Not A Good Idea....
March 21, 2006
BY JEFF GELLES
KNIGHT RIDDER NEWSPAPERS
PHILADELPHIA -- The Internal Revenue Service is quietly moving to loosen the once-inviolable privacy of federal income-tax returns.
If it succeeds, accountants and other tax-return preparers for the first time would be able to sell information from individual returns -- or even entire returns -- to marketers and data brokers.
The change is in a set of proposed rules the Treasury Department and the IRS published in the Dec. 8 Federal Register, where the official notice labeled them "not a significant regulatory action."
IRS officials portray the changes as housecleaning needed to update outmoded regulations adopted before it began accepting returns electronically. The proposed rules, which would become effective 30 days after a final version is published, would require a tax preparer to obtain written consent before selling tax information.
Critics call the changes a dangerous breach in personal and financial privacy. They say the requirement for signed consent would prove meaningless for many taxpayers, especially those hurriedly reviewing stacks of documents before a filing deadline.
"The normal interaction is that the taxpayer just signs what the tax preparer puts in front of them," said Jean Ann Fox of the Consumer Federation of America, one of several groups fighting the changes. "They think, 'This person is a tax professional, and I'm going to rely on them.' "
Criticism of the proposal also came from U.S. Sen. Barack Obama, D-Ill. In a letter March 14 to IRS Commissioner Mark Everson, Obama warned that, once in the hands of third parties, tax information could be resold and handled under even looser rules than the IRS sets, increasing consumers' vulnerability to identity theft and other risks.
The IRS announced the proposal in a news release the day before the notice was published, headlined: "IRS Issues Proposed Regulations to Safeguard Taxpayer Information."
The announcement did not mention potential sales of tax information.
IRS spokesman William M. Cressman said, "The heart of this proposed regulation is about the right of taxpayers to control their tax return information. The idea is to emphasize taxpayer consent and set clear boundaries on how tax return preparers can use or disclose tax return information."