With a federal government that is pushing ever closer to a $30 trillion national debt, and that has seen two consecutive fiscal years with deficits exceeding $3 trillion, the pressure to close that gap is growing. The more the Biden administration plans to spend, the more President Biden tries to ramp up the federal government’s revenue. And while he claims that he’s going to tax the rich to pay for his schemes, many of his proposals could end up affecting ordinary Americans like you.
One of the most controversial portions of Biden’s current plan is his proposal to require banks and financial institutions to report to the Internal Revenue Service (IRS) all total inflows and outflows of accounts whose activity exceeds $600 in a given year. That is obviously a very low threshold, and one that isn’t just going to affect the ultra-rich. If you have a bank account of any type and use it for anything, the IRS is going to find out exactly how much money is going and coming from your accounts.
Backlash against that proposal has been, to put it mildly, severe. And so there have been proposals to raise the limit at which reporting is required. But even those proposals are severely lacking and will ensnare tens of millions of Americans, with you very likely being among them.
Trying to Catch Tax Cheats
The administration claims that its efforts are an attempt to try to get the mega-rich to pay all the taxes they owe. Apparently the administration believes that the ultra-rich must be using a series of bank accounts and engaging in multiple small-scale transfers if it thinks a $600 annual threshold is going to ensnare only the rich.
Just think about your own bank account and imagine how much money comes into and out of your account every year. If you have a job, you’re depositing well more than $600 into your account every year.
Even if you don’t have a job, you’re likely seeing more than $600 worth of welfare benefits, Social Security benefits, disability benefits, or unemployment insurance deposited into your account. And if you spend money, whether writing checks or paying off credit card bills, there’s a good chance you’re exceeding the $600 threshold on account outflows too.
Treasury Secretary Janet Yellen has proposed raising the threshold for bank reporting to $10,000 annually. But even that will catch too many Americans in its nets.
Just about anyone with a full-time job will still find that their bank account information will be sent to IRS. And anyone on Social Security, where the average monthly benefit payment is $1,543, will similarly see their information reported to the government.
There have even been proposals to increase the threshold to $50,000. While that may exempt some retirees who are dependent upon Social Security income, it would still likely ensnare many wage earners. The lower this threshold is, the more Americans will be caught up in an IRS dragnet. And the more reports IRS has to wade through, the more difficult it is going to be to actually find whose accounts belong to the ultra-rich and figure out how they’re not paying taxes.
Just imagine that you’re the IRS. What’s going to be easier, combing through 200 million reports from banks hoping to find a needle in a haystack, or going through 1 million reports of the largest accounts? The more Americans get caught up in this reporting scheme, the more likely it is that innocent ordinary Americans could be unfairly targeted.
The Current State of Negotiations
Right now Congressional Democrats are proposing a $10,000 reporting threshold, with wage income exempted from that limit. That still doesn’t address the possibility that accounts with more than $10,000 in outflows will still be subjected to reporting, which renders the wage income exemption moot. It could also still mean that retirees receiving Social Security, or those taking distributions from retirement accounts, would remain in the government’s crosshairs.
This is an issue that is likely to affect you, so it’s important to pay attention to what’s going on in Washington. House Speaker Nancy Pelosi has previously stated that she intends to keep the $600 threshold, so this could be an issue that doesn’t get resolved until the very last minute.
Can You Defend Yourself?
At some point it may become impossible to keep the federal government from finding out every last detail of your finances. But that time hasn’t come yet. Still, you’ll want to consult with your financial planner and tax advisor to determine if you’ll come under these new regulations and how you might be able to protect your financial privacy.
One of the keys could be the definitions of just what has to be reported and who has to report to IRS. If you take distributions from retirement accounts and receive those funds into your bank account, your bank may need to report those, although it supposedly wouldn’t have to report the source of those funds. And it’s unclear whether all retirement accounts would be subject to mandatory reporting too.
It’s important to remember that not all retirement account distributions have to be in cash. If you invest in a precious metals IRA, for instance, you can take delivery of your distribution in physical gold or silver coins or bars. With dozens of choices available to you, you can choose exactly which gold and silver coins you want to hold in your gold IRA or silver IRA account. And since those coins would pass from your IRA account to your personal possession, the funds wouldn’t ever touch a bank.
Obviously you have to pay taxes on your distributions if your precious metals IRA is a Traditional IRA, so the IRS would know about your gains. But not putting cash gains into your bank account could keep your bank account information from being reported to IRS. And if you have a Roth precious metals IRA, your distribution would be tax-free.
It’s definitely worth talking to your tax advisor to see whether a precious metals IRA might be a useful investment to help protect your financial privacy after Congress passes its legislation. Or if that still doesn’t protect your financial privacy, you can always buy gold and silver directly, without an IRA. That way you can store gold and silver the way you want to, without the government having to know.
Whichever way you decide to invest in gold and silver, give the precious metals experts at Goldco a call. With years of experience helping thousands of satisfied customers just like you, Goldco’s experienced representatives can help you through the process of opening a precious metals IRA and purchasing gold and silver. Don’t let your financial privacy fall victim to a government that can’t spend within its limits. Call Goldco today and start protecting your assets with gold and silver.