Why does the IRS want to Inspect Bank Accounts
When it comes to bank accounts in the United States, there was always the sense amongst consumers that bank accounts have an element of privacy to them. In order to access the accounts online — you need a password and in order to withdraw money at the ATM — you need a pin. The US Government seeks to reduce that level of privacy, by allowing them access to your accounts to inspect the transactions. The US Government believes it should have the right to inspect law-abiding, US Taxpayer bank accounts “just because” they want to ensure that there are no nefarious activities going on. This does seem more like a “big brother” situation and an attempt to snoop around Taxpayer’s accounts — without any rational basis for doing so — just in case the Taxpayer may be participating in illegal activities or avoiding reporting/tax — either domestic or overseas. While there must be other, less invasive techniques the US Government could use to accomplish the same goal, here are four (4) important facts to consider.
Who are You Transferring Money To?
By gaining access to Taxpayer bank accounts, the IRS can then assess bank accounts transfers that are being made out of the accounts. For example, are transfers being made overseas — or in lieu of properly paying employees through payroll. Moreover, the IRS can use this to track acquisitions of and payment for cryptocurrency and other items that are more difficult for them to trace.
Who are You Receiving Money From?
For example, did the account holder receive a large transfer from abroad? If so, what was the purpose of the transfer, and did the account holder properly report the income money on the necessary tax and reporting forms.
Did you Report all the Income?
When a person is a sole proprietorship, oftentimes they may use their own personal account to receive monies for work performed and/or products provided by the account holder. With access to account holder banks accounts, the IRS can determine whether or not employment, sales, and income taxes have been paid.
Transferred Money to a Crypto Exchange?
The IRS dislikes virtual currency — and there are currently proposed regulations, such as FinCEN Notice 2020-2 — in addition to other notices on the way. The IRS can use the access to help track acquisitions, sales, and transfers of money used for cryptocurrency.
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