Three tax-preparation companies have given the private information of millions of American taxpayers to Facebook’s parent company Meta, a bombshell new congressional report has revealed.
The tax firms shared the “extraordinarily sensitive” personal data with Meta and other Big Tech companies such as Google.
The tax-prep companies—TaxAct, H&R Block, and TaxSlayer—are said to have “shared millions of taxpayers’ data with Meta, Google, and other Big Tech firms” using computer code known as pixels, according to the report by congressional Democrats.
Pixels are used across the Internet as pieces of code on websites that are used to gather information about visitors.
Companies, such as advertisers, use that information to understand the website users’ interests and behaviors.
“Tax-prep companies shared extraordinarily sensitive personal and financial information with Meta,” the report said.
Collected data include names, tax information, and details of dependents among others.
The tax firms and Big Tech claim that the shared data were anonymous.
However, the report points out that the U.S. Federal Trade Commission (FTC) and leading data experts have suggested the information could be used to identify individuals.
During the investigation, Meta admitted that it used the collected data to target ads to taxpayers as well as train the company’s AI algorithms.
The report was prepared by U.S. Senators Elizabeth Warren (D-MA), Ron Wyden (D-OR), Sheldon Whitehouse (D-RI), Richard Blumenthal (D-CT), Tammy Duckworth (D-IL) Bernie Sanders (I-VT), and Rep. Katie Porter (D-CA).
The lawmakers point out that the report reveals a “shocking breach of taxpayer privacy by tax prep companies and by Big Tech firms that appeared to violate taxpayers’ rights and may have violated taxpayer privacy law.”
“The Internal Revenue Service, the Treasury Inspector General for Tax Administration, the Federal Trade Commission, and the Department of Justice should fully investigate this matter and prosecute any company or individuals who violated the law,” the report said.
The lawmakers sent a letter to these agencies demanding an investigation.
The data of users were collected via Meta Pixel and Google Analytics.
TaxAct’s Meta Pixel deployment collected the following information on taxpayers:
- full names
- email address
- country
- state
- city
- zip codes
- phone numbers
- gender
- date of birth
- filing status
- approximate adjusted gross income
- approximate refund amount
- names of dependents
- buttons clicked online
- web browser used
In addition, TaxAct used another Meta tool to collect indicators of whether a taxpayer was the head of the household, had certain assets, investment income, mortgage interests, standard deductions, charitable contributions, Schedule Cs, and student loan interest.
TaxAct collected “substantially similar” data using Google Analytics.
“H&R Block and TaxSlayer also revealed an extensive list of data shared via the Meta Pixel, including transmitting information on whether taxpayers had visited pages for many revealing tax situations, such as having dependents, certain types of income (such as rental income or capital gains), and certain tax credits or deductions,” the report said.
Taxpayer privacy laws contain penalties for violating the rights of those who pay taxes, including large fines and potential jail time.
Tax preparers are required to obtain written consent from the taxpayer before disclosing their tax return information to a third party.
The report notes that, by handing over such data to Meta and Google, the three tax-prep firms violated the law.
Violation of the law comes with criminal penalties of up to $1,000 per instance as well as jail time of up to a year.
Since the companies shared the data of millions of taxpayers, they could be on the hook for billions of dollars in potential criminal liability
Though tax firms can turn over data to “auxiliary service providers,” the lawmakers noted that the data shared with Meta and Google were for advertising purposes and not related to the preparation of a tax return.
“H&R Block takes protecting our clients’ privacy very seriously, and we have taken steps to prevent the sharing of information via pixels,” said the company in a statement.
Following the release of the report, TaxSlayer pushed back against the allegations in the report, according to the Associated Press.
A company representative claims the report contained “numerous false or misleading statements” about the taxpayer information sent to Meta and Google.
The firm said that it would send a request for retraction or correction from Sen. Warren’s office.
“TaxAct has engaged with Senator Warren and her staff to provide transparent, detailed explanations on our use of these standard analytics tools,” the firm added.
“TaxAct has always complied with laws that protect our customers’ privacy and, as noted in the report, we disabled the tools in question while we evaluated potential concerns.
“Protecting the rights and privacy of our customers is our top priority, and we are committed to engaging with stakeholders to address any concerns and to help advance public policy.”
According to Meta, its policies have made it clear that advertisers “should not send sensitive information about people through our Business Tools.
“Doing so is against our policies and we educate advertisers on properly setting up Business tools to prevent this from occurring.”
Meta insisted that its system is designed to “filter out” potentially sensitive data that it can detect.
However, lawmakers in the report had said that Meta’s filtering systems “appeared to be ineffective” when it came to preventing the collection of sensitive taxpayer information.
The report pointed out that over 80 percent of all filings in 2022 were done through “one of a handful of private, online tax-filing companies” like TaxAct, H&R Block, and TaxSlayer.
The report accused the tax preparation industry of having “long fought against efforts to make U.S. tax filing simpler and cheaper.”
It goes on to highlight the fact that many countries “offer return-free tax filing.”
In a return-free system, the government uses the information it has on taxpayers to help prepare their returns rather than requiring them to make their own tax calculations.
This makes such service free and fast.
Back in May, the IRS published a report showing that 72 percent of Americans would be interested in a free, electronic tax-filing service from the agency.
A pilot version of such a service is planned to be released in the 2024 tax filing season to a limited number of taxpayers.
