Death and taxes are both inevitable, according to Benjamin Franklin. While paying taxes is never enjoyable, they do serve a purpose of providing and maintaining essential infrastructure, public spaces and human services.
As a community bank, we know that healthy communities require investments. First Fed has given over $5 million to community organizations in the past five years through our foundation donations and bank sponsorships. Our donations are an investment in making our communities healthier, safer and better places to live.
Currently banks are in the middle of a polarizing proposal being debated by federal lawmakers regarding IRS reporting requirements. The intent is to reduce tax evasion, but it would have a significant impact on the banking industry and on taxpayer privacy.
An original IRS reporting proposal was based on a threshold of $600 — any consumer or business transactions at or above $600 would require banks to report that customer’s total annual inflows and outflows.
Stated another way, if you had at least one transaction of $600 or more during 2021, your bank will be required to report the aggregate numbers of your total deposits and total withdrawals exceeding that amount during 2021 to the IRS at the end of the year.
The $600 threshold would unnecessarily impact people at all income levels. The low bar amounts to a financial search warrant for nearly every American — a clear overreach of consumer privacy.
Any financial reporting policy should consider the following:
Privacy: Does the amount of data gathered fit the purpose? Or does it cast too wide and invasive a net for the stated purpose of preventing tax evasion?
The Anti-Money Laundering Act requires banks to report daily cash transactions over $10,000 to Financial Crimes Enforcement Network. We support law enforcement efforts to investigate criminal activities. But it is also essential that we protect consumer privacy, especially for sensitive financial data.
Security: Sharing data between organizations creates a greater exposure for potential cyber-hacking.
Data hacks are growing in frequency and not just limited to large organizations. Even some city governments have had data held hostage to ransomware attacks — requests for cash bounties to restore access to data.
Timing: Adequate time must be given to set up scalable systems for reporting and delivering information securely. Data processing and transmission systems are expensive to develop, modify and maintain.
Organization size: Proportionally, it will be more burdensome for smaller banks to focus limited resources on compliance with the new policies.
Beyond banks: Increasingly, financial transactions are conducted by credit unions or on fintech platforms — PayPal, Venmo, etc. These transactions should be subject to the same reporting requirements.
Banking is an essential service which provides a safe place for consumers and businesses to keep their money secure and to get paid and pay others conveniently. For almost 100 years, First Fed has been dedicated to serving our customers and communities. Our relationships are built on trust — with the comfort that we will protect our customers’ money, data and privacy.
Personally, I find this proposal to be disturbing as it impacts the personal privacy of most Americans.
I ask you to consider reaching out to your federal representatives to voice your concerns, as it is important for them to hear from their constituents.
Should this legislation pass, First Fed will keep our customers informed of any data reporting changes that may impact them.
Matt Deines is CEO of First Fed, a locally headquartered community bank with 15 locations offering services in Clallam, Jefferson, King, Kitsap and Whatcom counties. First Fed will be celebrating 100 years in Port Angeles in 2023.