Lawmakers Question Tax Prep Corps on FTC Privacy Violation Warnings

Following up on civil penalty warnings from the Federal Trade Commission (FTC), as well as their own independent investigation, a bicameral group of lawmakers pressed five major players in the tax preparation industry over potential missuses of collected taxpayer personal data.

Senate Finance Committee Chair Ron Wyden (D-OR), along with Sens. Richard Blumenthal (D-CT), Tammy Duckworth (D-IL), Bernie Sanders (I-VT), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI), as well as Rep. Katie Porter (D-CA), sent identical letters October 25 to tax prep companies the FTC warned in September could face civil penalties if they are found to have violated consumer privacy protections by selling personal data to Meta.

The companies are H&R Block, Intuit, TaxAct, TaxSlayer, and the Lampo Group (Ramsey Solutions).

Emboldened by reporting from media outlet The Markup, which alleged in November 2022 that the companies were monetizing private identifying information for the purpose of feeding advertising algorithms — such as on social media platform Facebook — the lawmakers opened their own investigation. Releasing their findings July 11, the lawmakers told the IRS, Treasury Inspector General for Tax Administration, and the Justice Department that the companies used computer code called “pixels” to send information like names (including names of dependents), emails, income, and tax data to not only Meta, but other large tech like Google without disclosing to customers that such information would be shared.

According to the lawmakers’ report, the tax prep firms claimed during the investigation that they “installed the Meta and Google tools on their websites without fully understanding the extent to which they would send taxpayer data to these tech firms, without consulting with independent compliance or privacy experts, and without full knowledge of Meta’s use of and disposition of the data.”

“In fact, the tax prep companies indicated that they were still not fully aware of the current status of millions of taxpayers’ data that had been shared with the Big Tech firms,” the lawmakers’ letter added.

Piggybacking off these findings, the FTC warned the tax preppers in individual notices they could incur civil penalties up to $50,120 per violation on the ground of “unfair and deceptive practices” if customers do not give express consent to have their sensitive information collected.

“Consumers trust tax preparers with sensitive information about their finances, marital status, children, and health,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that violate American’s privacy by seeking to monetize personal data without consent can face significant financial consequences.”

Now, the lawmakers are asking the companies to answer a series of inquires by November 8, like if Meta Pixel or other pixels are currently in use. Additionally, the lawmakers want to know if they:

• Believe they ever engaged in deceptive or unfair practices per FTC guidelines
• Are currently compliant with the FTC’s notices and will commit to remaining compliant
• Have processes in place to ensure taxpayer data is “never improperly used or disclosed” and that “taxpayers are never misled regarding how their data are being used or disclosed.”

“Americans should be able to file their taxes without fear that their sensitive data will be shared with Big Tech companies,” the lawmakers wrote.