How New IRS Reporting Mandates Threaten Taxpayers and Community Banks
While five former Treasury secretaries have endorsed the Biden administration’s plan to require financial institutions to report customer bank account information to the IRS, ICBA and the nation’s community bankers are deeply concerned with the plan.
Background
Under the administration’s proposed American Families Plan, financial institutions would have to report to the IRS on account flows, including bank loans, of accounts worth more than $600.
While ICBA and community bankers don’t take issue with investing in the IRS to improve their technology and tax collection, we strongly oppose implementing new data-reporting requirements.
Taxpayer Impact
First, the proposal would constitute an unwarranted infringement on the privacy of bank customers without grounds to suspect tax evasion. Requiring the mass reporting of customer financial data would essentially be a fishing expedition.
These privacy concerns also would undoubtedly drive customers out of the banking system at a time when banks and the Biden administration are working to reach more unbanked Americans. This likely would push many consumers to financial system alternatives such as cash, cryptocurrencies, and unregulated providers that could put them at greater financial risk.
Regulatory Burdens
The proposal also would create complex new reporting burdens and expose community banks to penalties for inadvertent errors.
Community banks already carry significant data collection and reporting obligations, such as meeting numerous Bank Secrecy Act reporting mandates.
The government increasingly turns to the banking system to act as uncompensated federal agents, diverting resources that would otherwise go toward providing credit and other banking services to local communities.
Process Concerns
Additionally, the proposal would expose banks to penalties for inadvertent errors. With customer accounts constantly opening, closing, changing names, and changing hands, these factors will reduce the value of the reported information, create mismatches, and trigger audits that put banks in the middle of disputes between taxpayers and the IRS.
Further, these reporting mandates would channel more information to the IRS than it can possibly process, leaving community banks to incur significant costs in providing information that cannot be effectively used.
Alternative Solutions
Instead of imposing a massive regulatory burden that drives Americans away from the banking system, policymakers should use new investments in the IRS to enable the agency to do its own data analysis and auditing that doesn’t threaten the banking system.
Better-trained auditors with more sophisticated technology at their disposal may significantly increase tax collections without costly and intrusive new bank reporting requirements.
While closing the tax gap can and should be an alternative to raising taxes on Americans, policymakers should emphasize investments in the IRS over regulatory mandates that would harm local communities. ICBA and community bankers nationwide will continue strongly opposing this proposal as the debate continues.
Robert Fisher is president and CEO of Tioga State Bank in Spencer, N.Y.; chairman of the Independent Community Bankers of America; and board member of the Independent Bankers Association of New York State.
Business Owner at Bob-O-Link Liquor outlet
2yWe are MISSING the point of this $600 reporting. To enable the "Finanical Transaction Fee (Tax) that Bernie Sanders, Elizabeth Warren and progessive want you have to FIRST get those transactions reported. As soon as they have it approved, step two wille be to pass the FTT (Financial Transfer Tax) at a very small rate, say 1/2% on high transfers then it will as all other progessive taxes, seep down the income ladder to the resst of us. The total value of deposits and withdrawls in this country is a staggering amount. THIS MUST BE STOPPED!!
Thank you for sharing this.
Dietitian at Cottesmore Of Life Care
2ySmells like a simmering social credit system. It's what's for dinner.
President at CFSB - Community Financial Services Bank
2yPerfectly said!! I appreciate the work you do, Bob!! Proud to call you a colleague!