Simon Fondrie-Teitler, Angie Waller, and Colin Lecher, reporting for the Markup in November:
Major tax filing services such as H&R Block, TaxAct, and TaxSlayer have been quietly transmitting sensitive financial information to Facebook when Americans file their taxes online, The Markup has learned.
The data, sent through widely used code called the Meta Pixel, includes not only information like names and email addresses but often even more detailed information, including data on users’ income, filing status, refund amounts, and dependents’ college scholarship amounts.
This alarming story caught the attention of lawmakers, including Sen. Elizabeth Warren, who commissioned a report (PDF) on the use of analytics and tracking in tax preparation software. Regrettably, the text in this document has been rasterized; if you need a version with recognized text — for example, if you use a screen reader — I have uploaded a copy to Dropbox. I recommend reading it if you are at all interested in this sort of thing.
For example, while everyone involved acknowledged the inadvertent collection of tax-related information by ad tech companies, they waved away any concern because, they said, the data was de-identified. We all know how comforting a statement like that really is. Two of the three tax software providers enabled the collection of additional data — one of them blamed it on advice given to them by a Meta representative — and none knew exactly what had been transmitted to Meta. Nobody seems to be able to say exactly how this information was used after transmission, but the investigation concluded it was likely it was used for targeted advertising, because that is the main reason for this data collection in the first place.
I previously filed tax returns through H&R Block; in 2022, I used Wealthsimple. The tax prep areas for both sites appear to still be using tracking products from Google and Meta. It looks to me like less information is being collected; however, it is still strange to me that I would find any third-party trackers in tax prep software. Wealthsimple’s site also has a number of other third-party analytics providers within its tax prep area, and it sure looks to me like my income is being processed by a third-party data unification platform for Wealthsimple’s internal use. Importantly, there is no indication it is being resold to advertisers nor collected by any other third-party product. I have asked Wealthsimple for comment. (Update: Wealthsimple assures me that “personal information is not shared with any other third parties such as Google or Meta”, and that data collected in Segment is “only used for internal purposes (such as our business intelligence tools) that improve the user experience”.)
Colin Lecher, the Markup:
Meta claims to have automated mechanisms to filter out sensitive data, but the lawmakers’ report claims those safeguards are “woefully inadequate” and appear to exist only to provide “a modicum of deniability.” According to the report, Meta told congressional staff that it sent notifications to tax prep companies about the data after The Markup requested comment ahead of publication, but the tax prep companies said they never received those notifications.
Unlike many other countries, the United States does not have a widely available, free tax-filing option run by the government itself, essentially forcing many taxpayers to go through tax preparation companies. The report urges the IRS to change that, concluding that the “investigation raises serious doubts about the ability of the tax prep industry to safeguard taxpayer information and highlights the urgent need for the IRS to develop its own online tax filing system—to protect taxpayer privacy and provide a better alternative for taxpayers to file their returns.”
Sen. Warren’s office:
The lawmakers also sent a letter to the Internal Revenue Service (IRS), the Treasury Inspector General for Tax Administration, the Federal Trade Commission, and the Department of Justice highlighting their key findings and calling on these departments to fully investigate this matter and prosecute any company or individuals who violated the law. The companies shared millions of taxpayers’ tax return data, meaning they could face billions of dollars in potential criminal liability.
Canadians also need to file our own taxes, but the federal government says automatic and free filing will be trialled next year.