PIERRE– State Treasurer Josh Haeder opposes the federal government’s policy proposal that would require financial institutions to turn over private citizens’ personal bank account information to the Internal Revenue Service (IRS) if they exceed $600 of inflows or outflows in an account.
Haeder said, “I do not believe the federal government should give the IRS the unprecedented and unconstitutional power to peer into law abiding American citizen’s private bank accounts. This would be one of the largest infringements of data privacy in our nation’s history and is a direct assault on law abiding private citizens’ financial disclosure.”
This would impact well over 100 million Americans who currently have a bank account. In the last year alone, over 127 million Americans qualified for the CARES ACT (Coronavirus Aid, Relief, and Economic Security Act) which deposited funds in excess of $600 into their bank accounts. Funds deposited included $600 weekly boost in unemployment benefits from the Federal Pandemic Unemployment Compensation Program (FPUC) for the 25 million Americans who lost their job during the pandemic, roughly $3200 in Economic Impact Payments (EIP) and most recently Advanced Child Tax Credit Payments to millions of Americans.
“Simply put, this is a direct assault on all Americans of all economic demographics and includes all business and personal accounts,” said Haeder
Forcing banks to mine additional customer data that will be sent to the IRS without consent is a violation of the 4th amendment. See Carpenter v. United States as potential case supporting this violation.
Haeder said, “There is zero quantitative or qualitative evidence that this proposed measure will aid in collecting taxes from tax evaders.”
The IRS is a constant target of cyber criminals and in recent years has suffered significant breaches. This reporting requirement will consistently put a large amount of sensitive financial data in transit to the IRS and will be at constant risk of cyber-attack. The IRS does not currently have the capability to effectively utilize or protect this data.
If passed this will be one of the largest and continuous data mining exercises against Americans in our history and will put a constant strain on customer privacy, data security and overall safety of the banking system.
Designing a system to track and report all account inflows and outflows of $600 or more for every customer will have a devastating cost impact on small community banks and credit unions.
A goal of the banking industry is to reduce the number of unbanked Americans. A bank account is an important step in creating a positive relationship with financial institutions and is a steppingstone to financial health. Requiring banks to police accounts and constantly reporting to the government may create a lack of trust, causing many to close bank accounts increasing the number of unbanked Americans.
There are no guardrails in place to prevent any abuse of this information by the IRS or other government actors.
This proposal may cause massive increases in tax preparation costs for America’s small businesses which is the heartbeat of our economy. Haeder said, “The federal government has a spending problem, fixing that should be the priority, not invading the privacy of law abiding citizens.”