Tax implications of the Silicon Valley Bank and New York’s Signature Bank collapseBy: National Association of Tax Professionals
March 16, 2023

On March 10, 2023, Silicon Valley Bank (SVB), one of the leading lenders to the tech sector, was shut down by regulators over concerns about its solvency. Then on March 12, regulators announced that New York’s Signature Bank had also collapsed.

Treasury Secretary Janet Yellen pointed to rising interest rates as the core problem for SVB. The bank invested heavily in government bonds and mortgage-backed securities when interest rates were low. As interest rates climbed, many of the bank’s assets lost market value. Signature Bank made large investments in cryptocurrency and digital assets.

Because tax professionals often serve as their client’s financial coach, especially during the first part of the year, you should be ready for client questions about the situation. Here’s what you should know:

What did the government do to help the collapse of Silicon Valley Bank and Signature Bank?

SVB was closed by the California Department of Financial Protection and Innovation Friday and Signature Bank was closed by the New York State Department of Financial Services Sunday. In both cases, the Federal Deposit Insurance Corporation (FDIC) was named receiver for the banks and “bridge banks” were formed so customers could access their money. The Federal Reserve, the U.S. Treasury Department and the FDIC guaranteed all customer deposits at SVB and Signature Bank, even amounts in excess of the $250,000 limit on deposits. Additionally, the FDIC pledged to repay all uninsured depositors.

Will the government be using taxes to cover the SVB and Signature Bank collapses?

Government officials say that guaranteeing customer deposits won’t require taxpayer funds, as the FDIC is an independent agency created by Congress and funded by the banks. Any losses from the FDIC’s insurance fund would be replenished by levying additional fees on member banks.

What are the tax implications if your client had funds in Silicon Valley Bank or Signature Bank?

Customers of either SVB or Signature Bank should not face any tax complications resulting from their failure since they are unlikely to suffer any direct financial losses. The FDIC said their successor banks were operational Monday morning and customers were not expected to experience any disruptions. The FDIC transferred all deposits in SVB to the newly created Silicon Valley Bridge Bank, N.A., and all customers will have access to their funds. Likewise, the FDIC transferred substantially all of Signature Bank’s assets to Signature Bridge Bank, N.A., which will operate as a full-service bank. Both new banks were set to begin serving customers Monday morning.

Since this situation happened right before March 15, a client may have scheduled an electronic funds withdrawal to pay their corporate taxes. If a client requested an electronic funds withdrawal, and the account has been closed, they will need to contact the IRS to cancel the payment and set up a new one. However, if their banking numbers stayed the same in the new bridge bank, it’s likely that the IRS would have received the payments on time.

How can you help clients affected by this situation because they used services that used Silicon Valley Bank or Signature Bank?

While most news coverage focuses on individual customers with money in these banks, we’ve seen reports of payroll services with accounts in the failed banks experiencing a lack of funds. For example, one client didn’t receive their pay on Friday because their payroll went through SVB. In this instance, the payroll company has since announced that the SVB direct deposit systems are now functional and fully FDIC-insured this week.

The company anticipates it will have made timely tax payments by the March 15 deadline for corporate and partnership tax returns, but will cover any delinquent tax penalties because of the SVB closure. In addition, the company will reimburse employees or contractors who have incurred non-sufficient fund or overdraft fees.

What should you tell customers who owned stock issued by Silicon Valley Bank or Signature Bank?

When it took over both banks, the FDIC issued statements specifying that stockholders and holders of unsecured debt would receive no protection. Since shares in neither SVB nor Signature Bank are still being traded and the institutions no longer exist, the shares are assumed to be worthless. Taxpayers who hold worthless securities are generally allowed to claim a capital loss in the year the asset becomes worthless.

How should you respond if your client asks about their funds in a community bank or credit union?

This is a great opportunity to explain to customers that investing in financial products that are not insured by the FDIC may have higher returns, but also subject them to more risk. For example, money market funds are a popular product that is not backed by the FDIC. While the FDIC said that none of SVB’s or Signature Bank’s customers will suffer any losses, the agency is not required to reimburse losses on non-insured accounts, and it may not be so generous if banks continue to fail in the coming months.

Remind clients that the FDIC insures up to $250,000 per depositor, per institution and ownership category at member banks. Adding a joint owner to the account will increase the insurance amount to $500,000. If they use a credit union, the National Credit Union Share Insurance Fund insures up to $250,000 per person, per institution, per ownership category at credit unions that have a membership and follow regulatory compliance.

This article was posted on the morning of March 16, and this situation is rapidly changing. NATP is closely monitoring the details of this news and will communicate with our members if additional guidance is provided or changes to be made aware of.

If you’re ready to become a member of NATP, you’ll receive vital, timely information through our news alerts so you can keep working while we watch for the changes that may affect your business.

Silicon Valley Bank
Signature Bank collapse
Business tax
Business return
Read more
penAbout National Association of Tax Professionals

The National Association of Tax Professionals (NATP) is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of over 23,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers.

The NATP headquarters is located in Appleton, WI. To learn more, visit

Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing. All taxpayer circumstances are different, and NATP recommends contacting research services if you have specific questions about your clients’ tax situations.

Additional Articles