By FATIMA HUSSEIN
A group of congressional Democrats has revealed that three major tax preparation companies have been sending “extraordinarily sensitive” taxpayer information to Meta, the parent company of Facebook, for at least two years.
In their report, the lawmakers call for federal agencies to investigate and potentially take legal action against H&R Block, TaxAct, and TaxSlayer for sharing this wealth of information with the social media giant.
In a letter addressed to the heads of the IRS, the Department of Justice, the Federal Trade Commission, and the IRS watchdog, the lawmakers describe these findings as a “shocking breach of taxpayer privacy by tax prep companies and Big Tech firms.”
The report reveals that highly personal and financial data, such as taxpayers’ sources of income, tax deductions, and exemptions, were made accessible to Meta through the tax software used by taxpayers to prepare their taxes.
This data was collected by Meta through its Pixel code, which the tax firms had installed on their websites in order to gather information for their own marketing campaigns. In return, Meta had access to this data in order to develop targeted algorithms for its users.
The program collected information on filing status, income, refund amounts, dependents’ names, approximate federal tax owed, user interactions on the tax preparers’ websites, and the names of text entry forms navigated by the taxpayer, according to the report.
The letter signed by Senators Elizabeth Warren, Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter calls for an immediate investigation into this incident by the federal agencies.
They also urge the agencies to prosecute any companies or individuals who have violated the law, as this breach could result in billions of dollars in criminal liability for the tax prep firms.
In November, nonprofit journalism outlet The Markup initially reported on the data-sharing between tax firms and Meta. TaxAct stated back then that it takes customer data privacy seriously and aims to comply with all IRS regulations. TaxSlayer claimed it values customer privacy and had removed the Pixel to evaluate its use.
H&R Block stated on Wednesday that it prioritizes the protection of client privacy and has taken steps to prevent information sharing through Pixel coding.
Meta, in response, emphasized that its policies make it clear that advertisers should not send sensitive information through its Business Tools. The company educates advertisers on setting up Business Tools to prevent such occurrences and its system is designed to filter out potentially sensitive data, according to an emailed statement.
Requests for comment from representatives of the IRS, the DOJ, the FTC, and the IRS watchdog have not received an immediate response.
The Democrats argue that their report provides support for the creation of an electronic free-file system for tax returns, run by the government. The IRS is currently running a pilot program for this and plans to launch a pilot program for the 2024 filing season to test a “direct file” system and assess its potential implementation in the future.
In May, the IRS published a feasibility report that outlined taxpayer interest in direct file, its operational challenges, cost, and more. The report indicates that a majority of surveyed taxpayers would be interested in using an IRS-provided tool to electronically prepare and file their taxes. Nearly 50% of respondents who preferred the IRS free-file option over commercial tax preparation firms stated that they would prefer giving their financial information directly to the IRS rather than a third party.
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