A Massive Search Without a Search Warrant?

A proposal from the Biden Administration that would require banks to monitor personal accounts and report all financial transactions over $600 to the IRS is under fire.  Treasury Secretary Janet Yellen defended the proposal by saying, “It’s just a few pieces of information about individual bank accounts,” the secretary said.

Is it ‘A Massive Search Without a Search Warrant’

Others disagree with Yellen’s description of the Treasury Department’s proposal, however.

Last month, economist Peter Jacobsen noted the change would give the IRS an “unprecedented look into the finances of many Americans.”

“Even the powerful political will behind the 2002 'Patriot Act' only led to requirements that banks report suspicious transactions of $5,000 or more,” Jacobsen observed.

More recently, a former Kansas City Fed president argued the policy was a dangerous trap that was being laid for the middle class.

“It’s a massive search without a search warrant,” said Thomas Hoenig, who served as president of the Kansas City Fed from 1991 to 2011. “It will be the middle class and the upper middle class who will be caught in this.”

Hoenig also pointed out that, in contrast to wealthier Americans, most in the middle class do not have lawyers and accountants they can rely on to help them navigate matters with the IRS.

“In the collection of the data, there will be false positives,” Hoenig said. “That means individuals will be approached by the government about what they’re doing and they will have to spend additional funds to defend themselves. It’s a really bad idea.”

Hoenig also said the regulation would “cost billions,” since banks will have to collect the data and present it in a usable format for the IRS.

Meanwhile, defenders of the Treasury Department policy say the IRS would be monitoring annual cash flows, not individual transactions, so that makes the policy okay.

“A simple way for the IRS to get a sense of where that might be is just a few pieces of information about individuals’ bank accounts,” Yellen said. “Nothing at the transaction level that would violate privacy; simply aggregate inflows into the account over the year and aggregate outflows. And that would really help the IRS target their auditing resources, which we have proposed to greatly expand.”

Conclusion

The government wants to monitor the inflows and outflows of (private) individual bank accounts so the IRS can do more audits with “greatly expanded” resources to allow the federal government to collect trillions of dollars they are “owed.”  However, doesn't the Fourth Amendment Apply?

 Is this unreasonable?  Are our financial interests protected?  Well, the law already mandates reports over $10,000.00 transactions or greater, by requiring a form 8300 be used to report it to the IRS.  Therefore, clearly a review and search can be done on your financial transactions, because this is just an extension of such a search.  The question is the reasonableness.

Why $600 dollars?  Probably, because anytime you pay $600 or more to an individual you are required by the IRS to issue a 1099-k to that person and report that to the IRS.  Therefore, the IRS is "searching" for when you have paid over $600 to make sure you properly report that to the IRS for tax collecting purposes.  The catch is that not only does the individual have to pay taxes on the money received, but if you don't report that payment then you are can be penalized between $50 to $280 per form in 2022 that you did not report to the IRS.

Therefore, if the Government is attempting to search if you are guilty of a criminal charge and you may face penalty for such charge - shouldn't you be held free from having such a search without probable cause if the 4th amendment protects you?

It is called the Bill of Rights after all.  If you need help defending your rights please call us at Winslow Law: 843-357-9301

God Bless You, Your Business, and this Country, 

Tom Winslow