Tuesday, March 21, 2006

Only You Know & I Know ... Tax Info Outrage

How would you like H&R Block or Turbo Tax to sell your tax return information?

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."

The IRS says it would require the preparers to get your signed consent - which is not something most people would give - but we can see where that's not good enough. It's hard to predict how and how often the abuses would start taking place, but they most surely would. Here is one example:

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.' "

What holds the system in check now is fear: tax preparers generally are just as afraid of running afoul of the IRS and federal prosecution as individual citizens. Leaking privileged data is a huge no-no. While we're no fans of the current income tax system, at least on the issue of privacy it works pretty well.

What is hacking at the root of the system now, we're afraid, is the desire for some companies to make an extra buck or two selling information. It's just too tempting for them not to try to subvert common sense by getting the IRS to change the rules. Profits before privacy; profits before people.

There is only one part of the proposed changes that makes sense.

Taxpayers would also have to give their written approval for companies to "farm out" (or "out-source") the computation of their taxes by overseas personnel.

The last thing we'd want is to have some 19-year-old gal in Bhopal doing our tax work.

Which is why we still do it the old-fashioned way. At home.

Win, lose or draw, when your butt is on the line anyway, take charge of your own affairs.


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