From: Arinze Ike <uai2101@columbia.edu>
  To  : <cpc@emoglen.law.columbia.edu>
  Date: Tue, 14 Mar 2006 15:37:01 -0500

IRS may allow tax preparers to sell your private information

well, i suppose until new regulations allow the govt to sell or give
your tax information to data brokers, more people may have to
consider doing their own taxes rather than going to H&R Block.

http://www.consumeraffairs.com/news04/2006/03/irs_data_sales.html

ne of the few comforts you can enjoy about tax time is that your
information -- your wages, assets, expenses, and personal data --
are shared only between you, the government, and any tax agents you
may use. No third parties can use it to target you for advertising
or offers.

But the IRS may be revising its rules to allow tax preparers to
share or sell customer information to third parties and database
brokers, as part of a sweeping change to its privacy regulations.

In Dec. 2005, the IRS announced it was planning to update Section
7216 of the tax code, which governs the usage and disclosure of
information gathered by tax preparers.

The regulation was being rewritten to reflect the increasing
reliance on electronic preparation of tax forms, such as the IRS'
E-File system or tax software programs such as TurboTax.

Under the revised regulations, "these proposed regulations allow tax
return preparers to obtain consents to use tax return information
for solicitation of services or facilities furnished by any person
rather than limiting solicitations to the services or facilities
offered by the tax return preparer or member of the tax return
preparer's 'affiliated group.'"

Put more simply, if you get your taxes done by H&R Block, under the
law, the firm can offer you its other services, such as its
much-maligned Refund Anticipation Loan (RAL) plan, but it can't use
your information for anything outside its purview.

Under the proposed new rules, H&R Block could sell your tax
information to data brokers like ChoicePoint, who in turn could
sell it to any company that wanted to pitch you products based on
your financial information.

The plan is drawing fire from consumer groups such as the U.S.
Public Interest Research Group (PIRG), the Consumer Federation of
America (CFA), and the National Consumer Law Center (NCLC).

PIRG's Ed Mierzwinski said that he was not surprised that "the same
IRS that let Richard Nixon and many other Presidents run roughshod
over the privacy of ordinary American citizens now wants to let
powerful special interests plunder our confidential tax records for
commercial gain."
Rules of the Game

In joint comments submitted to the IRS regarding the proposed rules
change, the three groups argued that privacy protections for
taxpayer returns should be increased, and exceptions for consent to
marketing should be eliminated.

The consent exception, in the consumer groups' view, enables tax
preparation firms such as H&R Block and Jackson Hewitt to take
advantage of the "trust relationship" between customers and firms,
enabling the multi-billion dollar growth of the RAL industry.

"Without the [consent] exception, preparers could only offer RALs to
those who actively sought the loans," they said. "Thus, the consent
exception is partly responsible for the ability of preparers to
actively pitch these high cost, high risk loans with triple digit
APRs to mostly low-income taxpayers, especially Earned Income Tax
Credit (EITC) recipients. Eliminating the consent exception would
reduce RAL volume tremendously, saving hundreds of millions for
taxpayers."

H&R Block has been the target of several lawsuits that charge it has
failed to properly inform consumers of the risks involved in taking
out RALs, in order to maximize the profits they gain from loan fees
and interest.

According to the NCLC's latest study on RALs, consumers took out
over $12 million worth of RALs in 2004, paying $1.24 billion in RAL
fees, and another $360 million in "administrative fees."

If the "consent exception" rule is broadened under the new IRS
regulations, the groups charged, harried and busy taxpayers could
be more easily conned into signing documents without having the
time to read and understand them fully, which could lead to their
information being traded among data aggregators, debt collectors,
and other agencies.

Jean Ann Fox, CFA's director of consumer protection, said she was
"astounded that the IRS has proposed changes that might enable data
brokering of the information in tax returns."

"Given the recent highly publicized instances of data security
breaches by information brokers, credit card processors, financial
institutions, and merchants," she said in the comments, "a breach
involving tax information would seriously erode public confidence
in the security and privacy of sensitive tax information."


-- 
Arinze Ike

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