ARLINGTON, Va.–A significant change in a plan before Congress to lift to $10,000 from $600 the threshold at which financial institutions would have to report transactions to the Internal Revenue Service has done nothing to change NAFCU’s opposition to the proposal.
Brad Thaler, VP-legislative affairs, told CUToday.info the proposed change is not an improvement and would still be a significant compliance burden for both credit unions and their members.
As CUToday.info reported, under a new proposal from Senate Democrats introduced last week, the scope of information financial institutions would have to provide to the IRS would be limited to requiring data be provided on accounts with total annual deposits or withdrawals worth more than $10,000, rather than the $600 threshold that was initially proposed.
The reporting requirement would not apply to payroll deposits for wage and salary earners or to beneficiaries of federal programs such as Social Security, according to the new Senate plan.
“But even at a $10,000 level most active accounts are going to find themselves having additional reporting requirements,” said Thaler. “Think about somebody earning minimum wage. They are still making tens of thousands of dollars a year if working full time. That is tens of thousands of dollars in flow that will still need to be reported.”
Scarce Details
Thaler noted details around the updated proposal remain scarce, with some suggesting perhaps there will be exemptions to the reporting requirements. But even that becomes a “slippery slope,” said Thaler, raising questions such as what is a payment? What it it’s a paper paycheck? What about a payment: how does a credit union know if it’s a mortgage or rent or anything else?
For consumers, there are just as many potential questions, Thaler continued, such as what happens if a paycheck doesn’t have the “government stamp of approval for exemptions.” Those questions, in turn, will be directed first to financial institutions, he said.
“The actions they took did not improve it,” said Thaler. “There is really not a way to fix this. It’s a bad concept to switch to account flows.”
‘Still Doesn’t Do the Job’
While the change still doesn’t make it more palatable to financial institutions, what about inside Congress?
“I think those that understand it will think this still doesn’t do the job,” said Thaler. “If they do think it makes it more palatable, they are just kidding themselves. “It’s still problematic. The fact they are changing it makes clear they are feeling the heat politically from this proposal. It’s why you’re seeing changes. It did not have the support to move forward, clearly, and that’s why it was not in the House Ways and Means bill. We have not seen the proposal as legislative language. The only place we’ve seen anything concrete is in the budget proposal and then in the additional talking points. There have been no additional details.”