How Much Do You Spend at Victoria’s Secret? The IRS Wants to Know!

February 15, 2006 – If you think you don’t have much in the way of financial privacy right now, you are correct. Banks can disclose your information to their affiliate companies without your permission (You can thank Congress for that). Database companies gather, store and resell your information (including your Social Security Number) to the highest bidder. But if you think financial privacy is lacking already, the Bush Administration is trying to hard to make the situation even worse. If they get their way, copies of your credit card bills and your ATM card purchases will be sent straight to the IRS. So much for due process!

 

If you over 35 years old, you probably remember hopping on your bike and riding down to the local bank. In fact, banks wanted you to come through the door an open an account. If you could talk and reach the counter with your piggy bank, they were happy to open an account for you. The teller would even gladly help you count your change.

 

You didn’t need a Social Security Number. You didn’t even need to know your address. You could come back with your parents and have them supply that for you.

 

When banks started using ATMs, they would send you a card. It didn’t matter if you were under 18 years old. You could make deposits and withdrawals. You could use the ATM. You got interest on your money and there were no fees! It was a different time. A time in which parents and society encouraged their kids to save.

 

But as with many good things, politicians got involved with the system and totally screwed it up. They passed laws that required Social Security Numbers for anyone opening a bank account. They passed laws that made it illegal for minors to have control of their own bank accounts. In fact, banks are not even allowed to furnish ATM cards to anyone under 18 years of age.

 

The reason for all of these laws was that the government, specifically the IRS, wanted to know everything about our finances. And over the past twenty years, the IRS has pretty much gotten its way. Banks are now required to report any transaction of $10,000 or more. But they also report smaller transactions if they are “suspicious” in nature.

 

But it is not just banks that are involved in this kind of financial surveillance. Even the Post Office has gotten into the game. The Post Office training manual tells employees that when someone is purchasing a money order and using cash, they should try to get identification from them. If the customer won’t provide it, then they are encouraged to try to identify them by getting a license plate number or by following them. This information can then be reported to the FBI or IRS for follow-up.

 

Now, convinced that we are all a bunch of tax cheats, the Bush Administration is suggesting to Congress that it pass legislation that would report aggregate payments to merchants that are made using credit or debit cards. While this type of reporting would not cover specifically what you purchase, it would tell the IRS where you shop and how much you spend.

 

The reason for suggesting this legislation has to do with an audit conducted by the IRS on underreported taxes for 2001. The IRS randomly reviewed 46,000 returns and then combined this information with other data. Based on their findings, the IRS estimated that American’s underpaid their taxes by $345 Billion in 2001 alone. $197 Billion of this shortfall came from individuals, with the rest being from business underreporting.

 

While the amount underreported is significant, IRS Commissioner Mark W. Everson admits that a large part of the problem may be due to confusion over the tax code. Complexity of the tax law contributes to noncompliance, Everson said, both by confusing taxpayers and by providing "opportunities for skirting the line."

 

Based on Everson’s comments, a logical first step for better compliance is simplifying the tax code. Not forcing Americans to give up more of their financial privacy.

 

But the chances are that it is financial privacy that will suffer, long before tax simplification. There are just too may special interests who make big campaign donations for us to believe that Congress will do the right thing.

 

So if you don’t want anyone to know where you shop, you might want to consider using cash. It may not be the most convenient thing to do but it is still relatively private.

 

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