Despite efforts from Treasury Secretary Janet Yellen to defend a proposal that would require the IRS to track transactions valued at $600 or more, many local banks across the country and banking associations are speaking out against the proposed actions.
The proposal, published within President Biden's $3.5 trillion spending bill, would require banks to report data from accounts with at least $600 in them, or at least $600 worth of aggregated transactions.
Many local baks across the country are calling the proposal "intrusive," warning that it would create an unnecessary burden for banks.
"We work for our customers and our community, not the IRS. Join us in telling Congress that proposed IRS bank account profiling is intrusive and indiscriminate for our customers," wrote the Oklahoma-based FNB Community Bank in an Aug. 31 Facebook post that was shared over 73,000 times.
"This comprehensive bank account reporting may soon be enacted in Congress. If you feel at all uncomfortable with this proposal, or if you feel that this is an invasion of your privacy, we encourage you to contact your congress member at your earliest convenience," Western State Bank in Kansas said in a Sept. 14 post.
"If passed, the law will invade consumer privacy, raise the cost of tax preparation for small businesses and create unnecessary and expensive burdens for banks. Stand with us in opposing unnecessary and intrusive reporting by registering your opposition today!" Wrote Florida-based Capital City Bank in a Sept. 13 post.
The state of Nebraska has stated that it would not comply with the new proposals for the IRS.
"My message is really simple. The people of Nebraska entrusted me to protect the privacy of these accounts and I am not going to comply with this. If the Biden administration sues me, we will take it all the way to the Supreme Court. We are going to fight every step of the way," State Treasurer John Murante told Fox Business.
Last month, the American Bankers Association, in collaboration with more than 40 trade associations, sent a letter to House leadership outlining their concerns regarding the proposal.
"While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population," the associations wrote.
"In addition to the significant privacy concerns, it would create tremendous liability for all affected parties by requiring the collection of financial information for nearly every American without proper explanation of how the IRS will store, protect, and use this enormous trove of personal financial information. We believe that this program is costly for all parties, not fit for purpose, and loaded with potential for unintended and serious negative consequences," the letter continued.
Despite mounting concerns regarding the proposal, Yellen continues to advocate for its necessity.
During an interview on CNBC's Squawk Box on Tuesday, Yellen was questioned whether the IRS is able to collect more information on bank accounts and taxpayers, according to the New York Post.
"Well, of course they do," Yellen said. "Right now, on every bank account that earns more than $10 a year in interest, the banks report the interest earned to the IRS. That’s part of the information base that includes W2's and reports on dividends in other income that taxpayers earned. So collection of information is routine."
"It's just a few pieces of information about individual bank accounts, nothing at the transaction level that would violate privacy," the secretary said.
Yellen said that the proposal would help close the "enormous tax gap" in the US, and would help determine where high-income individuals may be concealing income and transactions, adding that "these would be helpful indicators of where it would make sense for auditing to occur."
"So, it is not reporting of individual transactions or anything of the like. And it would be a simple thing for banks and other payment providers to provide along with the other information they're already providing," Yellen said.
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