New disclosure rules from the Internal Revenue Service are generating heat from both tax-preparation firms, which describe them as cumbersome, and consumer advocates, who don’t want the IRS to allow marketing of taxpayer information.
Currently, if taxpayers consent, their information can be shared by tax preparers with other businesses for marketing purposes.
The IRS will hold a public hearing April 4 in Washington, D.C., to discuss rule changes that broaden the information tax preparers can share and tighten consent requirements.
Consumer groups want a ban on outside parties accessing tax information, even with consent. Local taxpayers said they fear unwittingly signing a consent form and losing control over their financial data.
“The less we control our personal information, the more dangerous it becomes for us as individuals,” said Dave Holman, president of Optimum Management Systems, a technology consulting firm in Denver.
Tax forms offer a treasure trove of information that marketing companies, financial-service providers and identity thieves would love to get, consumer advocates say.
“We would like to see a prohibition on the use of tax information by anyone for cross-marketing purposes,” said Chi Chi Wu, a staff attorney with the National Consumer Law Center in Boston.
Her group is especially opposed to the use of information to market high-interest loans against refunds to consumers.
Making it easier for tax preparers to cross-market products could make them less objective, said Brian Chase, a tax expert with Fay CPA in Denver.
“A CPA or tax preparer should be an unbiased source of information,” he said. “When you get yourself aligned with someone else you lose that objectivity.”
Already, financial-service firms are approaching CPA firms in an effort to form strategic alliances, he said.
In theory, savvy consumers would reject sharing their tax-return data. And the IRS claims it is trying to give consumers more information, not less.
IRS disclosure forms would require consumers to consent to each specific use of information, a requirement that Intuit Inc., HSBC Holdings PLC and Jackson Hewitt Tax Service Inc. oppose as too cumbersome.
The firms argue the new rules would limit the ability of consumers to access useful products and services.
But Wu said many people who use tax preparers sign where they are told without asking a lot of questions.
“I could put about anything in front of some of my clients and they trust me enough that they would sign it,” said Leslie Twarogowski, founder of Cheap1040.com, a Denver tax-preparation firm that offers home delivery.
The IRS describes the changes as a way to strengthen existing consent rules and enhance consumer protections.
Under current rules, tax preparers can send returns overseas to be prepared by foreign workers, for example, without a taxpayer’s consent.
“We thought it was important to clarify the consent provision because of widespread concerns about the disclosure of tax-return information without taxpayer knowledge, including the offshore preparation of tax returns,” said IRS Commissioner Mark Everson in a statement.
Bloomberg News contributed to this report.
Staff writer Aldo Svaldi can be reached at 303-820-1410 or asvaldi@denverpost.com.
