Democrats want DOJ to prosecute tax prep companies for privacy violations

A group of Democratic lawmakers are urging the Justice Department to prosecute tax prep companies accused of improperly sharing user information with Meta and Google through their advertising pixels.

Sens. Elizabeth Warren (D-MA), Ron Wyden (D-OR), Richard Blumenthal (D-CT), and Rep. Katie Porter (D-CA), are calling on the DOJ to take action against tax prep companies that they say failed to protect taxpayer privacy. In a new letter shared exclusively with The Verge, the lawmakers advance their previous calls for law enforcers to investigate these companies.

All this is the latest in a series of events that kicked off after The Markup published a report in 2022 revealing how tax prep companies shared financial information with Meta and Google through a common piece of code known as a pixel. (At least one of the companies told The Markup at the time that it hadn’t realized the information was being shared and deactivated the pixel.) Lawmakers responded with a congressional probe, which was in turn followed by an audit from the Treasury Inspector General for Tax Administration (TIGTA). The results of the audit were released by the TIGTA last month, and the senators say that the audit confirms their own findings, which were released back in July 2023.

The lawmakers’ own investigation covered TaxSlayer, H&R Block, and Tax Act. The Markup also found the code on software provider Ramsey Solutions. The TIGTA report does not name individual tax prep providers but said its review of “four tax software companies” found that they did not comply with a Treasury regulation aimed at protecting taxpayer privacy. Although the companies collected taxpayer consent for disclosing tax return information (think: a checkbox with general language about letting the company share your data) they did not clearly identify the specific reason why they were soliciting consent. Neither did they identify who specifically would receive that data. The IG also noted that federal guidance for obtaining taxpayer consent does not specifically address the use of pixels, and recommended the Internal Revenue Service update its procedures to include it.

The lawmakers say it’s now up to the Justice Department to enforce the relevant criminal law. “The penalties for knowingly or recklessly disclosing or using tax return information include up to 1 year in prison, and penalties of up to $1000 per violation,” the senators write in their letter to the DOJ.

“Accountability for these tax preparation companies — who disclosed millions of taxpayers’ tax return data, meaning they could potentially face billions of dollars in criminal liability — is essential for protecting the rule of law and the privacy of taxpayers,” the letter reads. “We urge you to follow the facts and the conclusions of TIGTA and the IRS and to take appropriate action against any companies or individuals that have violated the law.”