LETTER: Misinformation trap
To the editor:
Recently a local financial institution posted on social media a “customer alert” describing elements of the American Family Plan to increase tax liability compliance by forcing financial institutions to report deposit and withdrawal information to the IRS. The local institution shared this to be “account profiling” and deemed it as an “intrusive & indiscriminate” practice. They also state that anyone carrying an account balance of $600 or more would be required to report all deposit and withdrawal information.
After researching the topic, I was unable to find any legitimate source of information on the $600 account trigger for this reporting. I have found that element in many media posts, but nothing official. It appears to only be conjecture.
Further research yielded a few examples of how this is already in place and prior to this situation has not been considered “intrusive” or “indiscriminate.” Since 1970 all financial institutions have been required to report any withdrawal or deposit in excess of $10,000. Additionally, all taxpayers are legally obligated to report any interest income earned, and banks are required to send a 1099 if the amount is above $10 in earnings. Likely much of this goes unreported each year and compliance is likely minimal, especially in instances with only slight or moderate interest payments have been earned.
It is precisely that lack of compliance that is being targeted by the American Family Plan. It is widely known that sources of income that are not subject to required reporting are often underreported or misreported. Having this information reported directly from the banks could assist in a higher collection of taxes from wealthy individuals and corporations that have not paid their fair share.
In the “customer alert” the local financial institution encouraged citizens to use a provided link to contact their congressional representatives to advocate against this measure. The plea was based on protecting the individual’s financial information. I personally know people that have used that link to do just that. They trusted this business to be providing true and accurate information along with legitimate concern. Unfortunately, they left out their primary motivation; the cost to the bank for the reporting. As previously stated, this type of reporting is nothing new and has never been thought to be an invasion of financial privacy. However, the additional compliance will come at a cost to each financial institution and may reduce the profit they see in their business. That was left out of the “customer alert.”
To gain more information, I personally contacted the financial institution requesting the source of their information. The reply was that the information had been provided by banker’s associations (ABA or ICBA) and suggested I reach out to those organizations for more information. Additionally they mention, in a direct message to me, that this portion of the American Family Plan would “increase compliance cost on our end” and describe the struggle it would cause for banks to track this information. It was not about customer’s privacy, it was about their bottom line.
This was disappointing to see a local business fall into the misinformation trap. As a lifelong Leavenworth resident I take much pride in using as many locally owned businesses as possible for my needs. Seeing a financial institution take advantage of that local loyalty is certainly very disappointing.
– Brian Stephens/Leavenworth