Senate Democrats to Unveil Scaled-Back IRS Bank-Reporting Plan

[Celerity]

Accounts of $10,000 or more would be reported to the IRS

https://www.bloomberg.com/news/articles/2021-10-18/senate-democrats-to-unveil-scaled-back-irs-bank-reporting-plan

Senate Democrats are set to unveil a proposal requiring that banks report some accounts to the Internal Revenue Service in their latest effort to come up with ways to finance President Joe Biden’s economic agenda, according to an aide familiar with the plan.

Senate Finance Committee Chairman Ron Wyden and Senator Elizabeth Warren, a member of the panel, will outline the proposal on a call with reporters Tuesday afternoon, according the aide, who spoke on condition of anonymity as the plans aren’t yet public. The senators won’t release the legislative text but will publish information refuting what they say are myths that Republicans are spreading about their plan to crack down on tax evaders.

The proposal is the result of weeks of talks between Democrats about how to scale back an idea first floated by Treasury Department officials that would report accounts with at least $600 in deposits or withdrawals to the IRS.

Wyden and House Ways and Means Committee Chairman Richard Neal have both said they want to increase that threshold to $10,000 as well as narrow the proposal to only hit high earners. Democrats are looking at exempting certain payments, like payroll direct deposits and mortgage withdrawals, so that fewer accounts would have aggregate inflows and outflows of more than $10,000.

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[BeerBarrelPolka]

1. This Whole Thing

seems the wrong approach. People do not want the IRS looking into their affairs like this. There are different ways to go after the big buck tax cheat. I know someone would didn't work in many months because of an auto accident and was in financial dire straights. Finally, after about a year he received a settlement check for about $15,000.

[Celerity]

3. Compensation for Physical Injury is Not Taxable

https://www.nolo.com/legal-encyclopedia/is-your-personal-injury-settlement-taxable.html

As a general rule, the proceeds received from most personal injury claims are not taxable under either federal or state law. It does not matter whether you settled the case before or after filing a personal injury lawsuit in court. It doesn't matter if you went to trial and won a verdict. Neither the federal government (the IRS), nor your state, can tax you on the settlement or verdict proceeds in most personal injury claims. Federal tax law, for one, excludes damages received as a result of personal physical injuries or physical sickness from a taxpayer's gross income.

This means typical personal injury damages that are meant to compensate the claimant for things like lost wages, medical bills, emotional distress, pain and suffering, loss of consortium, and attorney fees are not taxable as long as they come from a personal injury or a physical sickness. A physical sickness means a claim for an illness. If, for example, you were negligently exposed to a germ that made you sick, any damages that you recover as a result of that illness would not be taxable.

Exceptions to the General Rule

Even if you suffer a physical injury or physical sickness, you will be taxed on damages relating to a breach of contract if it is the breach of contract that causes your injury, and the breach of contract is the basis of your lawsuit. Punitive damages are always taxable. If you have a punitive damages claim, your lawyer will always ask the judge or jury to separate its verdict into compensatory damages and punitive damages. That ensures that you can prove to the IRS that part of the verdict was for compensatory damages, which are not taxable. Get details on the different types of damages in a personal injury case.

One other portion of a personal injury verdict that is taxable is interest on the judgment. Most states have court rules that add interest to the verdict for the length of time that the case has been pending. For example, if you filed your suit on January 1, 2019, you would generally receive interest on the verdict starting from January 1, 2019, and running until you receive payment. If you won at trial on January 10, 2020, but the defendant appeals and does not end up paying you until March 31, 2021, you would receive two years and three months of interest on the amount of the unpaid verdict. This interest is taxable.