A group of lawmakers, led by Massachusetts Democratic Senator Elizabeth Warren, is urging the Biden administration to launch an investigation into tax preparation software companies accused of illegally sharing customer data with tech giants Google and Meta. The lawmakers have written a letter 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, outlining their own findings from an extensive probe. The investigation builds upon earlier reporting by The Markup and The Verge, which originally uncovered the data sharing. However, the FTC has declined to comment on the letter, and the other agencies mentioned have not yet responded to the request for comment.
Revelations of Data Sharing
In a previous report published last year, The Markup and The Verge revealed that tax prep software companies, including TaxSlayer, H&R Block, and TaxAct, had shared sensitive financial information with Meta’s Facebook using a pixel code. The report uncovered that Meta’s pixel trackers had transmitted names, emails, and income details to Meta, violating the platform’s policies. Additionally, it was discovered that TaxAct had shared similar information with Google through its analytics tool, although the data did not include names. Following the initial report, both Meta and Google claimed to have policies in place to prevent the transmission of sensitive or identifying information. Some statements from the tax prep companies suggested that the data sharing had occurred unintentionally.
Lawmakers’ Investigation Unveils Extent of Data Sharing
Expanding upon the original reporting, the group of lawmakers conducted their own investigation into the scale of data sharing. Their findings, released recently, indicate that millions of taxpayers’ information was shared with major tech firms through tax prep software. The lawmakers criticized both the tax prep companies and tech giants for their “reckless” handling of sensitive information. While the companies had asserted that the shared information would remain anonymous, experts believed it wouldn’t be difficult to connect the data to individuals. Senators Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter joined Senator Warren in the investigation and co-signed the letter.
According to the lawmakers, although the tax prep companies installed Meta’s and Google’s tools without fully comprehending the implications for privacy, the tech platforms failed to provide sufficient information on how the collected data would be used. Despite Meta and Google claiming to have filters to identify inadvertently collected sensitive data, the lawmakers found these filters to be “ineffective.” The investigation also revealed that Meta’s tools used by TaxAct collected even more information than initially reported, including approximate federal tax amounts owed. Meta confirmed using the data collected from tax software providers to target advertisements to taxpayers, including those unrelated to the tax prep companies, as well as for training their artificial intelligence algorithms.
The group of lawmakers believes that their findings suggest the tax prep companies may have violated taxpayer privacy laws. As a result, criminal penalties of up to $1,000 per instance and potential imprisonment for up to a year could be imposed. In their letter, the lawmakers called for the relevant agencies to investigate and prosecute as necessary. They also highlighted the potential for new policies to address the issue in the future. The lawmakers welcomed the IRS’s recent announcement of a free, direct file pilot program for the following year. This initiative would provide taxpayers with the option to file taxes without sharing their data with untrustworthy and incompetent tax preparation firms.
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