The USA’s credit union apex bodies are opposing the proposed Internal Revenue Service (IRS) reporting requirements, which would see banks and credit unions provide data on accounts with annual deposits or withdrawals exceeding US$10,000.
While the threshold is an increase from the $600 threshold initially proposed, credit unions still reject the plan, which they view as “an invasion of privacy” which could deter lower income clients from opening accounts.
The president and CEO of the National Association of Federally-Insured Credit Unions (NAFCU), Dan Berger, said: “It has become abundantly clear that Americans oppose the IRS obtaining additional information on their financial accounts. The updated plan is nothing more than window dressing in an attempt to shore up support for a flawed proposal. Instead of creating financial privacy risks for consumers and adding compliance costs for our nation’s community financial institutions, Treasury and the IRS should focus its attention on the data it already has to increase tax compliance.”
The reporting requirement excludes payroll deposits for wage earners and beneficiaries of federal programmes such as Social Security.
The move is an attempt to crack down on tax avoidance while generating funds for the Biden administration’s $3.5tn budget reconciliation package, a ten-year spending plan.
On 21 October, 202 Republican members of Congress wrote to Treasury Secretary Janet Yellen to express their opposition to the plan.
“The impact that these new reporting requirements will have on tens if not hundreds of millions of unsuspecting Americans cannot be emphasised enough,” they wrote. “Arbitrarily increasing the threshold to $10,000, as most recently proposed, will still apply to individuals at every rung of the income ladder.”
Another 21 Democratic House members expressed similar concerns in a letter to Speaker of the House Nancy Pelosi (D-Calif.) and House Ways and Means Committee Chairman Rep. Richard Neal (D-Mass.)
“While the intent of this proposal is to ensure all taxpayers meet their obligations – a goal we strongly share – the data that would be turned over to the IRS is overly broad and raises significant privacy concerns,” wrote the group. “This proposal would erode trust in financial services providers,” it added.
NAFCU is asking Congress to reject the proposal and is encouraging credit unions across the country to “get involved and voice their opposition” to the proposal.
The Credit Union National Association (CUNA) is also opposed to the plan. “Thanks to the officials who heard the concerns of credit union members and consumers about the negative impact this proposal would have on their financial lives, and for the credit union advocates who continue to push back against this proposal,” said CUNA president and CEO Jim Nussle.
CUNA and NAFCU have joined over 90 other organisations in writing to President Biden asking him to scrap the measure, which would be “harmful to both financial institutions and consumers”.
“These changes fail to address the reality that any programme based on gross annual inflows and outflows will impact Americans from all income levels,” the letter read. “Even with the proposed exclusions of certain types of income, a large number of common and totally innocent transactions by individuals and small businesses will be captured by this new regime.”
The letter calls for “more targeted methods of tax enforcement” and argues that the IRS “can use its existing authorities to directly focus on those taxpayers suspected of evading their taxes”.
According to CUNA, more than 700,000 credit union stakeholders have sent comments in opposition of the proposal.
The apex is asking credit unions to use its Grassroots Action Center to reach out to lawmakers.
