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February 02, 2023

Schiff Urges Investigation into Disclosure of Taxpayers’ Personal, Financial Information to Facebook

Washington, D.C. – Today, Congressman Adam Schiff (D-Burbank), and Reps. Judy Chu (D-Calif.) and Raja Krishnamoorthi (D-Ill.), members of the House Ways and Means and House Oversight Committees, respectively, urged the Internal Revenue Service to investigate the data-sharing practices of online tax filing companies that have been found to have disclosed taxpayers’ sensitive personal and financial information to Facebook. 

In late November, The Markup published a report revealing that U.S. companies providing online tax filing services, such as H&R Block, TaxAct, and TaxSlayer, have been sending taxpayers’ identities and financial information to Facebook through a pixel present on their websites. The Meta Pixel, operated by Facebook’s parent company, collected taxpayers’ personal information through various tax e-filing websites, including taxpayers’ names, usernames, email addresses, home addresses, income, filing status, refund status, dependents, health savings accounts, college tuition grants, and college scholarship amounts of their dependents.

“We are concerned about the implications these findings have on the rights of taxpayers and on fairness for the working-class Americans who largely depend on the services of private companies to e-file their taxes… Bad actors in this space have the potential to profit from Americans’ most sensitive and private information, and simultaneously put their data at risk of further exposure,” wrote the members. “We believe that the American people deserve to know whose personal information was shared with Meta and Facebook, how this was allowed to happen, and what steps the IRS will take to ensure this cannot happen again. We strongly urge you to take swift action to thoroughly investigate, take steps to mitigate the harm caused, and protect the rights of American taxpayers.”

The IRS Data Book showed that more than 150 million tax returns were filed electronically in 2021 and millions of taxpayers use online tax filing services such as H&R Block, TaxAct, and TaxSlayer – making this a potentially massive disclosure to Facebook of personal and financial information, on the heels of Meta being found in violation of federal health privacy law after the Meta Pixel gathered sensitive health information from hospital websites. 

In addition to calling for an investigation, the members request the IRS provide answers to the following questions:

  1. Can you estimate how many taxpayers may have had their data unknowingly shared with Meta and Facebook through e-filing websites?
  2. Does the IRS know which individual taxpayers’ data was improperly transmitted to Meta, or will this information need to be recovered from the companies?
  3. The IRS directs taxpayers attempting to file for free to some of the companies reporting found using the pixel via Free File. The IRS also directs taxpayers to Tax Slayer through Volunteer Income Tax Assistance (VITA) sites. Free File and VITA are directed toward low income, elderly, and disabled taxpayers. Can you confirm whether Tax Slayer was one of the software packages embedding the pixel?
  4. If there is a violation of Section 7216, and tax return information has been disclosed or used by a return preparer without the taxpayer’s consent, will TIGTA issue criminal referrals?
  5. Does Section 7216 guidance presently ban the use of these pixels from online tax filing service sites or do regulations need to change to specifically prevent the use of this technology?
  6. What legislative remedies should Congress consider to prevent this from happening again?

 

You can read the full letter below:

February 2, 2023
The Honorable J. Russell George
Inspector General
Treasury Inspector General for Tax Administration (TIGTA)
901 D Street SW, Suite 600
Washington, DC 20024


Dear Inspector General George:

We write to request that the Internal Revenue Service (IRS) investigate the data sharing practices of online tax filing companies found to have disclosed taxpayers’ sensitive personal and financial information to Facebook. In late November, The Markup, an investigative journalism media organization, published a report revealing that U.S. companies providing online tax filing services, such as H&R Block, TaxAct, and TaxSlayer, have been sending taxpayers’ identities and financial information to Facebook through a pixel present on their websites.[1] The Meta Pixel, operated by Facebook’s parent company, collected taxpayers’ personal information through various tax e-filing websites, including taxpayers’ names, usernames, email addresses, home addresses,
income, filing status, refund status, dependents, health savings accounts, college tuition grants, and college scholarship amounts of their dependents.

Foremost, we are concerned that the disclosure of countless taxpayers’ personal information was potentially done in violation of Section 7216 of the Internal Revenue Code (26 U.S.C. § 7216). Guidance issued by the IRS in late 2009 states that tax preparers, including e-filing companies, can use the information they receive from taxpayers only for the purpose of preparation of income tax returns, and any purpose other than preparation requires an explanation of the information being disclosed and explicit consent from the taxpayer. Section 7216(a) also establishes a criminal penalty for tax return preparers who knowingly or recklessly disclose or use taxpayer information without consent.

We are concerned about the implications these findings have on the rights of taxpayers and on fairness for the working-class Americans who largely depend on the services of private companies to e-file their taxes. The IRS Data Book shows that over 150 million tax returns were filed electronically in 2021 and millions of taxpayers use online tax filing services such as H&R Block, TaxAct, and TaxSlayer.[2] Section 7216 and IRS guidance and regulations clearly demonstrate the concern from both Congress and the Department of Treasury regarding the potential for misuse and abuse of taxpayers’ sensitive financial information by tax preparers. Bad actors in this space have the potential to profit from Americans’ most sensitive and private information, and simultaneously put their data at risk of further exposure. If Meta (including Facebook) and e-filing companies are found to have violated Section 7216, they must be held accountable in order to deliver justice for countless taxpayers who have been wronged, while ensuring this wrongdoing never happens again.

While Meta’s Data Policy states that companies who use the Meta Pixel must have “lawful rights to collect, use, and share your data before providing any data to us”, many of these tax filing companies claim that the pixel
was embedded on their websites unknowingly. This is not an isolated incident—Meta was found to be in violation of federal health privacy law after the Meta Pixel gathered sensitive health information from hospital websites. It is clear that federal government must investigate.

We believe that the American people deserve to know whose personal information was shared with Meta and Facebook, how this was allowed to happen, and what steps the IRS will take to ensure this cannot happen again. We strongly urge you to take swift action to thoroughly investigate, take steps to mitigate the harm caused, and protect the rights of American taxpayers.

We respectfully request answers to the following questions:

  1. Can you estimate how many taxpayers may have had their data unknowingly shared with Meta and Facebook through e-filing websites?
  2. Does the IRS know which individual taxpayers’ data was improperly transmitted to Meta, or will this information need to be recovered from the companies?
  3. The IRS directs taxpayers attempting to file for free to some of the companies reporting found using the pixel via Free File. The IRS also directs taxpayers to Tax Slayer through Volunteer Income Tax Assistance (VITA) sites. Free File and VITA are directed toward low income, elderly, and disabled taxpayers. Can you confirm whether Tax Slayer was one of the software packages embedding the pixel?
  4. If there is a violation of Section 7216, and tax return information has been disclosed or used by a return preparer without the taxpayer’s consent, will TIGTA issue criminal referrals?
  5. Does Section 7216 guidance presently ban the use of these pixels from online tax filing service sites or do regulations need to change to specifically prevent the use of this technology?
  6. What legislative remedies should Congress consider to prevent this from happening again?


Thank you for your attention to this matter. Because we are swiftly approaching the 2022 tax filing deadline, we look forward to your timely response.


Sincerely,

 

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