Posted: Wednesday, March 29, 2006 6:00 pm
There is a troubling move afoot by the Internal Revenue Service to allow tax-return preparers to sell information to marketers and data brokers.
At first glance, this seems to be a wrong-headed move. At second and third glances, too.
Americans cringe at having to share their deepest fiscal secrets with the government in the first place. But it is against the law to refuse. And now the IRS wants to help someone make a buck sharing it with other strangers?
It is ironic that the proposal is described as an effort to increase safeguards. In fact, the IRS referred to the measure in a news release headlined: “IRS Issues Proposed Regulations to Safeguard Taxpayer Information.”
The change was included in a set of rules that the Treasury Department and the IRS published in the Dec. 8 Federal Register.
The rules, to go into effect 30 days after publication of a final version, would include requiring a tax preparer to obtain written consent before selling tax information.
The resulting furor cast a spotlight on a little-known fact: Return-preparers long have been allowed to sell taxpayer information, if they obtain their clients’ permission.
The proposal at hand was explained as an attempt to prevent abuse in this age of computer communication and the practice of some firms to “offshore” their clients’ tax preparations to India and elsewhere.
Then consumer groups and privacy advocates got wind of the plan.
Jean Ann Fox of the Consumer Federation of America said taxpayers can be duped into releasing their information. She told the Washington Post that the new rules are “dangerous” and “essentially turn tax-return information into a commodity for the highest bidder.”
In a letter to the IRS commissioner, U.S. Sen. Barack Obama, D-Ill., said, “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.”
It’s difficult enough to persuade taxpayers to file honest claims without inventing more reasons for them to be distrustful of the entire tax system.
Despite the claimed good intentions of the IRS in offering up these rules, it is difficult for some to grasp why tax return data should be for sale at all. Besides the tax-preparer factories and marketers, who benefits by it?
The IRS is going in the wrong direction here. The agency should have moved to eliminate the offending rule, not try to toughen it up, risking unintended consequences and further alienation of a gun-shy citizenry.