With Congress expected to begin considering a new tax reporting requirement that would require banks to report information on account flows to the Internal Revenue Service as early as next week, bankers are urged to contact their lawmakers to oppose the proposal. While acknowledging that the IRS has an obligation to ensure that taxpayers pay what they owe, the American Bankers Association believes this proposal raises serious data privacy and data security concerns, in addition to imposing new costs on small businesses and the financial institutions that serve them.
The proposal would specifically require banks to report on all customers with gross inflows and outflows above a de minimis level of $600 in an effort to crack down on tax avoidance. In an article defending the proposal Wednesday, a top Treasury official asserted that the proposed reporting requirements would not “impos[e]any burden on taxpayers whatsoever.” However, as ABA pointed out in a letter to congressional leaders yesterday, the proposal would likely increase tax preparation costs, particularly for small businesses operating as sole proprietorships, and could also undermine public trust in banks and hinder progress toward promoting financial inclusion.
“This proposal implicates customer privacy and data security on a massive scale, would increase compliance costs to individuals and small businesses, will work against important efforts to bring more Americans into the banking system, and has the potential to damage customer relationships for banks of all sizes across America,” ABA said.
The association is calling on bankers to take immediate action to help block the proposal from being included in forthcoming legislation. Bankers can contact their representatives through ABA’s grassroots platform, Secure American Opportunity.