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

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Jim Reuter, the chief executive of FirstBank near Denver, said concerns about the potential provisions have bubbled up frequently, including over a coffee he had with a small-business owner in early October.

“Their upshot is, ‘I pay my taxes, so why would you be sending additional information to the I.R.S.?’” Mr. Reuter recalled. “I said I agree with them. We’re in the trust business. And it just goes without saying that sending the customer’s information somewhere without giving consent — that’s not what we do as a bank.”

The proposal’s critics have said the I.R.S. appears ill-equipped to process and safeguard such an overwhelming amount of data to actually catch cheats.

“I have to tell you the proposal that has been put forth about expanding the amount of information that the I.R.S. is going to get on private bank accounts has been something I’ve been asked about at parks, at grocery stores, at convenience stores around the district,” Representative Trey Hollingsworth, Republican of Indiana, told Ms. Yellen at the congressional hearing last month. “This has people deeply afraid about the emergence of an apparatus that can be used against them.”

J.P. Freire, a spokesman for Representative Kevin Brady of Texas, the top Republican on the House Ways and Means Committee, said Texans were “terrified” of the I.R.S. and that his boss was fielding inquiries about the proposed disclosures from at least three or four constituents every week.

Ms. Castilla, the community banker in Oklahoma, said a local schoolteacher had stopped by her office two weeks ago to share her anxieties about the idea of the government peering into her financial records. She told the teacher she believed the proposal was an overreach, Ms. Castilla recalled, and added that banking associations and Oklahoma’s congressional delegation were fighting it.

Even if the dollar threshold were raised to $10,000, Ms. Castilla said, it would still be onerous for her bank. “This would require a massive amount of infrastructure,” she said.