More Privacy or Less Under Proposed IRS Rules?

A privacy proposal by the Internal Revenue Service (IRS) has apparently angered consumer advocates, tax professionals and state governments.

The IRS, in a hearing Tuesday, took comments on changes to new privacy proposals that would allow tax preparers, with the taxpayers' permission, to sell or disclose information included on their returns.


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The proposed rules would change the way in which tax professionals get approval from taxpayers before sharing their tax information with third parties. The IRS said the new rule would make it clearer to consumers, through a "strong warning," that their tax information might be shared.

The IRS says companies have always had the power to reveal the information, if a taxpayer agrees. The changes, the IRS says, update the 1974 rules for modern, electronic business methods.

According to Business Week, attorneys general from 47 states called for severe restrictions or an outright ban on using tax return information for marketing. “There is simply too much at risk for American taxpayers, particularly with respect to the ongoing scourge of identity theft, to increase the likelihood that their most personal information will be stolen or misused,” they said in a letter to IRS Commissioner Mark Everson.

The Consumer Federation of America said the IRS should focus on making sure tax information is not shared for any reason. "We're trying to close the loophole that lets tax preparers sell personal information. We think that the new regulation will allow tax preparers to sell your information to an even wider group of marketers," spokeswoman Jean Ann Fox told ABC News.

And H&R Block Vice President Murray Walton said at the hearing, “We find the idea of selling tax return information repugnant.”

IRS spokeswoman Nancy Mathis told ABC News: "It requires that tax preparers must tell taxpayers that if you give consent, things can happen to your information that you may not want to happen," said. "The tax preparer can do nothing - absolutely nothing - with a tax filer's information without that consent."

The Treasury Department and IRS will now make a final a rule that takes the comments into account.

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