Summary of the Proposed Change
A current proposal to the federal budget would require banks and other financial institutions to report to the IRS on the deposits and withdrawals of business and personal accounts with average balances over $600.
- All banks would be required to participate. There is no option for the bank to decline participation.
- There is no opt-out for the account holder, either.
- All bank account transaction information: Inflows (deposits), Outflows (withdrawals, purchases, transfers, etc.) would be reported to the IRS.
Why We Believe This is Detrimental
We believe this is an intrusive overreach into your privacy and a costly burdensome process that will produce negative unintended consequences for our nation’s economy. We also believe it won’t accomplish the stated goal of reducing tax evasion.
- It constitutes a broad, unwarranted infringement on the privacy of all bank customers, even those under no suspicion of tax evasion.
- Honest but private people could feel forced to avoid using the banking system, just on the principle that the government shouldn’t have the prerogative to monitor honest citizens without probable cause.
- Avoidance of the banking system means an increase in underground activity and reliance on cash, which increases safety concerns and the risk of loss.
- Money movement does not equate to taxable net income.
- Undermining the banking system weakens our economy and our nation’s ability to manage monetary policy for our global economic protection.
- The costs of data-gathering and reporting have to be paid by someone, likely resulting in the increase of fees or reduced interest rates on deposits.
- Would there be a level playing field between regulated banks required to perform this function and other pseudo-financial companies like PayPal?
- The “bad” actors will just find another way to avoid scrutiny.
- It will increase tax filing complexity and confusion.
- It will overwhelm the IRS with personal financial data and increase the risks of data breaches.
- The proposal would require banks to perform a policing function on behalf of the Treasury, an inherently governmental role that is inappropriate for private sector organizations.