As part of the Biden’s administration’s strategy to collect more taxes from high-net-worth individuals, the US Treasury Department will ask US financial institutions (FIs) to file reports of the annual aggregated inflow and outflow from every individual and business taxpayer’s accounts.
This follows cuts to the US Internal Revenue Service’s (IRS’s) which in the last years resulted in more difficulties to address tax evasion schemes, with the necessity now to invest USD80 billion over the next ten years in order to tackle sophisticated tax evasion.
The plan is for authorities to implement systems to gather more information on partnerships, large corporations and HNWIs, seeking the help of third-parties with information gathering powerswith the aim to prevent income accumulation through opaque sources.
Statistics show in fact that up to 55% of taxes owed by these structures is unpaid and that the top 1% of Americans hide more than 20% of their income, with the necessity for the IRS to set in place mechanism allowing for crosschecking the accuracy of tax filings and possibly collect annually another USD175 billion of taxes from undetected income.
According to the National Bureau of Economic Research (NBER) a comprehensive approach to tackle the issue will include:
The proposal also introduces new measures regarding professional tax prepares and, specifically, the introduction of safeguards in the tax preparation industry setting penalties for ghost preparers who fail to identify themselves on tax returns.