In New Report, Senators Warren, Wyden, Lawmakers Reveal Massive, Likely Illegal Breach of Taxpayer Privacy by Tax Prep Companies with Meta – Call for Agencies to Investigate, Prosecute
“Big Tax Prep has recklessly shared tens of millions of taxpayers’ sensitive personal and financial data with Meta for years” in what “appears to represent a violation of taxpayer privacy laws”
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.), and Sheldon Whitehouse (D-R.I.), along with Representative Katie Porter (D-Calif.), released a new report: Attacks on Tax Privacy: How the Tax Prep Industry Enabled Meta to Harvest Millions of Taxpayers’ Sensitive Data. The 54-page report, which comes after a seven-month long investigation, reveals 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 Internal Revenue Service (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. The companies shared millions of taxpayers’ tax return data, meaning they could face billions of dollars in potential criminal liability.
“The findings of this report reveal a shocking breach of taxpayer privacy by tax prep companies and by Big Tech firms that appeared to violate taxpayers’ rights and may have violated taxpayer privacy law,” wrote the lawmakers. “Relevant enforcement entities – including the IRS, the Treasury Inspector General for Tax Administration (TIGTA), the Federal Trade Commission (FTC), and the Department of Justice (DOJ) should fully investigate this matter and prosecute any company or individuals who violated the law.”
In the letter, the lawmakers applauded the free, direct-file pilot that the IRS is implementing starting next year, which will give taxpayers the option to file taxes without sharing their data with untrustworthy and incompetent tax preparation firms.
The investigation revealed that:
- Tax preparation companies shared millions of taxpayers’ data with Meta, Google, and other Big Tech firms: The tax prep companies used computer code – known as pixels – to send data to Meta and Google. While most websites use pixels, it is particularly reckless for online tax preparation websites to use them on webpages where tax return information is entered unless further steps are taken to ensure that the pixels do not access sensitive information. TaxAct, TaxSlayer, and H&R Block confirmed that they had used the Meta Pixel, and had been using it “for at least a couple of years” and all three companies had been using Google Analytics (GA) for even longer.
- Tax prep companies shared extraordinarily sensitive personal and financial information with Meta, which used the data for diverse advertising purposes: TaxAct, H&R Block, and TaxSlayer each revealed, in response to this Congressional inquiry, that they shared taxpayer data via their use of the Meta Pixel and Google’s tools. Although the tax prep companies and Big Tech firms claimed that all shared data was anonymous, the FTC and experts have indicated that the data could easily be used to identify individuals, or to create a dossier on them that could be used for targeted advertising or other purposes.
- Tax prep companies and Big Tech firms were reckless about their data sharing practices and their treatment of sensitive taxpayer data: The tax prep companies indicated that they installed the Meta and Google tools on their websites without fully understanding the extent to which they would send taxpayer data to these tech firms, without consulting with independent compliance or privacy experts, and without full knowledge of Meta’s use of and disposition of the data.
- Tax prep companies may have violated taxpayer privacy laws by sharing taxpayer data with Big Tech firms: Under the law, “a tax return preparer may not disclose or use a taxpayer’s tax return information prior to obtaining a written consent from the taxpayer,” – and they failed to do so when it came to the information that was turned over to Meta and Google. Tax prep companies can also turn over data to “auxiliary service providers in connection with the preparation of a tax return.” But Meta and Google likely do not meet the definition of “auxiliary service providers” and the data sharing with Meta was for advertising purposes – not “in connection with the preparation of a tax return.”
Senator Warren has been at the forefront of holding tax prep firms and Big Tech accountable for their behavior, and pushed for an effective IRS direct free file program:
- In June 2023, Senators Warren and Carper and Representatives Sherman, Porter, and Beyer led a coalition of 99 Democratic lawmakers in sending a letter to Internal Revenue Service (IRS) Commissioner Daniel Werfel and Deputy Treasury Secretary Adewale Adeyemo, applauding the IRS’ announcement of a pilot of a free tax filing tool next year.
- In April 2023, Senators Warren and Carper led their colleagues in sending a letter to IRS Commissioner Daniel Werfel 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 Internal Revenue Service (IRS) Commissioner Daniel Werfel about the IRS’s failed Free-File partnership with private tax preparation software companies and called on the agency to implement a direct E-File program that will be truly free and easy for millions of Americans.
- Commission Werfel agreed with Senator Warren that the gap between the 70% of taxpayers that Free File is supposed to serve and the 2% it actually does is “massive.” When Senator Warren pointed out that tax prep companies are instead pushing alternative services that should be free, are marketed as free, but are not, Commissioner Werfel also agreed that “the whole process needs to be improved,” that taxpayer rights have been violated, and the IRS has an obligation to make “the tax system easier for taxpayers to navigate.”
- In March 2023, Senators Warren and King wrote a letter with 19 other senators to the Internal Revenue Service and Secretary Yellen expressing strong support for Secretary Yellen’s directive for the IRS not to raise audit rates for small businesses or households making under $400,000 annually.
- In December 2022, Senators Warren and Wyden, along with Representatives Porter and Sherman 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 July 2022, Senator Warren led 22 of her colleagues in introducing the Tax Filing Simplification Act of 2022 to simplify the tax filing process for millions of Americans by lowering costs, eliminating red tape for all taxpayers, and saving them hours and hundreds of dollars.
- During an exchange of the United States Senate Finance Committee in June 2022, U.S. Treasury Secretary Janet Yellen agreed with Senator Warren on the need to create a free tax filing system that actually works for Americans.
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