IRS Free File Firms Accused Of Exploiting Taxpayer Data

by Leroy Baker, Tax-News.com, Washington

03 April 2003

The US Treasury Department has agreed to investigate companies who offer free tax filing services via the IRS website after allegations that they are improperly using tax-payer data to market other products.

The call has come from consumer groups concerned that the firms are using client details to promote such things as mortgages and investments. The drive has the support of Senator Jeff Bingaman (D-New Mexico), who says he objects to the fact that the government is unwittingly being used as a marketing tool for these tax advisory firms. He intends to call for laws preventing them using taxpayer data in such a way if the Treasury Department does not tighten its regulations.

However, the IRS has defended the 17 companies that offer free electronic tax filing services through its website, most of whom offer other financial products. The tax agency intends to get 80% of taxpayers filing returns electronically by 2007, and it argues that these firms need some form of incentive for their assistance in facilitating this process.

Legally, the firms are not doing anything wrong, according to IRS taxpayer advocate Nina Olson. However, she did admit that their actions are perhaps not following the intended spirit of the law.

One of the firms which has come under fire, H&R Block, has responded by arguing that its software is fully compliant with all of the appropriate laws. It also contests the allegation that the firm has flouted privacy laws, pointing out that consumers need to twice give their consent before the firm will offer alternative products.

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