Chet Edwards For Congress

April 6, 2006
Chet Edwards: IRS should not violate taxpayer privacy

Waco Tribune Herald
By Chet Edwards |

WASHINGTON — Would you be shocked if the IRS allowed your private personal financial information, such as your Social Security number, bank balance, home mortgage information or other financial investments, to be sold to the highest bidder?

Get ready to be shocked.

If new proposed IRS regulations go into effect, accountants and tax preparers will be able to sell your tax returns and financial information to private marketers and data brokers who could then share them with anyone.

This disturbing practice could become a reality for millions of American households if these proposed IRS regulations are not blocked. That is why I have introduced H.R. 5063, the Taxpayer Privacy Protection Act of 2006

It is deeply troubling that the IRS is threatening to expose taxpayers to unregulated third party groups under this proposed rule. Those entities then could then sell personal information. It is dangerous for outside groups, governed by even looser rules than the IRS, to be given incentive to profit from your personal information. This should be absolutely prohibited in the interest of protecting consumer privacy.

Current IRS rules require tax preparers to obtain written consent of the taxpayer to pass information to affiliated financial groups, but prohibit any third party group from buying it. The new rule also requires written consent, but would allow anyone to buy the information. The fundamental problem with this is that many taxpayers do not fully read the forms they are signing and could easily sign away their private financial information unknowingly on one of the pages earmarked for their signature. 

In today’s electronic information age, there is no guarantee that once taxpayer financial information becomes loose on the market, it would not be used for questionable or even illegal purposes such as identity theft.

The IRS says that its proposed regulations are meant to safeguard taxpayer information, yet the new rules made no mention of the potential to sell personal financial information to third party groups. Given the troubling reality of sharing private information electronically, the IRS saying it has the best interest of the taxpayers in mind with this rule change is a bit like the fox guarding the henhouse.

We must do more to strengthen taxpayer privacy rules, not weaken them.

The proposed rule by the IRS is a breach of trust between taxpayers and their tax preparers, a relationship that is second only to immediate family when it comes to the sharing of personal information. Not only that, but the IRS and the largely voluntary American system of taxation could be damaged permanently if people fear the system is responsible for their private information being sold to the highest bidder. The IRS can hardly afford lower public approval ratings than it currently enjoys.

I am not the only member of Congress troubled by these proposed rules. Republicans and Democrats alike in Congress, along with several consumer groups, are questioning the IRS’s motivation behind these new rules and seeking to block them from being implemented.

Just how is the public served by selling personal information for profit, and who or what is responsible for pushing the IRS for this regulatory change?

My legislation, the Taxpayer Privacy Protection Act of 2006, is a direct response to the proposed IRS rules and would prevent tax preparers from seeking the consent of taxpayers before selling their tax returns. Specifically, it would require the taxpayers themselves to actively request that tax preparers pass their information to outside groups instead. This would help prevent taxpayers from unknowingly signing forms that grant permission to share their information with groups that have questionable motives. It would also allow taxpayers to maintain their right to pass their financial information to institutions such as banks for home loans or other financial transactions needed by the taxpayer

Personal financial information we share with our tax preparers and accountants is highly sensitive, and most accountants don’t intend to sell your information. However, if you have any doubts, talk to your tax preparer.

U.S. Rep. Chet Edwards, D-Waco, represents District 17 in Congress.