One of the proposals in President Biden’s $3.5 trillion Budget Reconciliation Bill is a provision that would require banks and credit unions to greatly expand the information we are required to report to the IRS. Under the proposed legislation, financial institutions would report data on customers’ accounts in an information return. The annual return would report gross inflows and outflows with a breakdown for physical cash, transactions with a foreign account, and transfers to and from another account with the same owner. It would apply to all business and personal accounts at financial institutions, including deposit, loan and investment accounts, with the exception of accounts below $600.
This proposal would mean the IRS can reach into the accounts of almost all Americans who maintain bank accounts. We believe everyone — whether a natural person, sole proprietor, small business or large corporation — has a legal and moral responsibility to pay their fair share of taxes. That said, these new reporting requirements raise serious concerns about consumers’ right to privacy.
Under current regulations, specifically the Right to Financial Privacy Act of 1978, the IRS is required to obtain a subpoena before it can access this same information. Can the IRS ensure it can and will keep secure the information it seeks to obtain? There are numerous examples in recent years of the vulnerability of government computer systems, and the IRS itself has been hacked on multiple occasions.
This approach does not target only wealthy tax cheats, but instead captures extensive information on nearly every taxpayer — and appears to capture millions of small business owners who operate as sole proprietorships, needlessly increasing their tax preparation costs. It could discourage some consumers from joining the banking system altogether, out of a mistrust of government. The IRS should instead focus on better utilizing the significant information it already has, and target those it believes are engaging in tax evasion, or better yet, eliminate tax loopholes altogether.
As a community bank, we exist to serve our communities and not to get involved in politics, but because we feel so strongly in opposition to this proposal, we are taking the unusual step of encouraging you to educate yourself on this proposal, and if you agree that it is overreaching, to contact your members of Congress to voice your opposition.
To contact your representative(s) or senators, go to congress.gov/contact-us.
President & CEO
Brattleboro Savings & Loan