IRS Privacy Nightmare

IRS Privacy Nightmare


The IRS has quietly proposed astounding new rules which would allow tax preparers to sell the contents of their client’s tax returns to third-party businesses, as long as a requisite form is signed. Historically, tax returns were a strictly private affair, with both tax preparers and IRS agents forbidden to share the info with anyone for any reason. But this could all change if the IRS’s blatant corporate giveaway is passed. That’s great news for “data-brokers” like ChoicePoint that make tens of millions of dollars selling personal information to corporate marketers. (Scroll down to the comments section below to see ChoicePoint’s response to this line.)

Here’s how the new rules would work: when you visit your accountant or a tax-preparation firm like H&R Block, your tax preparer would ask you to sign a form authorizing them to release your information at their discretion. Once you sign that form, your tax preparer has permission to sell or share the information contained in your tax filings. You have no control over how that data will be used, who will get it, or whether it’ll be adequately safeguarded from identity thieves.

The proposed rule would require express written permission from the consumer to allow the information to be sold, but as Beth McConnell of PennPIRG argued before the IRS on April 4, that’s not good enough for a number of reasons: nothing in the IRS rules would prohibit tax preparers from offering incentives in exchange for privacy–say, a ten percent discount on accountant fees and a free clock in return for a signature could sound very appealing. There’s also nothing to prevent unscrupulous preparers from adding another in a long series of forms for their clients to sign at tax time without amply detailing the consequences of the signature.

In any case, there’s absolutely no good reason for the new rule–and lots of good reasons to oppose it, including the arguments of law-enforcement officials who are warning that this rule would be a boon to identity theft, and are urging the IRS to drop the proposal. (“The IRS would allow tax preparers to sell a consumer’s return to companies that have a terrible track record of safeguarding information from identity thieves,” testified Beth McConnell.)

This issue should cross ideology. Bob Barr has already spoken out about it. And, as Stephen Lilienthal wrote in the smart, conservative online magazine Enter Stage Right, “Conservatives have good reason to express displeasure with this IRS initiative….The “consent signatures” are too likely to be signed by taxpayers based upon trust in their tax-preparer. Conservatives have qualms about mandated collection of information by government; that a government rule might serve to encourage the selling of that information to third parties, such as data brokers, should give conservatives pause.”

The best way to help fight what the IRS and corporate lobbyists are trying to do is simply to tell people about it. It’s happening very quietly–though thanks to the good work of the state PIRGs, not nearly as quietly as the IRS and business interests had planned–so click here to find contact info for local newspaper editors and talk-radio hosts and then write and ask them to look into and take a stand on the issue. You can also contact the Bush Administration through the PennPIRG site and demand that it direct the IRS to abandon this proposal and keep taxpayers’ returns private. Finally, and perhaps more fruitfully, click here to get contact info for your own local elected reps and then ask them to support Barack Obama and Maria Cantwell’s Protecting Taxpayer Privacy Act, which would prohibit tax preparers from disclosing taxpayer information to third parties.

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Katrina vanden Heuvel
Editorial Director and Publisher, The Nation

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