Wyden, colleagues urge DOJ to prosecute tax prep companies for illegally sharing personal, financial taxpayer data

WASHINGTON (KTVZ) -- Senator Ron Wyden said Wednesday he has joined Senate and House colleagues to urge the Department of Justice to act against major tax preparation companies illegally sharing protected and sensitive taxpayer information with Big Tech firms. 

“We write to urge you to investigate and prosecute the criminal behavior of major tax preparation companies identified in our investigation and confirmed by the Treasury Inspector General for Tax Administration and the Internal Revenue Service,” the lawmakers wrote.

Last month, the U.S. Treasury Inspector General for Tax Administration released an audit report confirming that four online tax preparation companies broke the law by sharing legally protected and sensitive taxpayer information with Big Tech firms without taxpayer consent.  Specifically, the report found that consent statements being used by the tax prep companies did not clearly identify the intended use of taxpayer data, a violation of Treasury regulations. The IRS agreed with that assessment. 

“The penalties for knowingly or recklessly disclosing or using tax return information include up to 1 year in prison, and penalties of up to $1000 per violation. DOJ has the sole authority to enforce the criminal statute on behalf of the millions of taxpayers harmed by this unauthorized disclosure of their sensitive personal and financial data,” the lawmakers continued.

Tax prep companies used pixels, computer code that tracks a user’s website activity, to obtain sensitive personal and financial information, including approximate income and refund amounts, for millions of taxpayers who filed their taxes online with these companies. Meta then used that information for advertising and to train its AI algorithm. 

The U.S. Treasury Inspector General for Tax Administration conducted a detailed review of four tax preparation companies, and found the companies did not obtain proper taxpayer consent for the release of their information. 

“Accountability for these tax preparation companies – who disclosed millions of taxpayers’ tax return data…is essential for protecting the rule of law and the privacy of taxpayers,” concluded the lawmakers. 

The IRS recently announced the expansion of the highly successful Direct File program to 24 total states, including Oregon – making 30 million taxpayers eligible to file for free, securely, and directly with the IRS. However, many taxpayers still rely on private tax prep companies. 

The letter was led by U.S. Senator Elizabeth Warren (D-Mass.). Along with Wyden, the letter was also signed by Senator Richard Blumenthal (D-Conn.) and U.S. House Representative Katie Porter (D-Calif.).

The full text of the letter is here.