Tuesday, March 28, 2006

IRS to Allow Tax Preparers to Sell Returns!

Philadelphia Inquirer | 03/21/2006 | IRS plans to allow preparers to sell data. This is without a doubt the most offensive idea to emerge in the financial privacy arena since CardSystems lost 40 million consumers' information in mid June of last year.

The IRS is considering a rules change that would allow our most trusted financial advisors to sell entire tax returns of consumers to marketers and data brokers! This would not only be a serious ethical violation and breach of trust by tax preparers, but may entirely undermine taxpayers trust in the tax systems in the US.

This rules change is apparently proposed at the behest of Congressman Ed Markey of Illinois who raised privacy concerns when it was discovered that some tax preparers were outsourcing tax preparation online to India and other countries without privacy protections. It was supposedly to prevent the loss of financial information to identity thieves. How ironic that the rule change was proposed as a privacy protection, when it allows outright sale of tax returns to marketers and data brokers.

While so-called notification and consent by taxpayers is required to allow this sale of information - can you imagine anyone questioning their accountant about why he is asking them to sign papers following tax return preparation? Most of us put full trust in our tax preparers, accountants and financial advisors when asked to sign documents. (I don't condone this, it's just the way we operate - every person should ALWAYS read EVERY document they sign and UNDERSTAND it before signing.)

If those professionals suffer even a momentary flash of reduced ethical and moral standards during that brief signing - they may choose not to disclose what we are signing and count on us to either ask pointedly what we are signing or that we read large sheafs of prepared documents to find out that we are about to sign away our financial privacy along with signing our tax returns.

By now we should all be painfully aware of the endless stream of data breaches, hacks, and dozens of cases of ineptitude by data brokers and handlers of private personal financial information.

This issue has somehow escaped much public notice since it was first proposed by the IRS on December 7, 2005. Here is the official government notice of the proposed IRS Rule Change allowing the sale of tax return data by tax preparers (38 page PDF file). The Philadelphia Inquirer broke the story and posted the following notice at the end of that piece:

It's too late to comment electronically, but the IRS may still consider written comments:

Mail comments to:

CC:PA:LPD:PR (REG-137243-02)
Room 5203
Internal Revenue Service, Box 7604
Ben Franklin Station, Washington, D.C. 20044.
This is so patently offensive that it is difficult to comprehend. I want to know who convinced the IRS rulemakers to slip this proposal in so quietly. Did Congressman Markey have a hand in the rule language or was that a back room deal between the Bush Administration and ChoicePoint? I find it hard to fathom that it was a lobbyist for beancounters who make their living by doing taxes for median income families. I don't think it is likely to have been Ernst & Young looking for extra little profit centers they might exploit in their corporate client tax filings.

Who would profit most from this? The data brokers and credit reporting agencies - just follow the money. Who wants access to broad swaths of taxpayer information? Those who don't currently have it yet - ChoicePoint, Experian, TransUnion, and dozens of subsidiary data brokers who currently don't have access to income (and spending) data directly.

Imagine the rich new income streams they'd see being able to sell information to marketers about our buying habits, food preferences, hotel choices, internet service providers, travel information, cell phone providers - all right there on our itemized deductions list.

A joint press release has been distributed by three separate consumer orgainizations calling for removal of launguage in the proposed rules that would allow for sale of information in taxpayer tax returns to third parties for purposes of selling "Subsidiary Services" to taxpayers. That broad language is the focus of concern.

Since many of us are on the current "Do Not Call" list and out of reach of telemarketing annoyance, you can bet your junkmail volume would increase dramatically after your spending habits are so well documented to marketing firms - right off of your tax forms, which they legally purchased!

If this were the only concern - it would be enough to rattle most Americans trust in our government. But it isn't the end of the story - we lose control over our financial data and risk identity theft on a grand scale once the information is in the hands of marketers. Just stop what you are doing and go write a letter to the IRS at the address above to demand that they stop this nonsense.

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posted by RealitySEO at 9:33 AM


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