In an effort aimed at increasing taxpayer compliance, the Biden Administration has proposed that financial institutions be required to report additional account holder information in an enhanced annual I.R.S. Form 1099-INT.
- CUNA remains concerned about the effect this proposed new requirement will have on credit unions. Privacy and data security are paramount issues. Whether it is the massive data breach at the federal Office of Personnel Management in 2014 or this year’s IRS leak of federal tax returns of many wealthy Americans, CUNA remains doubtful that such data will be safe and private.
- Also, smaller credit unions would be especially burdened by this new proposal. From the increased costs of software upgrades to staff training, smaller institutions would perhaps need financial resources and additional time for implementation to meet new requirements.
- CUNA also has concerns about how the proposal will affect accounts that are comingled with business and personal funds, as well as how jointly held accounts would be treated.
- CUNA also wants to avoid any unintended consequences that may arise from the Administration’s proposal. For example, the Foreign Account Tax Compliance Act of 2010 placed similar burdensome reporting requirements on financial institutions. In response, many Americans overseas were unable to obtain or lost access to the banking system as many financial institutions were unwilling or unable to meet the requirements of that law. CUNA believes that any future account reporting requirements be subject to rigorous and lengthy review and study.
- Credit unions and other financial institutions already churn out many federal tax information reporting forms. This new requirement further puts credit unions in the position of further policing their members and account holders. CUNA believes that better tax compliance can be achieved through other means such as the IRS using its existing audit authority.
- It should be noted that the $600 de minimus exemption is deliberately set so low in order to require financial information from nearly every account held in American depository institutions.
- CUNA has significant concerns about this proposed new compliance burden. CUNA strongly urges lawmakers to oppose the adoption of these costly and burdensome new requirements on financial institutions.