October 26, 2023

After FTC Warns About Misuse of Confidential Data, Senators Warren, Wyden, Lawmakers Demand Answers from Tax Prep Companies on Abuses of Taxpayer Privacy

“Americans should be able to file their taxes without fear that their sensitive data will be shared with Big Tech companies.”

Text of Letters (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, Richard Blumenthal (D-Conn.), Tammy Duckworth (D-Ill.), Bernie Sanders (I-Vt.), Sheldon Whitehouse (D-R.I.), and Representative Katie Porter (D-Calif.) sent letters to five tax preparation companies—H&R Block, TaxAct, TaxSlayer, Ramsey Solutions, and Intuit—that recently received notices of penalty offenses from the Federal Trade Commission (FTC) regarding the misuse of taxpayer’s sensitive and confidential information. 

“The FTC’s warning followed the release of our months-long investigation revealing that major tax preparation companies sent tens of millions of Americans’ sensitive personal data to Meta without providing appropriate disclosures or obtaining taxpayer consent—in apparent violation of taxpayer privacy laws,” wrote the lawmakers in their letters to H&R Block, TaxAct, TaxSlayer, and Ramsey Solutions. “Accordingly, we write to confirm that, in accordance with the FTC’s notice of penalty offenses, your company is not engaged and will not be engaged in any further abuses of taxpayer privacy.”

In July 2023, the lawmakers published a report revealing that major tax filing services were secretly transmitting sensitive financial information, including  names, emails, dependents’ names, income, filing status, and refund amounts to Facebook when Americans filed their taxes online. Building on public reporting by the Markup, the report also concluded that the tax preparation companies’ actions potentially violated federal law, and the lawmakers asked the Department of Justice, Internal Revenue Service, Treasury Inspector General for Tax Administration, and FTC to investigate the matter further.

Last month, the FTC took action by issuing a notice of penalty offenses. The notice explained that it is a violation of Section 5 of the Federal Trade Commission Act, which prohibits companies’ unfair or deceptive practices, to (1) use confidential information for purposes not explicitly requested by an individual absent the individual’s affirmative express consent and (2) to make false, misleading, or deceptive representations or omissions about the use or confidentiality of information collected in a confidential context. These notices, which highlighted the role of tracking pixels and emphasized the high bar for a consumer’s consent, could subject the companies to civil penalties of up to $50,120 per violation, meaning they could face billions of dollars in potential criminal liability.

“Taxpayers who choose to use your company’s services must receive assurances that their confidential data—data about their finances, their children, their health, and more—are not being illegally monetized without their consent,” concluded the lawmakers.

In the letters, lawmakers reiterated their support for Direct File, an IRS initiative that would allow Americans to file their taxes online and directly with the federal government for free. They also asked a series of questions to determine whether the tax preparation companies have been and will be compliant with the FTC’s recent notice and to further understand what processes they have implemented to ensure that taxpayer privacy will not be violated in this way again.

Senator Warren has been at the forefront of holding tax prep firms and Big Tech accountable for their behavior and fought for years for a free E-File program to make tax filing simpler and more affordable for millions of Americans:

  • In July 2023, Senators Warren, Ron Wyden (D-Ore.), Richard Blumenthal (D-Conn.), Tammy Duckworth (D-Ill.), Bernie Sanders (I-Vt.), and Sheldon Whitehouse (D-R.I.), alongside Representative Katie Porter (D-Calif.), released a report revealing the outrageous, extensive, and potentially illegal sharing of taxpayers’ sensitive personal and financial information with Meta by online tax preparation companies. The lawmakers also sent a letter to the IRS, the Treasury Inspector General for Tax Administration, the Federal Trade Commission, and the Department of Justice highlighting their key findings and calling on these departments to fully investigate this matter and prosecute any company or individuals who violated the law.
  • In June 2023, Senators Warren and Tom Carper (D-Del.), alongside Representatives Brad Sherman (D-Calif.), Katie Porter (D-Calif.) and Don Beyer (D-Va.), led a coalition of 99 Democratic lawmakers in a letter to IRS Commissioner Daniel Werfel and Deputy Treasury Secretary Adewale Adeyemo, applauding the IRS’s announcement of a pilot of a free tax filing tool next year.
  • In April 2023, Senators Warren and Tom Carper (D-Del.) led 29 other senators in a letter to the IRS Commissioner, urging the agency to simplify the tax process and broaden access to free e-filing options.
  • In April 2023, at a hearing of the Senate Finance Committee, Senator Warren questioned the IRS Commissioner about the agency’s failed Free-File partnership with private tax preparation software companies and called on the agency to implement a direct E-File program. 
  • In December 2022, Senators Warren and Ron Wyden (D-Ore.) and Representatives Katie Porter (D-Calif.) and Brad Sherman (D-Calif.) sent letters to tax preparation companies H&R Block, TaxAct, and TaxSlayer, plus big tech firms Meta, and Google, amid reports that the tax preparation companies have been secretly transmitting individual taxpayers’ sensitive financial information to Meta and Google
  • In August 2022, Senator Warren highlighted key priorities she secured in the Senate’s Inflation Reduction Act, including establishing an IRS task force to look into developing and running an IRS-run free direct E-File tax return system, based on Senator Warren’s Tax Filing Simplification Act. 
  • In July 2022, Senator Warren led 22 lawmakers to introduce the Tax Filing Simplification Act of 2022, legislation that would direct the IRS to develop its own free online tax preparation and filing service that would simplify the tax filing process for millions of Americans 
  • In June 2022, at a hearing of the Senate Finance Committee, Secretary of Treasury Janet Yellen agreed with Senator Warren on the need to create a free tax filing system that actually works for Americans.