Area banks react to new reporting proposal
Published 9:00 am Saturday, October 16, 2021
Area financial institutions are voicing their concerns with a new measure that is under consideration in Congress. The Treasury Department’s proposal would require the IRS to report banking transactions from accounts with at least $600 of deposits or withdrawals. However, many lawmakers are urging to increase that limit to $10,000 and explore other exceptions like excluding mortgage payments or payroll deposits. Under this proposal, banks would be required by law to report account information to the IRS, though they would not give information on individual transactions.
The treasury department believes the measure would help stop evaders and bridge the current tax gap, which the IRS estimated to be $166 billion between taxes owed by businesses and what’s actually paid.
At a congressional hearing last month, Treasury Secretary Janet L. Yellen talked about the estimated tax gap.
“I think it’s important to recognize that we have a tax gap that’s estimated at $7 trillion over the next decade,” Yellen told the committee. “That is taxes that are due and are not being paid to the government that deprive us of the resources we need to do critical investments to make America more productive and competitive.”
Farmers and Merchants Bank President and CEO Stanley Tucker disagrees.
“If this were truly about finding the tax gap for the top earners, the reporting threshold would be in the hundreds of thousands, not $600, not $10,000,” Tucker told The Valley Times-News. Tucker encourages individuals to reach out to their local representatives and voice their opinion on this proposal.
The bank issued a statement related to the Treasury Department’s proposal.
“Farmers and Merchants Bank opposes this proposal because it is definitely overreach by the government and an invasion of privacy. Farmers and Merchants Bank does not currently track this type of information on customers’ accounts,” the statement reads. “The bank would have to hire additional staff and/or purchase software. The cost would be substantial, making small banks like us even less competitive with the large banks.”
The Independent Community Bankers of America (ICBA) issued a statement in opposition of the proposal.
“The IRS reporting proposal is an invasion of consumers’ privacy, a violation of Americans’ due process, a data security risk amid the agency’s ongoing tax return leak investigation, and a threat to bipartisan efforts to reduce the unbanked population by driving more Americans out of the banking system and toward predatory lenders.”
In a similar statement, Renasant Bank president and CEO Mitch Waycaster said the financial institution also opposes this proposal.
“The administration’s proposal to require financial institutions to track and submit the vast majority of their banking customer information to the IRS risks major data breaches, infringes on financial privacy and overburdens the banking system with massive data collection responsibilities, all for a purpose that is not obviously served by the proposal,” Waycaster said. “This policy proposal also undermines community bankers’ efforts to reach the unbanked, who are often skeptical of working with federally regulated organizations.”
On Tuesday, House Speaker Nancy Pelosi, D-Calif said the threshold was negotiable but stood behind the Biden proposal.