Selling of tax info too prone to abuses

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Your favorite federal agency, the Internal Revenue Service, just can’t catch a break. Here they were scribbling away in the Federal Register, dutifully telling us they are merely trying to clarify their regulations, oxymoronic as that may sound.

Their front people say they were trying to make it more apparent that taxpayers can let somebody paid to do their income taxes share that information with others willing to mine it for ways to make money.

You got that? 

The IRS says the rules have always given tax preparers the power to disclose information to a third party if a taxpayer consents.

Last month, the agency, without a lot of attention, proposed rules that allow tax return information to be shared or sold  for one year with any third party, including marketing firms and other data brokers, if the taxpayer consents.

Not surprisingly, the agency got some hot responses when it went to a hearing this week.

Among the pitchfork and torchbearers are 47 state attorneys general, not including Nebraska’s, and a whole parcel of consumer defense forces.

They all want the IRS to prohibit or greatly restrict, not expand, the use of tax-return information for purposes like peddling “tax refund anticipation loans” for those who need the money before the government check comes.  

“There is simply too much at risk for American taxpayers, particularly with respect to … identity theft, to increase the likelihood that their most personal information will be stolen or misused,” the attorneys general wrote in a letter to IRS Commissioner Mark Everson.

Nebraska Attorney General Jon Bruning  took a look at this one and decided it was up to the taxpayer.  If you want to give permission, so be it.

“This issue is about taxpayers controlling who has access to their personal information, and we trust Nebraskans to make their own decisions,” Bruning said.

Meanwhile, representatives from Intuit, which makes TurboTax software, and H&R Block, the tax preparation company, told the IRS they oppose allowing the sale of this information, according to news reports.

Murray Walton, vice president and compliance officer at H&R Block, was quoted by the Associated Press as telling the IRS: “We find the idea of selling tax-return information repugnant.”

This from the company that’s being sued by the California attorney general for  allegedly marketing and selling tax refund anticipation loans illegally.

 The question is this:  If somebody actually says it’s OK to sell his or her tax return information, why should anybody else care?   

Supporters of the proposed changes, including IRS officials, point out that preparers would be required to produce a separate piece of paper or Web page requesting permission to disclose personal information, Information Week reported. The request would have to be written clearly, in 12-point type, and outline each possible use.

Still, let’s look at it this way.   The anxiety-stricken taxpayer is facing a deadline and in a fit of haste, checks the box that that allows the sale of the information to anybody willing to pay the price. 

So then the information is mishandled by the third-party purchaser and gets into the hands of someone even more greedy and less responsible.

The potential good that might come from this transaction, a dubious proposition, is way overshadowed by the potential for abuse and for more identify theft. 

And then the AGs have to go chase the identity thieves.

As the attorneys general pointed out to the IRS, most people are not clamoring to make their financial information more available to more businesses.

Are you?