Lawmakers ask DOJ to prosecute tax prep firms for sharing customer data with big tech

Democratic lawmakers are asking the Department of Justice to prosecute major tax preparation firms for sharing customers’ sensitive personal and financial data with Google and Meta, the latter of whom they say used the information for advertising and to train its artificial intelligence algorithm.

The lawmakers, who sent the letter late last week and posted it publicly Tuesday, said their appeal follows a Treasury Department audit released last month which found that unnamed online tax prep companies illegally shared customer data. The Internal Revenue Service (IRS) subsequently confirmed Treasury’s findings, the lawmakers said in a press release.

“Accountability for these tax preparation companies – who disclosed millions of taxpayers’ tax return data, meaning they could potentially face billions of dollars in criminal liability – is essential for protecting the rule of law and the privacy of taxpayers,” Sens. Elizabeth Warren (D-MA), Richard Blumenthal (D-CT) and Ron Wyden (D-OR) and Rep. Katie Porter (D-CA) said in the letter.

Code used by Google and Meta was embedded in the tax prep companies’ websites to track customers and harvest their data, the lawmakers said. The letter doesn’t say how Google used the data it received. 

While Treasury did not name the tax prep companies, the lawmakers say that a July 2023 Congressional investigation showed TaxSlayer, H&R Block, TaxAct and Ramsey Solutions are the responsible firms.

The Congressional report revealing the results of that investigation alleged that the tax prep firms had “recklessly shared tens of millions of taxpayers’ sensitive personal and financial data with Meta for years, without appropriately disclosing this data usage or protecting the data, and without appropriate taxpayer consent.”

The Meta and Google pixel code allegedly gathered data including income, filing status, deductions, exemptions and refund amounts from millions of the tax prep firms’ customers, according to the lawmakers.

The Treasury audit found that the tax prep companies allegedly shared the customer information without clearly explaining how they intended to use the data, which violates department regulations. Specifically, the firms allegedly required customers to grant consent for the sharing of tax return information, but did not say why they were asking or who they planned to give the data to.

The lawmakers had previously appealed to the Justice Department to address the issue and underscored the agency’s public commitment to address such crimes.

“In line with your commitments to prioritize enforcement of white collar and corporate crime, you must act without delay,” the letter said.

Penalties for the tax firms’ alleged conduct can include payment of $1,000 per violation and up to 1 year in prison, the lawmakers said. 

The allegations against the tax preparation companies were first made in a 2022 report by The Markup.

H&R Block is being sued for its alleged actions by a lawyer who filed the suit under the Racketeer Influenced and Corrupt Organizations Act (RICO), a statute which is typically used to prosecute organized crime. The attorney previously secured a $90 million verdict against agrochemical firm Monsanto.

Last September, the Federal Trade Commission (FTC) cautioned H&R Block and four other tax prep companies to get consent from consumers’ before using their data for advertising.