Lawmakers Call for Investigation into Tax Prep Software Companies

A group of lawmakers, led by Massachusetts Democratic Senator Elizabeth Warren, are urging the Biden administration to investigate allegations that tax prep software companies have illegally shared customer data with tech giants Google and Meta.

The Call for Investigation

In a letter addressed to Attorney General Merrick Garland, Federal Trade Commission Chair Lina Khan, IRS Commissioner Daniel Werfel, and Treasury Inspector General for Tax Administration J. Russell George, the lawmakers outlined key findings from their own investigation. These findings expanded on previous reporting from The Markup and The Verge, which first brought the data sharing practices to light. While the FTC and the other agencies named did not immediately respond to requests for comment, the lawmakers are pushing for action.

Data Sharing Practices

The publications reported last year that tax prep software companies TaxSlayer, H&R Block, and TaxAct had shared sensitive financial information with Facebook and Google, respectively. Through a piece of code known as a pixel, Meta’s Facebook received names, emails, and income information, while Google received similar information from TaxAct’s analytics tool, albeit without names.

Reckless Handling of Sensitive Information

The investigation conducted by the lawmakers found that millions of taxpayers’ information had been shared with Big Tech firms through tax prep software. The lawmakers allege that both the tax prep companies and the tech firms were “reckless” in their handling of sensitive information. While the companies claimed that the shared information would be anonymous, experts believe it wouldn’t be difficult to link the data back to individuals.

Lawmakers’ Call to Action

Senators Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter joined Warren in the investigation and co-signed the letter. The lawmakers argue that the tax prep companies may have violated taxpayer privacy laws, with potential criminal penalties of up to $1,000 per instance and up to one year in prison. They are calling on the agencies to investigate and prosecute where necessary.

Future Mitigation and Policy Changes

In addition to seeking investigation and prosecution, the lawmakers also highlight the need for new policies to prevent similar issues in the future. They commend the IRS’s recent announcement of a free, direct file pilot program, which will allow taxpayers to file their taxes without sharing data with potentially untrustworthy tax preparation firms.

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