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You may have recently heard that the Biden Administration is proposing 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. Here is an overview of the potential impact of these new reporting requirements for you and PeoplesBank.
The proposal, if enacted, would require banks to report to the IRS detailed information on the inflows and outflows of every customer account above $600.
Congress is expected to vote on this new proposal in the coming days.
These new reporting requirements raise questions about Americans’ right to privacy and will raise the cost of tax preparation for individuals and small businesses. Collecting information from essentially every account in the U.S. also creates data security concerns. The IRS has not explained how it will store, protect, and use this massive amount of personal financial information.
If enacted, banks of all sizes will have to spend significant resources to capture and report this information to the IRS and customers. The biggest cost to banks, however, would be the damage done to the bank-customer relationship. Banks are trusted to safeguard customers’ money and information, and we take that responsibility seriously. This proposal could threaten that trust by forcing banks to share account information with the IRS.
It could also set back efforts to reduce the number of unbanked in the country – and possibly even increase it. Some Americans are skeptical about opening a bank account and are not currently taking advantage of all the benefits access to banking can bring. This proposal could make them even more reluctant to open an account, and cause others to exit the system to maintain their privacy.
Both the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA) are opposed to this proposed legislation and are encouraging consumers to contact Congress. Learn more by visiting their websites.
ABA