IRS proposal would affect anyone with $600 or more, Steil and bank CEO warn
Asoutheastern Wisconsin bank is warning customers about a federal proposal that would require financial institutions to report additional bank activities to the IRS for any account holders with more than $600 in annual transactions.
The proposal would require financial institutions to report to the IRS aggregate inflows and outflows on an annual basis from accounts with more than $600 in annual transactions. There is talk that the threshold could change to $10,000, but that would still affect anyone receiving or spending $10,000 or more in a year using a bank account.
In an email sent to customers on Tuesday, Community State Bank President and CEO Scott Huedepohl said: “This indiscriminate, comprehensive bank account reporting to the IRS could soon be enacted in Congress and would create an unacceptable invasion of privacy for our customers, and could harm small businesses.”
The email is part of a nationwide effort to fight the federal plan. It’s a proposal that U.S. Treasury Secretary Janet Yellen defends as a way to catch tax evaders, but that Rep. Bryan Steil, R-Wis., calls “an invasion of America’s privacy and also raises very serious cybersecurity questions.”
The proposal was included in the $3.5 trillion spending bill that is being debated in Congress. The IRS proposal was removed from the bill amidst criticism, but Yellen is still pushing for it and Republicans, including Steil, are concerned it’s going to be put back in.
“People sneak stuff in until the final hour,” Steil said Thursday in a phone interview with the Lake Geneva Regional News. “I remain concerned.”
Huedepohl said, if the legislation is approved, the federal government would have more information about how people spend their money.
“It just doesn’t need to be done, and it’s something I’m very adamant about,” Huedepohl said when reached by phone. “Most community bankers in America are adamant about it also. Your financial business is your own business. It’s private, and nobody needs to know about it.”
Huedepohl said there are ways the federal government can obtain someone’s financial information if they need it.
“They can always get it if they need to subpoena something if there’s a concern of illegal transactions,” Huedepohl said. “They already have the ability to get that done. We just don’t need to turn it over across the board. It just doesn’t make sense to me.”
As part of the letter to customers, Huedepohl encouraged residents to contact their representatives in Congress to oppose the change.
Community State Bank has its headquarters in Union Grove and has branches throughout Racine, Kenosha and Walworth counties.
In a letter to the House Ways and Means Committee last month advocating for the proposal, Yellen said that “compliance rates are under 50 percent for opaque sources of income-resulting in a disproportionate tax burden for complying taxpayers and a shortage of necessary funds for key national priorities.”
“Existing empirical evidence confirms that the introduction of third-party reporting regimes is highly effective,” Yellen said.
Financial institutions already must report interest, dividend and investment income to the IRS.
During a House Financial Services Committee hearing in Washington on Sept. 30, Yellen said “this is a simple matter for banks that already file 1099-INT forms,” and said, it’s “two additional pieces of information, not transaction level data.”
“I don’t believe it’s an invasion of privacy,” Yellen said.
Steil said he is also concerned about “mission creep.”
“Once the federal government gets to one level they are going to try to go up and snag the next level,” Steil said.
The goal of the proposal to find more people cheating on taxes is correct, Steil said. But he said, “There are better ways to do that than gross invasions of Americans’ privacy.”