Biden Administration’s new proposal for financial institutions to report transactions over $600 has been a hot topic over the last couple of days. If the proposal were to take into effect, it will touch more than just those that earn a high income with income that’s left unreported.
Currently, any transaction that’s more than $10,000 is required to be reported to the Internal Revenue Service. Some say this is an outdated law; some say it’s still right on the spot. Regardless of what you think, there might be an upcoming change in the following months that can affect your taxes.
When there is a transaction over $10,000, the Internal Revenue Service requires the person that made the transaction to file Form 8300, Report of Cash Payments Over $10,000. With possible changes to the law, there might be a change in this, and the IRS will update its forms that revolve around transactions. That said, it’s likely that you will report transactions over $600; but considering systems the financial institutions use have been updated to a point where it doesn’t require individuals to handle these types of things, there is a high chance that you won’t need to do any reporting yourself.
When is the new IRS Monitor $600 law?
It’s safe to say that there is no such law at the moment of writing this article. However, it’s a proposal that could turn into actual functional law. If the proposal were to be accepted by Congress, it can take into effect within a month or two. After that, the IRS will be able to monitor transactions that exceed $600 to get in the way of tax evasion and any income that’s earned over the threshold won’t be left unreported.
A new law like this would have an impact on the number of people who are locked up or facing penalties for tax evasion significantly. This law in particular is not just targeting rich people that have income that’s not reported to the Internal Revenue Service, but everyone regardless of their income.
What does the new law mean for your taxes?
The new changes to the law that requires financial institutions to report transactions over a certain amount may mean something or may not mean anything at all. The Internal Revenue Service mandates every taxpayer to report the income earned during the tax year anyways. If you’re not reporting a certain portion of your income, know that it won’t be left unreported anymore, therefore, it will result in a higher tax bill but it will be fair for everyone when you think about it.
Like any other changes to the law that include taxes, it’s expected that there will be incentives for those that report income that otherwise won’t be reported. Nevertheless, IRS monitoring transactions over $600 is a big deal as it’s $10,000 compared to today and this change could impact many taxpayer’s finances. As soon as more information comes out of the Congress and Biden Administration regarding the changes, we’ll keep you updated.