Your tax info may not be as secure as you think

A rule change proposed by the U.S. Treasury Department and the Internal Revenue Service (IRS) has come under fire from privacy advocates who have taken issue with a clause allowing tax preparers to sell tax-return information to third parties.

Introduced last December, the IRS change was proposed to update regulations that govern how tax preparers handle return information. These rules have not been changed since 1974, and the IRS wrote in the proposal that the revision will give preparers greater flexibility in the age of electronic filing.

According to privacy promoters such as Beth Givens, director of the Privacy Rights Clearinghouse, the change is a good one. The new rule requires tax preparers to get consent from their clients before sending paperwork overseas for processing. But Givens voiced dismay at one clause in the new rule that gives tax preparers the right to sell their client's information to third parties after obtaining written consent.

"We think that provision should be abandoned, that it is really crossing a line that should not be crossed," she said.

But officials with the IRS argue that the clause is written to protect consumers by requiring written consent before any sale could occur.

"Contrary to some recent press reports, the proposed rules significantly tighten existing requirements regarding the customer consent a return preparer must obtain to disclose the customer's tax return information to third parties," said the IRS website on the proposed change.

Givens said too many consumers will sign consent forms unknowingly in the haste to file. Most tax-preparation clients are barraged with paperwork, and advocates like Givens think that a consent form could easily be snuck into a pile of other papers.

"It is an opt-in, but it's not necessarily meaningful," she said. "If you're presented a bunch of papers to sign at tax time and you're in a hurry, you're just going to sign on the dotted line and sign the next one. Also, the disclosure might not be written well; it might be written in legalese, and you might not know what you are signing away."

Privacy Rights Clearinghouse was one of dozens of organizations voicing concern over the new clause during an IRS public-comment hearing earlier this month. The agency is taking these comments into consideration, but all signs indicate that the rule will be instated unchanged. If the rule does go into effect without modification, the only way for tax filers to fight the provision is to lobby their legislative representatives.

Givens pointed to legislation proposed by U.S. Sens. Barack Obama, D-Ill., and Maria Cantwell, D-Wash., as one way to stop this rule from exposing private information.

"People can certainly voice their concern to their elected representatives," she said.

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