Trade groups representing the banking, credit union and financial services industry are sounding the alarm over a provision in a bill already passed by the Senate that would require them to report information to the Internal Revenue Service on both interest-bearing and non-interest-bearing accounts.
In a letter last week to Senate Majority Leader Mitch McConnell, R-Ken., and House Speaker John Boehner, R-Ohio, the American Bankers Association, the Consumer Bankers Association, the Credit Union National Association, the Financial Services Roundtable, the Independent Community Bankers of America and the National Association of Federal Credit Unions complained about the provision in an effort to keep it from being passed by the House. The bill is the Trade Preferences Extension Act, H.R. 1295, which passed the Senate on May 14.
“Section 603 of the legislation would change current law to require banks, credit unions and broker/dealers to report to the Internal Revenue Service and our customers on all interest bearing as well as non-interest bearing accounts,” the groups wrote. “Currently, information reports are not required on non-interest accounts, while there is a $10 threshold for reporting on interest bearing accounts. This change would be effective for the current tax year of 2015, giving banks and credit unions little time to adapt their systems for compliance.”
They pointed out that the provision would greatly increase the number of 1099 forms that financial institutions would need to send and receive. “Should this provision be enacted, taxpayers will be awash in new 1099s reporting de minimis amounts of interest,” the groups wrote. “In many cases, they will report less than a one dollar in earned interest per year. Additionally, this new reporting requirement will impose substantial costs on the financial services industry that far exceed the revenue that will be gained by the proposal. Many information reports will contain no interest at all, resulting in confusion for taxpayers who may not be aware of our new reporting requirements. This will create an environment ripe for taxpayer and IRS error and may trigger unnecessary audits.”
The financial groups argue that the provision would provide little additional revenue for the government. “The nominal tax revenue raised by this provision will come at the costs of added complexity to industry and will be an unnecessary nuisance for nearly every American,” the letter said.
The financial groups asked legislative leaders to remove this section from H.R. 1295 as soon as possible.
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