Biden’s Proposal to Empower I.R.S. Rattles Banks and Their Customers

To help fund its new initiatives, the Biden administration wants banks to report more customer information. Account holders aren’t happy.



By Kate Kelly and Alan Rappeport

When the Biden administration looked for ways to pay for the president’s expansive social policy bill, it proposed raising revenue by cracking down on $7 trillion in unpaid taxes, mostly from wealthy Americans and businesses.

To help find those funds, the administration wants banks to give the Internal Revenue Service new details on their customers and provide data for accounts with total annual deposits or withdrawals worth more than $600. That has sparked an uproar among banks and Republican lawmakers, who say giving the I.R.S. such power would be an enormous breach of privacy and government overreach.

Banks and their trade groups are running advertising and letter-writing campaigns to raise awareness — and concern — about the proposal. As a result, banks from Denver to Philadelphia say they are being deluged with calls, emails and in-person complaints from both savers and small-business owners worried about the proposal. JPMorgan Chase & Company has issued talking points to bank tellers on what to tell angry customers who call or come into a branch to complain.

“We have heard a lot from our customers about their concerns about their privacy,” said Jill Castilla, the chief executive of the one-branch Citizens Bank of Edmond, just outside Oklahoma City. “I’ve gotten calls, emails, and then we’ve had many customers come in.”

Banks already submit tax forms to the I.R.S. about the interest that customer accounts accrue. But the new proposal would require they share information about account balances so that the I.R.S. can see if there are large discrepancies between the income people and businesses report and what they have in the bank. The I.R.S. could audit or investigate the gaps to see if those taxpayers are evading their obligations.

Biden administration officials say the United States needs more information from taxpayers to crack down on those who do not pay what they owe. The measure, which would affect more than 100 million households and millions of businesses, is estimated to capture $460 billion in additional revenue over a decade, primarily from the wealthiest Americans.

“This is a very serious policy proposal,” Treasury Secretary Janet L. Yellen said at a congressional hearing last month. “We have a $7 trillion estimated tax gap that we have a great deal of tax avoidance by individuals and businesses — typically very high-net worth, high-income individuals and businesses that have opaque sources of income that are not paying the taxes that are due.”

Treasury officials say the effort is not about tracking individual transactions and is not aimed at lower- or middle-class households. The $600 threshold was chosen to weed out accounts that are generally dormant or get little use, such as children’s accounts, while still giving the government the broadest possible visibility. Administration officials say audit rates for taxpayers who earn less than $400,000 per year will not go up.

“This is about making sure the top 1 percent can’t evade $160 billion per year in taxes,” said Alexandra LaManna, a Treasury Department spokeswoman.

Top Democrats say that empowering the I.R.S. is key to making the economy more fair. Senator Elizabeth Warren of Massachusetts has warned that the I.R.S. is handicapped when it comes to tracking the income of the wealthiest.

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