3 tax prep firms shared 'extraordinarily sensitive' data about taxpayers with Meta, lawmakers say


WASHINGTON (AP) —A group of congressional Democrats released a report on Wednesday revealing that three major tax preparation firms, namely H&R Block, TaxAct, and TaxSlayer, had been transmitting "extraordinarily sensitive" data of tens of millions of taxpayers to Meta, the parent company of Facebook. This data exchange had been ongoing for a minimum of two years, according to the report.


The report strongly urges federal agencies, including the IRS, the Department of Justice, the Federal Trade Commission, and the IRS watchdog, to launch investigations into this matter and consider legal action against both the tax preparation companies and the tech giant, Meta.


The findings outlined in the report highlight a disturbing violation of taxpayer privacy, perpetrated by both tax preparation firms and major players in the Big Tech industry. As taxpayers utilized the tax software to prepare their taxes, highly personal and financial details pertaining to their income sources, tax deductions, and exemptions were made accessible to Meta.


The data shared with Meta was obtained through the installation of Meta's Pixel code on the tax firms' websites. This code was intended to gather information for the tax preparation companies to enhance their own marketing campaigns. In return, Meta gained access to the data, allowing them to develop targeted algorithms for their own users.


According to the report, the program collected a range of information, including taxpayers' filing status, income, refund amounts, names of dependents, approximate federal tax owed, website navigation, and interactions such as button clicks and text entry form names.


The letter to federal agencies was signed by Senators Elizabeth Warren, Ron Wyden, Richard Blumenthal, Tammy Duckworth, Bernie Sanders, Sheldon Whitehouse, and Representative Katie Porter. They called for an immediate investigation into the incident and urged the agencies to prosecute any companies or individuals found to have violated the law, potentially resulting in significant criminal liability for the firms involved.


The Markup, a nonprofit journalism outlet focusing on technology, initially reported on the data-sharing between tax firms and Meta in November. At the time, TaxAct stated that it takes customer data privacy seriously and complies with IRS regulations. TaxSlayer claimed that customer privacy was of utmost importance and that it had removed the Pixel code for evaluation. H&R Block stated on Wednesday that it prioritizes client privacy and has taken measures to prevent information sharing through Pixel coding.


Meta responded by stating that their policies explicitly prohibit advertisers from sending sensitive information through their Business Tools. They asserted that their system is designed to filter out potentially sensitive data that it detects.


As of now, representatives from the IRS, the Department of Justice, the Federal Trade Commission, and the IRS watchdog have not provided immediate comments on the matter.


The Democrats behind the report argue that it emphasizes the need for an electronic free-file system for tax return submissions, to be administered by the government. The IRS is currently conducting a pilot program for a "direct file" system, scheduled for the 2024 filing season, which will help determine whether the government should proceed with its implementation. A feasibility report published by the IRS in May outlined taxpayer interest in the direct file system, its potential functionality, associated costs, operational challenges, and more.


According to the report, a majority of surveyed taxpayers expressed interest in using an IRS-provided tool to electronically prepare and file their taxes. Nearly 50% of respondents who preferred the IRS free-file option over commercial tax preparation firms indicated a preference for providing their financial information directly to the IRS rather than a third party.