Proposed Tax Reporting Raises Consumer Privacy Concerns

Updated October 29, 2021: The controversial proposal that would require financial institutions to report customer account information to the IRS has reportedly been omitted from consideration at this time. First State Bank joined the American Bankers Association and banks nationwide in voicing deep concerns for such federal legislation and will continue to oppose proposals that put customer privacy at risk.

Congress is expected to vote on a sweeping expansion of tax information reporting aimed at raising 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 Internal Revenue Service information on customer accounts with just a $600 threshold for gross inflows and outflows. As proposed by Treasury, nearly every bank account in the country would be captured by this newly proposed requirement. This approach does not target wealthy tax cheats, but instead captures information on almost every taxpayer. These new reporting requirements raise serious concerns about consumers right to privacy.

In a September 17, 2021 news release, the American Bankers Association (ABA) joined more than 40 organizations stating opposition to the proposal. First State Bank of St. Charles stands with the ABA on this issue primarily out of concern for customer privacy and consumer confusion.

It is questionable whether the new reporting requirements would improve the IRS’s ability to identify the high-income tax evaders the administration is apparently targeting. Instead, the proposal appears to capture the millions of small business owners that operate as sole proprietorships, needlessly increasing their tax preparation costs. The ABA suggests the IRS should instead focus on better utilizing the significant information it already receives and targeting those it believes are engaging in tax avoidance.

The banking industry is working hard to reduce the number of unbanked in the country. As some interpret this proposal to require banks to police and report on the accounts of customers, we are concerned that it will undermine trust in the banking system and erode progress the industry has made.

If you oppose such a proposal, we encourage you to contact your lawmakers at this link provided by the American Bankers Association: aba.social/ContactCongress.