I am writing to you to express in the strongest terms my concerns about the IRS reporting proposal set to be heard in the FY2023 budget resolution in the coming days.
First, let me be clear that we are in full support that people and businesses pay the taxes that are due. However, the proposal for banks and credit unions to report inflows/outflows of $600 or more on bank accounts is an extreme overreach of the government’s power. Not only is this going to produce more data than is reasonable in a burdensome process on our financial institutions, but this proposal also represents an unprecedented invasion into a person’s or business’s bank account. Surely there is another way to find and investigate those who owe taxes.
Financial institutions are already subject to significant reporting requirements to the IRS through existing tax reporting (Forms 1099 and 1098), in addition to already being required to perform enhanced due diligence and account monitoring to report suspicious activity to FinCEN. This IRS reporting proposal disproportionately targets small businesses by increasing tax preparation costs in addition to raising the compliance costs for smaller banks and credit unions. The privacy concerns alone for individuals and businesses is very high, particularly considering the IRS’s data breaches. Indeed, this new IRS reporting could keep people from opening bank accounts and push those who truly want to avoid taxes to more creative means to hide their wealth.
Perhaps you could be looking for better coordination between federal agencies for this data, (e.g. FinCEN) rather than new regulation. In short, the Idaho Department of Finance, the state’s regulator for financial institutions, is opposed to this proposed new reporting.
Thank you for allowing us to weigh in on this important topic and ask that you move away from endorsing this proposal.
— Patricia R. Perkins is the director of the Idaho Department of Finance.