In 2021, The Biden Administration proposed legislation that would allow banks to provide the IRS all transactions on bank accounts with more than $600. The IRS would have information on every deposit and withdrawal you made in your accounts.
However, after much opposition, Biden backed off the proposal to track all bank transactions on October 19th:
The Biden administration on Tuesday backed down on a controversial proposal to direct the IRS to collect additional data on every bank account that sees more than $600 in annual transactions, after widespread criticism from Republican lawmakers and banking industry representatives, who said the tax enforcement strategy represented a breach of privacy by the federal government.Read the story HERE.
However, there was a change to the tax code as part of the American Rescue Plan Act covid response bill passed in March 2021:
Starting Jan. 1, 2022, the IRS says, if a person accrues more than $600 annually in commercial payments on an app like Venmo, then Venmo “must file and furnish a Form 1099-K” for them — reporting on all the commercial income they collected through the app.
Starting January 1, 2022, Venmo, PayPal, Cash App and others must report annual commercial transactions of $600 or more to the Internal Revenue Service.Read more HERE.
These changes apply to people who sell items on internet auction sites like eBay and people who “have a holiday craft business” so long as they accept credit cards payments through these apps. Visit the IRS website for more information HERE.
Could these changes could be a sign of increased monitoring of transactions in the future?
The Rise of Central Bank Digital Currencies
Many feel this plan to monitor transactions over $600 is a sign of what’s to come with central bank digital currencies. Also known as CBDC, it is the virtual format of a fiat currency for a particular nation or region. It is an electronic record or digital token of the official currency and is issued and is regulated by its monetary authority.
So far, nearly 40 nations are working on creating a CBDC, with China leading the pack. While many people have no problem with a CBDC, others fear this will be an invasion of privacy and give governments tremendous control over a person’s finances and overall quality of life.
There are three reasons people feel this way:
Reason #1: The Ability to Regulate Spending.
Governments can dictate what the CBDC is spent on. If they feel a person is buying too many fast foods or items that are unhealthy, they can prohibit using these monies to purchase those items.
Reason #2: Process Deposits and Withdrawals Without Customer Consent.
CBDC issued by governments can be deposited (and withdrawn) from accounts at any time without the account owner’s knowledge or consent.
Reason #3: Issuance of Social Credit Scores.
Governments issuing CBDC can create a social credit score. For example, China’s social credit system is a combination of government and business surveillance that gives citizens a “score” that can restrict the ability of individuals to take actions — such as purchasing plane tickets, acquiring property or taking loans — because of behaviors.
The Social Credit System is a national credit rating and blacklist being developed by the government of the People’s Republic of China. The program initiated regional trials in 2009, before launching a national pilot with eight credit scoring firms in 2014.Read more about China’s Social Credit System HERE.
Even though the law focuses on business transactions, many fee this is to get people used to having their accounts watched by the government.
In an attempt to avoid this potential monitoring of their accounts, some are seeking alternative forms of money. This where gold, silver and cryptocurrency come into play.
Gold, Silver and Cryptocurrency
In an attempt to avoid CBDC’s and monitoring by the IRS, some people are looking to get away from the U.S. dollar and exchange their dollars for precious metals and cryptocurrency. Each are outside of the U.S. monetary system. Let’s look at each:
Cryptocurrencies have gained popularity for a few reasons: cryptocurrency is outside the existing monetary system, and the anonymity of the transactions. When cryptocurrency transactions are entered into the blockchain ledger by a pseudonym for everyone to see. While they may not be under a person’s name, they can be traced and tracked.
Not all cryptocurrencies are created equal. Some are believed to be more anonymous than others. Here are a few of the most anonymous cryptocurrencies:
- Verge (XVG)
- Moreno (XMR)
- ZCoin (XZC)
- DeepOnion (ONION
- NavCoin (NAV)
- Zen Cash
- Particl (PART)
There are many cryptocurrencies to choose from, and some of the above listed may eventually become worthless. As with any investment, do your own thorough research before making an investment.
Precious metals such as gold and silver have been used as money for thousands of years. The dollar was once backed by gold, but in 1971 President Richard Nixon removed the dollar from the gold standard, making it a fiat currency, y is a government-issued currency that is not backed by a commodity such as gold.
When owning physical gold and silver coins or bars, they cannot be tracked like a CBDC. However, if the gold or silver are converted to a currency like dollars, the transaction would be reported.
Call To Action
The world has changed tremendously in the last 2 years. It is critical we stay abreast of current events and react accordingly. As governments around the world begin toying with a new currency, the need to become financially savvy has increased. This also includes discovering ways to keep money outside of the monetary system. This could protect you from inflation as well these new IRS rules. Will they be implemented? Time will tell.
Understanding how money works and improved financial literacy is key. Money matters aren’t taught in school, so it’s critical we are proactive and learn everything we can on our own.
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