Last April, President Biden announced his American Families Plan, which promises many wonderful things such as more affordable education, comprehensive paid family and medical leave, expanded nutrition assistance for children and families, and bigger tax credits for workers and families, just to name a few.
What is funding this amazing plan? Well, tax reform, of course – but as always, the devil is in the details. As stated in The Treasury’s Compliance Agenda, “The President’s proposal requires information reporting on financial accounts to increase the visibility of gross receipts and expenses to the IRS… Financial institutions would simply report additional data on the financial accounts of these existing information returns.”
Specifically, this would require credit unions and banks to report information from accounts with balances or gross inflows/outflows of more than $600 to the Internal Revenue Service. This requirement includes information on all deposit, loan, and investment accounts of both businesses and individual account holders.
During markup of the Build Back Better Act last Wednesday, the House Ways and Means Committee removed the language from bill. However, this doesn’t mean that the proposal is dead. In fact, more than likely it will be reintroduced in either the Budget or Rules Committee before it hits the floor. I don’t have tell you that if this language resurfaces and somehow passes, how devastating it will be to credit unions and banks, not to mention what a huge invasion of privacy and government surveillance this would be on American citizens.
This unprecedented access to consumers’ personal financial data raises several alarms. Not only would this proposal expand the IRS scope along with a massive funding hike, but we also feel its ultimate agenda would violate consumers’ personal privacy by forcing our credit unions and other financial institutions to provide the government with information that does not reflect taxable activity.
This is nothing more than a hunting exercise. We are all a source of funding for the government, and they don’t trust you to report what you have. The federal government and the IRS want access to your financial transactions so they can take a deeper dive into your personal records and accounts, and they are using banks and credit unions as a tool to do it. This is an invasion of privacy because this information cannot be directly used to ascertain a taxpayer’s tax liability.
What will this mean to credit unions and banks? If this proposal passes, it will push more and more people into cryptocurrency markets. (The only other option will be to start stashing cash under the mattress again.) People will lose trust in their financial institutions and simply stop using banks and credit unions.
Credit unions and banks are pushing back for all these reasons. Besides the whole privacy debate, we have concerns regarding the added regulatory burden this proposal would impose, all at the expense of the consumer. In addition, there are serious cybersecurity concerns should the IRS be responsible for collecting this data, as there have been several recent breaches that raise questions about the government’s ability to keep the data secure.
Credit unions do not want to be in the business of surveilling accounts on behalf of the federal government. Clear and concise guidelines should be in place to prevent suspicious or illegal activity, but taxpayers’ financial privacy should continue to be a priority.
Dakota Credit Union Association
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