October 22, 2024

Warren, Wyden, Blumenthal, Porter Call on DOJ to Prosecute Tax Prep Companies for Illegally Sharing Sensitive Personal and Financial Taxpayer Data

Treasury, IRS assessment confirm 2023 Congressional investigation finding that companies broke the law by sharing sensitive data with Big Tech firms. 

Tax prep companies potentially face billions of dollars in criminal liability. 

“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.”

Text of Letter (PDF)

Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Chair of the Senate Committee on Finance, and Richard Blumenthal (D-Conn.), along with Representative Katie Porter (D-Calif.) wrote to the Department of Justice (DOJ) urging the investigation and prosecution of major tax preparation companies for illegally sharing protected and sensitive taxpayer information with Big Tech firms. 

Last month, the Treasury Inspector General for Tax Administration (TIGTA) 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 TIGTA’s assessment. The report confirms November 2022 investigative reporting by the Markup and the results of a July 2023 Congressional investigation, led by Senator Warren, which found that the improper sharing of sensitive taxpayer personal and financial information by TaxSlayer, H&R Block, TaxAct, and Ramsey Solutions with Meta and Google appeared to be illegal. 

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. 

TIGTA conducted a detailed review of four tax preparation companies, and found that the companies did not obtain proper taxpayer consent for the release of their information. 

“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,” wrote the lawmakers. The penalties for these violations can include $1,000 per violation and up to 1 year in prison. TIGTA itself notes that it “reports potential criminal violations directly to the Department of Justice when TIGTA deems that it is appropriate to do so.” 

The IRS recently announced the expansion of the highly successful Direct File program to 24 total states, 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. 

“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. 

Senator Warren has been at the forefront of holding tax prep firms and Big Tech accountable for their behavior, and pushed for an easy and free IRS Drect File program:

  • In May 2024, Senators Elizabeth Warren and Tom Carper (D-Del.), along with Representatives Don Beyer (D-Va.), Katie Porter (D-Calif.), and Brad Sherman (D-Calif.) led over 130 lawmakers in sending a letter to the Secretary of the Treasury Janet Yellen and IRS Commissioner Daniel Werfel, applauding the successful pilot of the Direct File program, and urging them to make it permanent and expand its functionality and scope.
  • In June 2023, Senators Elizabeth Warren and Tom Carper (D-Del.), along with Representatives Brad Sherman (D-Calif.), Katie Porter (D-Calif.), and Don Beyer (D-Va.) led a coalition of 99 Democratic lawmakers in sending a letter to IRS Commissioner Daniel Werfel and Deputy Treasury Secretary Adewale Adeyemo, applauding the IRS’ announcement of a pilot  of a free tax filing tool next year. 
  • In April 2023, Senators Elizabeth Warren and Tom Carper (D-Del.) led their colleagues in sending a letter to IRS Commissioner Daniel Werfel urging the agency to simplify the tax process and broaden access to free e-filing options.
  • In April 2023, at a hearing of the Senate Finance Committee, Senator Elizabeth Warren questioned IRS Commissioner Daniel Werfel about the IRS’s failed Free-File partnership with private tax preparation software companies and called on the agency to implement a direct E-File program that will be truly free and easy for millions of Americans. 
    • Commission Werfel agreed with Senator Warren that the gap between the 70% of taxpayers that Free File is supposed to serve and the 2% it actually does is “massive.”  When Senator Warren pointed out that tax prep companies are instead pushing alternative services that should be free, are marketed as free, but are not, Commissioner Werfel also agreed that “the whole process needs to be improved,” that taxpayer rights have been violated, and the IRS has an obligation to make “the tax system easier for taxpayers to navigate.”
  • In March 2023, Senators Warren and Angus King (I-Maine) wrote a letter with 19 other senators to the Internal Revenue Service and Secretary Yellen expressing strong support for Secretary Yellen’s directive for the IRS not to raise audit rates for small businesses or households making under $400,000 annually. 
  • In December 2022, Senators Warren and Ron Wyden (D-Ore.), along with Representatives Katie Porter (D-Calif.) and Brad Sherman (D-Calif.) sent letters to tax preparation companies H&R Block, TaxAct, and TaxSlayer, plus big tech firms Meta, and Google, amid reports that the tax preparation companies have been secretly transmitting individual taxpayers’ sensitive financial information to Meta and Google.
  • In July 2022, Senator Elizabeth Warren led 22 of her colleagues in introducing the Tax Filing Simplification Act of 2022 to simplify the tax filing process for millions of Americans by lowering costs, eliminating red tape for all taxpayers, and saving them hours and hundreds of dollars. 
  • During an exchange of the United States Senate Finance Committee in June 2022, U.S. Treasury Secretary Janet Yellen agreed with Senator Elizabeth Warren on the need to create a free tax filing system that actually works for Americans.

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