A group of nearly 100 banks and other industry groups urged the Biden administration to drop a deeply controversial proposal that would force banks to turn over most customers’ account information to the Internal Revenue Service, even after the White House agreed to narrow the scope of the plan.
In a Monday letter addressed to President Biden, a wide range of business and financial industry groups demanded that the White House reject the latest IRS reporting plan and search for another way to close the tax gap – the difference between what taxpayers owe and what they actually pay.
“We respectfully request that this proposal be withdrawn from further consideration, and the administration consider more targeted measures to reduce the tax gap,” the coalition said.
Under the new plan that Senate Democrats unveiled last week, banks, credit unions and other financial institutions would be required to report annually on accounts with deposits and withdrawals worth more than $10,000, rather than the $600 threshold that President Biden initially proposed.
But the banking groups and credit unions slammed those as “cosmetic changes” that did little to truly change the essence of the bill; though the minimum amount that would trigger a report to the IRS on individual accounts is substantially higher, it will likely still encompass “Americans from all income levels.”
Even with the slimmer scope, however, banks and other industry groups have argued the policy presents potential financial privacy risks for customers while increasing compliance costs for banks and adding to the already existing burden the industry faces in turning over information to the government.
“The privacy concerns for Americans who pay their taxes and would be swept into this account reporting program are real and should not be taken lightly,” the group said.
The tightening of the plan follows a steady lobbying campaign from banking groups and other industry organizations, in addition to fierce pushback from Republican lawmakers who see it as the worst type of government overreach.
The White House has repeatedly defended the plan, writing in a memo to congressional Democrats that requiring banks and financial institutions to provide a “little bit of high-level information” to the IRS on account flows gives the agency more information about wealthy Americans’ earnings from investments and business activity. Recipients of federal benefits like unemployment and Social Security would be exempt from the policy, which would also exclude any income received through a paycheck in which federal taxes are automatically deducted.
“This is a well-reasoned modification: for American workers and retirees, the IRS already has information on wage and salary income and the federal benefits they receive,” a Treasury Department fact sheet on the changes said.