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Private Tax Prep Companies Violated the Privacy of Millions of Taxpayers. It’s Time for a Free Public Option.

By Daniela Klein

On July 12, a congressional investigation report confirmed that private tax filing services including H&R Block, TaxAct, and TaxSlayer shared millions of taxpayers’ personal financial data to Big Tech companies Meta and Google. 

This major privacy breach impacted millions of taxpayers, and this scheme is unfortunately not surprising – American tax prep companies have already been implicated in other investigations, such as for deceptive advertising and misleading taxpayers into using their services. 

Reporting done by The Markup this past November spurred the recent congressional investigation. In the weeks after The Markup published their investigative reporting, Public Citizen’s President, Robert Weissman, called on the IRS, FTC, and CFPB to look further into the allegations of data sharing. The final report confirmed many of The Markup’s findings, outlining how tax prep companies used a type of data technology called a tracking pixel to export not only taxpayers’ names, phone numbers and email addresses, but also financial information such as their filing status, income, their tax refunds, and more. The congressional report also detailed how the Big Tech firms used the data they obtained from tax prep corporations to create targeted advertising, using sensitive taxpayer information recklessly and violating consumer privacy laws. 

This deal between Big Tax Prep and Big Tech demonstrates the capability and willingness of private tax prep companies to deceive and exploit taxpayers for their own profit. Taxes are a part of every American’s life, and American people should not have to hire tax prep companies to find assistance in filing their taxes quickly and correctly.  

The report’s findings have emphasized the urgent need for a publicly offered, safe, simple, and free tax prep option like the IRS direct file tool. The recent IRS report to Congress has demonstrated that the IRS is capable of providing a free and simplified tax filing option online. In fact, within that same report, interviews and surveys of American people illustrated how American people care deeply about privacy concerns while making tax filing decisions. The report concludes that taxpayers “recognize that the IRS will not sell or use their information for commercial benefit” as opposed to private companies that have the incentive to sell or repurpose taxpayers’ personal data. 

As urged by the congressional report, it is essential that the Department of Justice, the IRS, the FTC, and the U.S. Treasury Inspector General for Tax Administration investigate this violation of privacy rights and regulations. As for taxpayers seeking a fast, simple, and secure tax filing process, the future of tax prep lies in a public option offered by the IRS.  

The IRS has already announced that they will be rolling out a pilot program of this free and simple tool in 2024, an exciting development in the effort for a free public filing tool. To urge the IRS to make this resource broadly available as soon as possible, please sign this petition. Nobody should have to put their privacy at risk to file their taxes.