Last week's news that the Internal Revenue Service wants to adopt
rules that would plainly allow tax preparers, with a taxpayer's
consent, to sell tax returns to marketers sparked a firestorm of
protest from taxpayers around the country.
It's not clear yet whether the IRS's response will douse or fan the flames.
In interviews and e-mails last week, IRS officials said consumer and
privacy-rights advocates were wrong in contending that the proposed
rules would weaken taxpayers' privacy by enabling tax preparers to cash
in on the mother lode of financial information they amass as they fill
out clients' tax returns or process them via the Internet.
Why? Because the IRS says that tax preparers already have that option - and have since the current rules were adopted in 1974.
"Accountants and other tax-return preparers have had the ability for
32 years to sell tax-return information - with the consent of the
taxpayers - to any third party," IRS spokeswoman Nancy Mathis said.
The Washington Post referred to the IRS's statement about the 1974 rules as "a little-known fact."
But to critics of the new rules, it wasn't "fact" at all.
"That's their interpretation," said Chi Chi Wu, a specialist in
consumer tax issues at the National Consumer Law Center. "Reading the
regulations, our interpretation is that a tax preparer can't sell tax
information for marketing purposes to a third party."
Is it going on already?
Who's right? As a nonlawyer, I really can't say, so I'll spare you
most of the arcane details. The IRS says it pretty much comes down to a
subtle distinction between the meanings of two words, use and disclose, in the 1974 regulations - though it acknowledges that the old rules don't actually define either word.
Consumer groups critical of the IRS's plan focus on the agency's own
words. In announcing the rules in December, the IRS said it would end a
prohibition on preparers' providing tax-return information to unrelated
companies for marketing purposes, adding that "taxpayer privacy
interests are adequately protected" by the consent requirements.
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