Tax
returns contain extremely sensitive, personal financial information
most Americans wouldn’t want the world to see, such as income, how much
was claimed in medical expenses, how much was spent on child care and,
of course, contact information. Up until now, Americans could trust
that their tax returns would remain private, and only they, their
accountant and the IRS had access to them.
But
now the IRS has proposed shocking new rules that would allow tax
preparers to share or sell the contents tax returns, as long as
consumers sign a form giving them permission.
“It
is appalling that the IRS would propose weakening the law to allow
consumers’ tax returns to be sold to the highest bidder,” said Laura
Etherton, Consumer Advocate for Oregon State Public Interest Research
Group (OSPIRG), “the IRS should drop this proposal, and keep tax
returns private.”
Under
current law, tax preparers are prohibited from sharing information in a
consumers’ tax return with an unaffiliated third party. But under the
new proposal, any tax preparer including H&R Block, Jackson Hewitt
or a private accountant could sell the contents of a consumer’s tax
return to an outside corporation.
“A
consumer needs to have a trusting relationship with his or her tax
preparer – the person who guides them through signing form after form
at tax time. Slipping a form in the shuffle that would allow the sale
of the tax return is a violation of that trust,” said Etherton.
The
proposed rule requires expressed written permission from the consumer
to allow information to be sold, but Etherton says that’s not good
enough, “consumers may not realize they’ve signed the form, may not
understand what they’re signing, or may feel pressured into signing
away their rights to privacy.”
The
IRS proposal does not contain any clear prohibition against tax
preparers offering consumers incentives for signing the permission
form, such as a discount on their tax service. Consumers’ personal
information has become a billion dollar business, with data brokers
like Choicepoint and others collecting and selling consumers’ personal
information to marketers.
A rash of breaches of security at major
corporations, including Choicepoint, MasterCard and dozens of others
over the last year has affected hundreds of millions of Americans and
put them at risk of identity theft.
“If
this proposed rule is adopted, you can bet data brokers like
Choicepoint will be among the first in line to purchase consumers’ tax
returns,” said Etherton, “and identity thieves will see this
information as one-stop shopping to make it easier for them to commit
fraud.”
On
March 8, 2006 the state PIRGs, such as OSPIRG, joined with the National
Consumer Law Center and the Consumer Federation of America to file
formal comments with the IRS in opposition to this rule. The coalition
of consumer groups also criticized other elements of the proposal that
would allow tax preparers to more easily market their own services such
as Refund Anticipation Loans which contain outrageous fees. The IRS
ended its formal public comment period on these proposed rules on March
8, 2006, but will be hearing testimony from those who already submitted
comments on April 4, 2006 in Washington D.C.
