Identity Theft Prevention News

Pending IRS Proposal Would Allow Tax Preparers To Seek A Consumer’s Permission To Share Their Returns With Unaffiliated Businesses

Under new rules proposed by the Internal Revenue Service (IRS) in December 2005, tax preparers would be permitted to share the contents of a consumers’ entire tax return with an unaffiliated business, provided the consumer signed a consent form. CALPIRG is working with other state PIRGs, the National Consumer Law Center, and the Consumer Federation of America to stop this proposal.

“The sale of personal tax returns would be a violation of individual taxpayers’ trust and would put consumers at an even greater risk for identity theft,” said Emily Rusch, Consumer Advocate for CALPIRG. “The IRS should drop this proposal, and instead ensure that taxpayer returns are kept private.”

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. The proposed rule requires expressed written permission from the consumer to allow information to be sold, but Rusch argues that requiring a signature is not enough.

“Consumers will not realize they’ve signed the form, will not understand what they’re signing, or will feel pressured into signing away their rights to privacy.” she continued. 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. Last year Choicepoint revealed that thieves had stolen the personal information of more than 163,000 consumers from their database. According to the Federal Trade Commission, more than nine million Americans are victims of identity theft each year.

“Consumers have nothing to gain from the sale of our tax returns, and everything to lose,” said Rusch. “Data brokers like Choicepoint are likely to be first in line to buy personal information from tax returns, and they’ve already proven that they can’t protect us from identity theft.”

The IRS proposal also makes it easier for tax preparers to market their own services, such as rip-off Refund Anticipation Loans, to their own customers.

On March 8th CALPIRG joined other state PIRGS, along with the National Consumer Law Center and the Consumer Federation of America, to file formal comments in opposition to the proposed rule. In addition, an advocate will testify on behalf of CALPIRG at a hearing in Washington D.C. on April 4th to urge the IRS to drop this proposed rule, and to argue for better consumer privacy protections.