Over 100 Groups Urge Biden Admin to Drop Plans to Let IRS Monitor Bank Accounts

Federal credit unions have joined dozens of industry groups in urging Congress to reject a proposal to allow the IRS to monitor customers' bank accounts.

The proposal, under consideration in the budget reconciliation bill, aims to clamp down on tax fraud by wealthy individuals and businesses. It would involve banks handing the IRS data on accounts with total annual deposits or withdrawals worth more than $600.

In a letter addressed to Senate and House leaders on Thursday, the National Association of Federally-Insured Credit Unions (NAFCU) called it an "overly broad proposal" that "will directly impact almost every American and small business with an account."

More than 100 signatories to the letter included the Agricultural Retailers Association, the Mortgage Bankers Association and the Small Business Council of America.

The letter called the proposal "costly for all parties" and "not fit for purpose."

It added that such a reporting system would create serious financial privacy concerns, increase tax preparation costs for both small businesses and individuals as well as, "create significant operational challenges for financial institutions."

Republicans and other business groups have also been outspoken about the proposal, suggesting it was overly burdensome and was effectively snooping on Americans.

In light of the criticism, there has been talk on Capitol Hill of raising the threshold from $600 to $10,000, and exempting some payment processors.

But such measures "will not significantly reduce the scale of this new IRS program," according to the new letter.

It also said that said "the privacy concerns for Americans are real" given that the IRS is "not impervious to being hacked and has suffered massive data breaches" in the past.

Citing the Treasury Department, it said "they only plan to use the data to increase the audits for those who make over $400,000 a year.

"The likely question of any American taxpayer making less than that is: Why does the IRS need my account information if they aren't going to use it?"

Newsweek has contacted the U.S. Department of the Treasury for comment.

The letter follows a similar missive sent on September 8 by NACTA vice president of legislative affairs, Brad Thaler, to the House Ways and Means Committee which urged the proposal be dropped from the fiscal year 2022 Budget Resolution.

House Democrats excluded the idea from their version of the tax-and-spending bill they wrote last month, Bloomberg reported, but Democratic leaders continue to work on the plan which could raise hundreds of billions of dollars to pay for social programs.

Treasury Secretary Janet Yellen has repeatedly defended the proposal and outlined how it would raise significant tax revenues by targeting the rich who were not paying their fair share.

She told CBS News on Wednesday that the U.S. government faced a tax gap of $7 trillion in the next decade "due to a failure of individuals to report the income that they have earned."

She said the proposal "has been seriously mischaracterized" and involved "no reporting of individual transactions of any individual."

Meanwhile, Natasha Sarin, a Treasury deputy assistant secretary for economic policy, wrote in a blogpost on Thursday that the proposal had been "marred by misinformation" as well as "the pernicious myth that banks will have to report all individual customers' transactions to the IRS."

She said the proposal "would direct banks to report basic, high-level information on aggregate account inflows and outflows."

"Banks would add just a bit of additional data to information that they already supply to taxpayers and the IRS," she wrote, "how much money went into the account over the course of the year, and how much came out."

Dollars and bank account book on table.
Stock image: U.S. dollars, a bank account book and calculator on a table. The National Association of Federally-Insured Credit Unions (NAFCU) has criticized plans to give the IRS more data to tackle tax evasion. iStock