$600/$10,000
The Biden Administration along with certain members of Congress have proposed requiring banks to report aggregate inflows (and possibly outflows) into bank accounts that exceed $600. These proposals have gotten major pushback from community banks and others.
It now appears that the threshold will be set at $10,000 and will exempt certain types of transactions such as mortgage payments and payroll deposits. Also, these rules may only apply to high income earners. However, what is the definition of a high income earner and how is a bank going to know if someone is a high income earner. Will the IRS directly indicate to the bank that a person is a high income individual and will this definition change over time to incorporate all taxpayers? Will this only apply to individuals or will it apply to all business entities. Likely it will apply to all business entities. Too soon to know.
The key question is how will this help the IRS raise money. Likely the taxpayer will get some type of 1099 from the bank indicating total transactions and then the taxpayer will need to “reconcile” these transactions on the tax return. Let’s look at an example.
Mary is a successful farmer and receives a 1099 from her bank showing $2.5 million of total inflows. On the form provided by the IRS, she will note that $759,000 was from loans, $452,000 was transfers to other accounts and the remaining $1,289,000 is income. She will then need to break down the income and indicate where on the tax return all of this income is reported and the dollar amounts.
As you can see this can become very quickly a paperwork burden but it appears that Congress does not care. For now, the assumption is that this number will be in aggregate. However, if the reporting is based on “EACH” transaction over $10,000, then the reporting to the IRS will have to reconcile “EACH” transaction. If a farmer has 100 transactions over $10,000, then you will be required to reconcile all 100 on the return. I think you can see your tax return bill getting higher if this provision is enacted.
We will keep you posted.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Comments are closed.