Tax Prep Company Data-Sharing Debacle

By: James Flippin · July 13, 2023 · Reading Time: 3 minutes

The Accusations

A group of seven lawmakers, led by Senator Elizabeth Warren (D-MA), issued a report calling for the Biden Administration to investigate a potential data breach involving Big Tech. Google (GOOGL) and Meta Platforms (META) have been implicated in illegal data sharing practices with the tax prep companies TaxSlayer, H&R Block (HRB), and TaxAct.

According to the report, all parties are to blame for the data misuse, which lawmakers referred to as “reckless”. Both Google and Meta are no stranger to hefty fines for violating data privacy issues. Google was recently fined $391.5 million for illegally tracking user locations and Meta fined $1.3 billion for violating data privacy rules in the EU.

Illegal Data Sharing

The data breach was first reported by The Markup and The Verge. From there, the group of seven lawmakers expanded and conducted their own probe.

According to the findings, once tax prep companies downloaded Meta’s suite of tools, Meta’s pixel tracker automatically sent names, emails, income, tax exemptions, deductions, and other sensitive financial info about users to Meta. A similar situation is claimed to have occurred with Google and TaxAct.

According to the report, the tax prep companies installed Meta and Google’s tools without a clear understanding of how the data sharing processes worked. But, at the same time, the tech companies failed to clearly state how they collect and use information.

Removing the Middleman

Ultimately, the report determined that Meta successfully used the data collected from H&R Block & Co. to show targeted ads to its own users. Additionally, there’s evidence that Meta used this data to train its AI algorithms.

If the federal government decides to investigate further, this could result in billions of dollars of criminal liability to the firms.

Fortunately for US taxpayers, the IRS has started working on a free pilot program to help you file taxes directly with the government. This program could eliminate the need for tax prep companies, ideally making it easier — and safer — to file taxes online.

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