The Biden Administration is proposing a sweeping expansion of tax information reporting to raise revenue to help offset the cost of additional spending programs in the American Families Plan. The proposal, if enacted, would require banks to report to the IRS detailed information on the activity of every customer account above $600. These new reporting requirements raise severe concerns about consumers’ right to privacy.
Generations Bank considers protecting our customer’s information as a top priority. This proposal raises serious concerns for us in our effort to protect sensitive information. Here are some of the issues that we see with this new proposal:
NO IMPROVEMENT - The banking industry firmly believes that Americans should honor their tax obligations. However, it isn’t clear that requiring banks to report on every customer’s financial account with transactions above $600 will lead to better tax compliance.
SECURITY RISK -This proposal would put customer privacy and data security at risk while increasing compliance costs to individuals and small businesses. This proposal also has the potential to damage customer relationships for banks of all sizes across America. The IRS is a constant target of cybercriminals and has recently suffered significant data breaches. The IRS experiences 1.4 billion cyber-attacks annually.
NOT ENOUGH RESOURCES - Banks already report a tremendous amount of data to the IRS, some of which the IRS has publicly stated it cannot utilize. Under the new proposal, important additional information, such as loan payments or transfers between a taxpayer’s various bank accounts, would be captured and reported. The amount of data submitted would be massive, unmanageable, and of questionable relevance to the calculation of taxable income.
CONSUMER COMPLAINTS - Much of the opposition to this proposal is really coming from taxpayers, not banks. Consumers are voicing real concerns about having their bank share this information with the IRS when the agency has a troubling track record of protecting taxpayer data. Consumers feel it isn’t in the people’s best interest to gather additional sensitive financial data when the government isn’t effectively utilizing the data they already collect. It is said that the increase in the amount of data collected could leave the IRS as a target for cyber-attacks.
NOT AIMED AT HIGH-INCOME - Congress is debating whether the new reporting requirements would improve the IRS’s ability to identify the high-income tax evaders. Currently, the proposal appears to capture the millions of small business owners that operate as sole proprietorships, needlessly increasing their tax preparation costs. Many representatives in Congress believe the IRS should instead focus on better utilizing the significant information it already receives and targeting those it believes are engaging in tax avoidance.
TARGETS OUR LOCAL SMALL BUSINESSES - Banks are already required to report a tremendous amount of data to the IRS through existing tax reporting (Forms 1099 and 1098). This new account flow reporting is unnecessary for tax compliance and would disproportionately target small businesses by increasing their tax preparation costs.
PUSHES PEOPLE OUT OF BANKING SYSTEM – As a community-focused bank, we work alongside the industry to reduce the number of unbanked individuals in our communities. This proposal would require banks to police and report on customers’ accounts. We are concerned that it will undermine the trust in the banking system and discourage unbanked individuals from opening their bank accounts.
Our Arkansas Congressmen and Senators are all opposed to this proposal. Even so, we, the people, need to vocalize our opinions of this proposal to get the attention of Congressional leadership. If you oppose such a proposal, we encourage you to use this sample LETTER to contact Congress. If you have personal stories or are a small business, please add those to the letter.
We take protecting our customers’ information very seriously. This proposal raises serious concerns for us to protect them. Please stand with us and speak out against the IRS Tax Proposal by calling or sending a letter to Congress.
Where to send your letter:
Nancy Pelosi Kevin McCarthy
Speaker of the House Minority Leader
U.S. House of Representatives U.S. House of Representatives
1236 Longworth H.O.B. 1236 Longworth H.O.B.
Washington, D.C. 20515 Washington, D.C. 20515
Other ways to reach out to representatives Nancy Pelosi and Kevin McCarthy:
Nancy Pelosi
Kevin McCarthy