to be audited and get that information in sequential order."


              https://irssolution.com/blog/four-types-of-tax-audits/

              Comment


                #8
                Originally posted by james.hendrickson View Post
                The proposed legislation is on its face unconstitutional. This legislation is saying that the IRS can search your accounts at their leisure, without any evidence of guilt or wrongdoing. Its a clear violation of the 4th Amendment.
                This is where I was confused about if the statement that the "IRS already has access to your bank account" was a reference to the proposed legislation, or was the current situation.

                Comment


                  #9
                  Originally posted by ua_guy View Post
                  If you've ever given the IRS authorization to direct-deposit funds into one of your bank accounts, then, yes, they already have that information.
                  Please define "that information".

                  Is it simply the account number, or is it the full account history showing all debts and deposits?

                  Comment


                    #10
                    Originally posted by myrdale View Post

                    This is where I was confused about if the statement that the "IRS already has access to your bank account" was a reference to the proposed legislation, or was the current situation.
                    So, lets talk about this. Here is the actual proposal from the Federal Register:

                    INTRODUCE COMPREHENSIVE FINANCIAL ACCOUNT REPORTING TO IMPROVE TAX COMPLIANCE

                    Current Law

                    Business income is subject to limited information reporting. Current information reporting of gross receipts exists for only certain types of revenue (from Forms 1099-MISC, 1099-NEC, and 1099-K), and there is no information reporting on total deductible expenses.

                    Reasons for Change

                    The tax gap for business income (outside of large corporations) from the most recently published Internal Revenue Service (IRS) estimates is $166 billion a year. (1) The scale of this revenue loss is driven primarily by the lack of comprehensive information reporting and the resulting difficulty identifying noncompliance outside of an audit. While the net misreporting percentage is only 5 percent for income subject to substantial information reporting, the net misreporting percentage for certain categories of business income exceeds 50 percent. Requiring comprehensive information reporting on the inflows and outflows of financial accounts will increase the visibility of gross receipts and deductible expenses to the IRS. Increased visibility of business income will enhance the effectiveness of IRS enforcement measures and encourage voluntary compliance.

                    Proposal

                    This proposal would create a comprehensive financial account information reporting regime.

                    Financial institutions would report data on financial accounts in an information return. The annual return will report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. This requirement would apply to all business and personal accounts from financial institutions, including bank, loan, and investment accounts 92), with the exception of accounts below a low de minimis gross flow threshold of $600 or fair market value of $600.

                    Other accounts with characteristics similar to financial institution accounts will be covered under this information reporting regime. In particular, payment settlement entities would collect Taxpayer Identification Numbers (TINs) and file a revised Form 1099-K expanded to all payee accounts (subject to the same de minimis threshold), reporting not only gross receipts but also gross purchases, physical cash, as well as payments to and from foreign accounts, and transfer inflows and outflows.

                    Similar reporting requirements would apply to crypto asset exchanges and custodians. Separately, reporting requirements would apply in cases in which taxpayers buy crypto assets from one broker and then transfer the crypto assets to another broker, and businesses that receive crypto assets in transactions with a fair market value of more than $10,000 would have to report such transactions.

                    The Secretary would be given broad authority to issue regulations necessary to implement this proposal.

                    The proposal would be effective for tax years beginning after December 31, 2022.

                    1 Computed from individual income tax business income, small corporations, and self-employment tax components.
                    2 Current income reporting by financial institutions would be expanded to all entities, including certain corporations. Interest payments would be included in the loan account reporting. Transferee information would be reported for all real estate transactions on Form 1099-S.


                    Source: Treasury.gov
                    james.c.hendrickson@gmail.com
                    202.468.6043

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