Lawmakers Call for Investigation into Tax Prep Software Companies
A group of lawmakers, led by Senator Elizabeth Warren from Massachusetts, have requested that the Biden administration investigate the potential illegal sharing of customer data between tax preparation software companies and tech platforms such as Google and Meta. In a letter addressed to Attorney General Merrick Garland, Federal Trade Commission Chair Lina Khan, Internal Revenue Service Commissioner Daniel Werfel, and Treasury Inspector General for Tax Administration J. Russell George, the lawmakers detailed their own investigation findings which supported previous reports from The Markup and The Verge. These reports initially brought attention to the data sharing issue. The FTC declined to comment on the letter, and the other agencies mentioned have not yet responded.
Last year, The Markup and The Verge jointly reported that tax preparation software companies TaxSlayer, H&R Block, and TaxAct had shared sensitive financial information with Meta’s Facebook and Google through various tracking mechanisms. Meta’s pixel trackers were found to have transmitted names, emails, and income information to Meta, violating the platform’s policies. TaxAct was also found to have sent similar information to Google through its analytics tool, although names were not included.
Meta and Google both claim to have policies against receiving sensitive or identifying information from customers or advertisers. Statements from the tax preparation companies implied that the data sharing was accidental.
The group of lawmakers conducted their own investigation, building upon the initial reports. They discovered that millions of taxpayers’ information had been shared with Big Tech firms through tax preparation software. Both the tax preparation companies and tech firms were criticized for their careless handling of sensitive information. Although the companies claimed the shared information would be anonymous, experts believed it could be linked to individuals.
Senators Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter joined Senator Warren in the investigation and co-signed the letter.
The lawmakers concluded that while the tax preparation companies were unaware of the privacy implications when installing Meta and Google’s tools, the tech platforms failed to provide sufficient information about how the collected data would be used. The effectiveness of the filters implemented by Meta and Google to prevent inadvertent collection of sensitive data was also questioned.
The investigation revealed that Meta’s tools used by TaxAct collected even more information than previously reported, including the approximate amount of federal taxes owed by individuals. Meta confirmed using data collected from tax software providers to target ads and train its AI algorithms.
The lawmakers believe that the findings indicate possible violations of taxpayer privacy laws by the tax preparation companies, which could result in criminal penalties of up to $1,000 per instance and up to a year in prison.
In addition to calling for investigations and prosecutions, the lawmakers suggested that new policies could help prevent similar issues in the future. They welcomed the IRS’s recent announcement of a free, direct file pilot program for next year, which would allow taxpayers to file taxes without sharing their data with untrustworthy tax preparation firms.
