The IRS is quietly moving to loosen the once-inviolable privacy of
federal income-tax returns. If it succeeds, accountants and other
tax-return preparers will be able to sell information from individual
returns - or even entire returns - to marketers and data brokers.
The change is raising alarm among consumer and privacy-rights
advocates. It was included in a set of proposed rules that the Treasury
Department and the IRS published in the Dec. 8 Federal Register, where
the official notice labeled them "not a significant regulatory action."
IRS officials portray the changes as housecleaning to update
outmoded regulations adopted before it began accepting returns
electronically. The proposed rules, which would become effective 30
days after a final version is published, would require a tax preparer
to obtain written consent before selling tax information.
Critics call the changes a dangerous breach in personal and
financial privacy. They say the requirement for signed consent would
prove meaningless for many taxpayers, especially those hurriedly
reviewing stacks of documents before a filing deadline.
"The normal interaction is that the taxpayer just signs what the tax
preparer puts in front of them," said Jean Ann Fox of the Consumer
Federation of America, one of several groups fighting the changes.
"They think, 'This person is a tax professional, and I'm going to rely
on them.' "
Criticism also came from U.S. Sen. Barack Obama (D., Ill.). In a
letter last Tuesday to IRS Commissioner Mark Everson, Obama warned that
once in the hands of third parties, tax information could be resold and
handled under even looser rules than the IRS sets, increasing
consumers' vulnerability to identity theft and other risks.
"There is no more sensitive information than a taxpayer's return,
and the IRS's proposal to allow these returns to be sold to third-party
marketers and database brokers is deeply troubling," Obama wrote.
The IRS first announced the proposal in a news release the day
before the official notice was published, headlined: "IRS Issues
Proposed Regulations to Safeguard Taxpayer Information."
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