Is Your Tax Filing Service Selling Your Data?
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Introduction

Imagine using a free tax preparation or filing service, only to discover afterwards that your devices are flooded with ads for expensive cars and luxury vacations. This scenario isn't far-fetched.

A revealing investigation by The Markup [1]  back in 2022 showed that popular tax filing services have been sending highly sensitive financial information to Facebook (Meta) through the Meta Pixel.

These implications extend beyond individual privacy concerns. Today, tax professionals are under threat too. The IRS has flagged a new series of scams aimed at tax preparers [2], endangering professionals and their clients. Scammers, masquerading as taxpayers, are tricking accountants into handing over confidential information or gaining access to client data, underlining the dangers of managing taxpayer information. 

These scams also expose businesses to financial liabilities. Social engineering attacks facilitated by access to this leaked information could lead to significant financial losses for businesses which Splunk [3] say averages at $130,000 dollars. IBM’s 2023 Cost of Data Breach Report [4] highlights that these losses are then passed on to consumers through increased prices.

This article delves into the hidden costs associated with "free" tax preparation services, offering insights into the risks not just to personal privacy but also to business operations. 

How "Free" Tax Preparation Works

The Business Model

You might wonder how firms offering "free" tax filing services turn a profit. The answer lies in several revenue-generating strategies beyond the basic filing service. These include software upsells, leads for other financial products and, in some cases, data sharing. Such models are crucial for these companies to sustain their operations while offering services at no upfront cost to the user.

Extensive Data Collection

When signing up for "free" tax services, you're asked to share a significant amount of personal information. According to TaxSlayer's privacy policy [5], this can include your Social Security Number, income, deductions, credits, health insurance information, dependents and other personal details. This level of data collection goes beyond filling out your 1040 form. It's a comprehensive collection of your financial and personal information, which raises questions about privacy and data security.

Data Fuels the Business Model

The core of the "free" tax prep service model often involves sharing personal financial data with third parties for marketing and targeting purposes as The Markup’s investigation highlighted.

The intended use of this data isn't entirely clear, but Meta's website states that the Pixel helps in making ads more relevant to the user. This underscores the real cost of using "free" tax preparation services: the use of your personal data in ways that may not always be transparent or fully understood by the user.

These data-sharing practises extend beyond tax preparation services and into for example, car insurance which we covered in our recent blog, The Invisible Data Sharing Market: An Exploration.

The 'Anonymisation' Myth

The concept of data anonymisation is commonly presented as a silver bullet for privacy concerns with businesses often claiming that they anonymise or de-identify user data and that this data cannot realistically be used to identify individuals.  By removing or altering personal identifiers, it's believed that data can be shared or analysed without risk.  

For instance, TaxAct's policy [6] asserts, "We may also disclose aggregated or de-identified information, which cannot reasonably be used to identify you." However, research indicates that seemingly anonymised data can often be re-identified when combined with other datasets, posing a significant privacy risk.

At first glance, this practice seems to offer a robust protection mechanism. However, the reality is far more complex and less secure than it appears.

Data anonymisation involves stripping away personal identifiers, such as names, addresses and Social Security numbers, from datasets. While this sounds reassuring, the effectiveness of anonymisation is being challenged. Advances in technology and data analytics have made it possible to piece together "anonymised" data with other publicly available data, leading to re-identification.

A study by researchers at the Université Catholique de Louvain and Imperial College London [7]  revealed that 99.98% of Americans could be correctly re-identified in any dataset using 15 demographic attributes, including seemingly innocuous ones like gender, date of birth and marital status.

The financial and personal information collected is not only sensitive but also highly specific to individuals. When companies like TaxAct disclose "aggregated or de-identified information," the risk doesn't vanish. 

Data brokers or entities with access to multiple data sources can potentially match this "anonymised" information with other details available in data leaks, social media, or public records, effectively undoing the anonymisation.

Risks and Potential Consequences

There are several risks and consequences to be aware of and look out for ranging from targeted advertising to data theft. With AI integration happening at every level of business, the risks can change quickly and the consequences could become much more severe.

Targeted Advertising

Targeted advertising might seem benign but it serves as a foundational example of how personal data can be used to draw insights from consumer behavior. If tax preparation services share your data, advertisers gain access to detailed insights, not just about your spending patterns but also about life changes and financial decisions, such as buying a house or saving for college. 

With the integration of AI, these advertising strategies become even more sophisticated, using predictive algorithms to forecast future purchases and life events, making ads more intrusive than ever.

This depth of knowledge enables advertisers to craft highly personalised and sometimes uncomfortably precise marketing strategies, potentially influencing your financial decisions without your explicit awareness.

Price Discrimination

Price discrimination is a more insidious outcome of data sharing. This practice leverages collected data to tailor prices to individual consumers based on their perceived ability to pay. For instance, if your data suggests you consistently purchase high-end products or services, companies might infer a higher disposable income and adjust their pricing models accordingly when you shop online. 

AI enhances this practice by dynamically adjusting prices in real-time and analysing a broader spectrum of your online behaviour to deduce purchasing power with unprecedented precision

This raises ethical concerns, as it can exacerbate socio-economic disparities by making goods and services more expensive for those deemed able to afford more.

Data Broker Networks

The role of data brokers in the digital ecosystem has grown exponentially in recent years. These entities amass vast amounts of data from various sources, including tax preparation services, and create detailed profiles on millions of individuals. With AI’s ability to analyse data at scale models can identify patterns and connections that would be imperceptible to human analysts. These profiles can influence a wide range of decisions about you, from personalised insurance plans to employment opportunities. 

The information sold by data brokers goes far beyond basic demographics, encompassing financial status, health information, purchasing behaviour and even your online activities. The application of AI in this context means that the extrapolation of sensitive information from seemingly benign data points becomes much more feasible, enhancing the depth and accuracy of the profiles created. This extensive profiling can have far-reaching implications, affecting not just consumer choices but also access to services and opportunities, often without the subject's knowledge or consent.

Once your personal information is disclosed to third parties, it becomes a part of the expansive web of data brokers. AI's role in optimising the data-sharing market further complicates privacy concerns, as it facilitates the rapid exchange and combination of vast datasets across networks, amplifying the potential for misuse.

This network operates largely unseen, buying and selling personal information to tailor marketing efforts, assess risk and make myriad decisions affecting consumers. The lack of transparency and control over this process poses significant privacy concerns, as individuals have limited ability to influence how their data is used or to whom it is sold. This situation highlights the need for more stringent regulations and consumer protections in the digital data market.

Beyond Targeted Ads

Expanding on the concept of targeted advertising, TaxSlayer's policy, which permits the sharing of data with affiliates and third parties for marketing purposes, hints at a deeper level of data use. Beyond just seeing personalised ads, this shared data can influence the rates you're offered by insurers, the credit offers you receive and even the job prospects available to you.

AI compounds the potential for discrimination and bias in these processes, as algorithms making these determinations can inherit and perpetuate existing biases.

Background checks by potential employers, for instance, may incorporate data sourced from these networks, affecting your employability based on criteria you may not be aware of. This extensive use of personal data underscores the importance of understanding and managing one's digital footprint in an increasingly interconnected world.

The Price of "Convenience"

The convenience offered by "free" tax preparation services often masks the true cost of these services—the potential compromise of your privacy. The Markup's investigation into the use of financial data by marketers and data brokers illustrates the trade-offs involved. 

The incorporation of AI into these services means that the analysis and use of your data are not only more efficient but also more invasive, as algorithms can quickly uncover and act upon patterns in your financial behaviour.

By choosing these services, consumers may unwittingly consent to the use of their sensitive financial information in ways that extend far beyond tax preparation, affecting their privacy and financial health in the long term.

Lack of Legislative Safeguards

The current regulatory framework in many jurisdictions falls short of providing adequate protection against the misuse of personal data. With the widespread adoption of AI models, data processing and analysis introduces new challenges to the regulatory landscape as technology developments can easily outpace regulations. 

As noted by AP News [8], the absence of comprehensive legislation leaves consumers vulnerable to privacy invasions and the potential misuse of their data. This regulatory gap highlights the importance of consumer awareness and the role of privacy advocacy in pushing for stronger data protection laws.

Data Breaches and Identity Theft

Finally, the risk of data breaches and identity theft cannot be overstated. Information shared with tax preparation services, if improperly secured, can become a target for cybercriminals. The repercussions of such breaches are profound, extending beyond privacy violations to include financial fraud and identity theft. 

Earlier this year, The Wall Street Journal [9] reported that the IRS had reviewed and restricted employee and contractor access to taxpayer data in the wake of a data breach that saw confidential tax information of wealthy individuals like Jeff Bezos and Elon Musk leaked to the public domain. The IRS's focus on safeguarding taxpayer information highlights the critical need for robust security measures to protect sensitive data from these threats.

Contact Us For More Information

If you’d like to understand more about Zendata’s solutions and how we can help you, please reach out to the team today.

Taking Control of Your Data

In an environment where personal data can easily be misused, taking proactive steps to protect your privacy becomes crucial.

Vetting Your Tax Preparer

Choosing a tax preparation service requires more than just comparing prices and services offered. It involves understanding and evaluating how your personal data will be handled and protected.

  • Data Storage and Access: It’s crucial to know where and how your data is stored. Is it on secure, encrypted servers? What measures are in place to protect against data breaches? Understanding who within the company has access to your information is equally important. Ensure that only essential personnel can view your sensitive data, and inquire about the procedures for accessing it.
  • Sharing with Third Parties: Clarify the circumstances under which your data might be shared. Even data shared in "anonymised" form can be at risk if combined with other information. Ask specifically whether your data is used for purposes beyond tax preparation, such as marketing and whether you can opt out of this sharing.
  • Temporary Staff: Hiring temporary staff during the busy tax season can introduce additional risks. Inquire about the background checks and data access policies for these temporary employees. How is their access to sensitive information controlled and what training do they receive on data privacy?

A firm’s transparency in responding to these questions can be a good indicator of their commitment to data protection.

Privacy-First Tax Preparation/Filing Software

For those opting to file taxes independently using software, the choice of platform can significantly impact your data privacy.

  • Look for software that explicitly states its commitment to user privacy in its policies. This includes details on data encryption, how data is stored and assurances that your information will not be sold or shared without consent.
  • Evaluate the software’s privacy settings, ensuring you have control over what information is shared and with whom. Some platforms may offer enhanced privacy options for an additional fee.

Choosing software from a company with a strong privacy policy not only protects your data but also aligns with best practices in digital security.

Opting Out

Removing your information from data broker lists and opting out of data tracking are proactive steps in taking control of your privacy.

  • While specific opt-out procedures vary by company, many data brokers and tracking services offer mechanisms to remove your information from their databases. This can prevent your data from being sold to advertisers or other third parties.
  • Investigate and make use of online resources dedicated to privacy protection. These websites often provide guides and links to opt-out pages for numerous data brokers and tracking services.

Taking these steps can reduce unsolicited marketing and decrease the risk of your information being used in ways you did not intend.

Make Informed Decisions

Data privacy laws lag behind technological advancements so making informed choices about tax preparation services is more important than ever.

  • Investigating a service’s privacy policy, understanding their data handling practices, and asking pointed questions about data protection will tell you how your information is treated.
  • Pay attention to red flags, such as vague policies or reluctance to provide detailed answers about data security measures.

An informed choice involves selecting a service that meets your needs and respects and protects your privacy.

Alternative Options

Exploring alternatives to mainstream tax preparation services can offer paths to greater data privacy.

  • Consider services that prioritise client confidentiality and data security, possibly at a premium. These providers often make privacy a cornerstone of their business model, differentiating themselves through rigorous data protection practices.
  • Local tax professionals or firms with a strong privacy focus can offer personalised service with a commitment to keeping your data secure and not sharing it without explicit permission.

These alternatives might require additional research and potentially higher costs but can provide added peace of mind regarding data privacy.

Vigilance is Key

The IRS's emphasis on vigilance against scams and fraud highlights the ongoing challenges in protecting sensitive data.

  • Tax professionals and taxpayers alike must be aware of the evolving tactics used by cybercriminals, from phishing emails to more sophisticated social engineering attacks.
  • Continuous education on the latest security threats and best practices for data protection is essential. Implementing robust security measures, such as two-factor authentication and regular security audits, can fortify defenses against data theft.

Staying informed and maintaining a proactive stance on data privacy are critical in navigating the complexities of today’s digital landscape.

Conclusion

It's important to stress that many tax professionals provide ethical services and prioritize client privacy. Paid tax preparation can be the best choice, particularly for those with complex tax situations where expert guidance is invaluable.

However, the allure of "free" tax preparation obscures the true cost – your personal data. This data isn't just used for targeted ads; it fuels a vast industry that profits from profiling and potentially sharing your information with businesses outside the tax sphere.

Ultimately, knowledge is power. This article aims to equip you to make informed choices about tax preparation.  Weigh the convenience of "free" against the potential long-term consequences of relinquishing control over your most sensitive financial details.

There are two key points to remember:

  • Investigate Before You File: Don't choose a tax preparation service blindly. Ask direct questions about how your data is stored, who has access and if it's ever shared with third parties.
  • Alternatives Exist: DIY software with clear privacy policies can be an option. Seek out paid tax preparers with a commitment to protecting your information.

We’re not trying to instil fear or raise the alarm. Our aim is to highlight the risks that are out there and provide recommendations on how to protect your personal data.. Our goal is to promote responsible decision-making and awareness of the trade-offs inherent in the digital age when it comes to your financial privacy.

[1] https://themarkup.org/pixel-hunt/2022/11/22/tax-filing-websites-have-been-sending-users-financial-information-to-facebook

[2] https://www.irs.gov/newsroom/irs-security-summit-partners-warn-of-surge-in-new-client-scams-aimed-at-tax-pros-as-2024-filing-season-approaches

[3] https://www.splunk.com/en_us/blog/learn/social-engineering-attacks.html#:~:text=98%25%20of%20cyberattacks%20rely%20on,access%20to%20sensitive%20business%20information.

[4] https://www.ibm.com/reports/data-breach

[5] https://www.taxslayer.com/policies/privacy/

[6] https://www.taxact.com/ffa/free-file/privacy-notice

[7] https://nature.com/articles/s41467-019-10933-3

[8] https://apnews.com/article/irs-taxpayer-tax-preparation-meta-congress-9315cfca7a0942ab89f765d183fbf822

[9] https://www.wsj.com/politics/policy/irs-cracked-down-on-access-to-tax-data-after-bezos-musk-leaks-fc3d9567

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Contact Us For More Information

If you’d like to understand more about Zendata’s solutions and how we can help you, please reach out to the team today.

Is Your Tax Filing Service Selling Your Data?

April 10, 2024

Introduction

Imagine using a free tax preparation or filing service, only to discover afterwards that your devices are flooded with ads for expensive cars and luxury vacations. This scenario isn't far-fetched.

A revealing investigation by The Markup [1]  back in 2022 showed that popular tax filing services have been sending highly sensitive financial information to Facebook (Meta) through the Meta Pixel.

These implications extend beyond individual privacy concerns. Today, tax professionals are under threat too. The IRS has flagged a new series of scams aimed at tax preparers [2], endangering professionals and their clients. Scammers, masquerading as taxpayers, are tricking accountants into handing over confidential information or gaining access to client data, underlining the dangers of managing taxpayer information. 

These scams also expose businesses to financial liabilities. Social engineering attacks facilitated by access to this leaked information could lead to significant financial losses for businesses which Splunk [3] say averages at $130,000 dollars. IBM’s 2023 Cost of Data Breach Report [4] highlights that these losses are then passed on to consumers through increased prices.

This article delves into the hidden costs associated with "free" tax preparation services, offering insights into the risks not just to personal privacy but also to business operations. 

How "Free" Tax Preparation Works

The Business Model

You might wonder how firms offering "free" tax filing services turn a profit. The answer lies in several revenue-generating strategies beyond the basic filing service. These include software upsells, leads for other financial products and, in some cases, data sharing. Such models are crucial for these companies to sustain their operations while offering services at no upfront cost to the user.

Extensive Data Collection

When signing up for "free" tax services, you're asked to share a significant amount of personal information. According to TaxSlayer's privacy policy [5], this can include your Social Security Number, income, deductions, credits, health insurance information, dependents and other personal details. This level of data collection goes beyond filling out your 1040 form. It's a comprehensive collection of your financial and personal information, which raises questions about privacy and data security.

Data Fuels the Business Model

The core of the "free" tax prep service model often involves sharing personal financial data with third parties for marketing and targeting purposes as The Markup’s investigation highlighted.

The intended use of this data isn't entirely clear, but Meta's website states that the Pixel helps in making ads more relevant to the user. This underscores the real cost of using "free" tax preparation services: the use of your personal data in ways that may not always be transparent or fully understood by the user.

These data-sharing practises extend beyond tax preparation services and into for example, car insurance which we covered in our recent blog, The Invisible Data Sharing Market: An Exploration.

The 'Anonymisation' Myth

The concept of data anonymisation is commonly presented as a silver bullet for privacy concerns with businesses often claiming that they anonymise or de-identify user data and that this data cannot realistically be used to identify individuals.  By removing or altering personal identifiers, it's believed that data can be shared or analysed without risk.  

For instance, TaxAct's policy [6] asserts, "We may also disclose aggregated or de-identified information, which cannot reasonably be used to identify you." However, research indicates that seemingly anonymised data can often be re-identified when combined with other datasets, posing a significant privacy risk.

At first glance, this practice seems to offer a robust protection mechanism. However, the reality is far more complex and less secure than it appears.

Data anonymisation involves stripping away personal identifiers, such as names, addresses and Social Security numbers, from datasets. While this sounds reassuring, the effectiveness of anonymisation is being challenged. Advances in technology and data analytics have made it possible to piece together "anonymised" data with other publicly available data, leading to re-identification.

A study by researchers at the Université Catholique de Louvain and Imperial College London [7]  revealed that 99.98% of Americans could be correctly re-identified in any dataset using 15 demographic attributes, including seemingly innocuous ones like gender, date of birth and marital status.

The financial and personal information collected is not only sensitive but also highly specific to individuals. When companies like TaxAct disclose "aggregated or de-identified information," the risk doesn't vanish. 

Data brokers or entities with access to multiple data sources can potentially match this "anonymised" information with other details available in data leaks, social media, or public records, effectively undoing the anonymisation.

Risks and Potential Consequences

There are several risks and consequences to be aware of and look out for ranging from targeted advertising to data theft. With AI integration happening at every level of business, the risks can change quickly and the consequences could become much more severe.

Targeted Advertising

Targeted advertising might seem benign but it serves as a foundational example of how personal data can be used to draw insights from consumer behavior. If tax preparation services share your data, advertisers gain access to detailed insights, not just about your spending patterns but also about life changes and financial decisions, such as buying a house or saving for college. 

With the integration of AI, these advertising strategies become even more sophisticated, using predictive algorithms to forecast future purchases and life events, making ads more intrusive than ever.

This depth of knowledge enables advertisers to craft highly personalised and sometimes uncomfortably precise marketing strategies, potentially influencing your financial decisions without your explicit awareness.

Price Discrimination

Price discrimination is a more insidious outcome of data sharing. This practice leverages collected data to tailor prices to individual consumers based on their perceived ability to pay. For instance, if your data suggests you consistently purchase high-end products or services, companies might infer a higher disposable income and adjust their pricing models accordingly when you shop online. 

AI enhances this practice by dynamically adjusting prices in real-time and analysing a broader spectrum of your online behaviour to deduce purchasing power with unprecedented precision

This raises ethical concerns, as it can exacerbate socio-economic disparities by making goods and services more expensive for those deemed able to afford more.

Data Broker Networks

The role of data brokers in the digital ecosystem has grown exponentially in recent years. These entities amass vast amounts of data from various sources, including tax preparation services, and create detailed profiles on millions of individuals. With AI’s ability to analyse data at scale models can identify patterns and connections that would be imperceptible to human analysts. These profiles can influence a wide range of decisions about you, from personalised insurance plans to employment opportunities. 

The information sold by data brokers goes far beyond basic demographics, encompassing financial status, health information, purchasing behaviour and even your online activities. The application of AI in this context means that the extrapolation of sensitive information from seemingly benign data points becomes much more feasible, enhancing the depth and accuracy of the profiles created. This extensive profiling can have far-reaching implications, affecting not just consumer choices but also access to services and opportunities, often without the subject's knowledge or consent.

Once your personal information is disclosed to third parties, it becomes a part of the expansive web of data brokers. AI's role in optimising the data-sharing market further complicates privacy concerns, as it facilitates the rapid exchange and combination of vast datasets across networks, amplifying the potential for misuse.

This network operates largely unseen, buying and selling personal information to tailor marketing efforts, assess risk and make myriad decisions affecting consumers. The lack of transparency and control over this process poses significant privacy concerns, as individuals have limited ability to influence how their data is used or to whom it is sold. This situation highlights the need for more stringent regulations and consumer protections in the digital data market.

Beyond Targeted Ads

Expanding on the concept of targeted advertising, TaxSlayer's policy, which permits the sharing of data with affiliates and third parties for marketing purposes, hints at a deeper level of data use. Beyond just seeing personalised ads, this shared data can influence the rates you're offered by insurers, the credit offers you receive and even the job prospects available to you.

AI compounds the potential for discrimination and bias in these processes, as algorithms making these determinations can inherit and perpetuate existing biases.

Background checks by potential employers, for instance, may incorporate data sourced from these networks, affecting your employability based on criteria you may not be aware of. This extensive use of personal data underscores the importance of understanding and managing one's digital footprint in an increasingly interconnected world.

The Price of "Convenience"

The convenience offered by "free" tax preparation services often masks the true cost of these services—the potential compromise of your privacy. The Markup's investigation into the use of financial data by marketers and data brokers illustrates the trade-offs involved. 

The incorporation of AI into these services means that the analysis and use of your data are not only more efficient but also more invasive, as algorithms can quickly uncover and act upon patterns in your financial behaviour.

By choosing these services, consumers may unwittingly consent to the use of their sensitive financial information in ways that extend far beyond tax preparation, affecting their privacy and financial health in the long term.

Lack of Legislative Safeguards

The current regulatory framework in many jurisdictions falls short of providing adequate protection against the misuse of personal data. With the widespread adoption of AI models, data processing and analysis introduces new challenges to the regulatory landscape as technology developments can easily outpace regulations. 

As noted by AP News [8], the absence of comprehensive legislation leaves consumers vulnerable to privacy invasions and the potential misuse of their data. This regulatory gap highlights the importance of consumer awareness and the role of privacy advocacy in pushing for stronger data protection laws.

Data Breaches and Identity Theft

Finally, the risk of data breaches and identity theft cannot be overstated. Information shared with tax preparation services, if improperly secured, can become a target for cybercriminals. The repercussions of such breaches are profound, extending beyond privacy violations to include financial fraud and identity theft. 

Earlier this year, The Wall Street Journal [9] reported that the IRS had reviewed and restricted employee and contractor access to taxpayer data in the wake of a data breach that saw confidential tax information of wealthy individuals like Jeff Bezos and Elon Musk leaked to the public domain. The IRS's focus on safeguarding taxpayer information highlights the critical need for robust security measures to protect sensitive data from these threats.

Contact Us For More Information

If you’d like to understand more about Zendata’s solutions and how we can help you, please reach out to the team today.

Taking Control of Your Data

In an environment where personal data can easily be misused, taking proactive steps to protect your privacy becomes crucial.

Vetting Your Tax Preparer

Choosing a tax preparation service requires more than just comparing prices and services offered. It involves understanding and evaluating how your personal data will be handled and protected.

  • Data Storage and Access: It’s crucial to know where and how your data is stored. Is it on secure, encrypted servers? What measures are in place to protect against data breaches? Understanding who within the company has access to your information is equally important. Ensure that only essential personnel can view your sensitive data, and inquire about the procedures for accessing it.
  • Sharing with Third Parties: Clarify the circumstances under which your data might be shared. Even data shared in "anonymised" form can be at risk if combined with other information. Ask specifically whether your data is used for purposes beyond tax preparation, such as marketing and whether you can opt out of this sharing.
  • Temporary Staff: Hiring temporary staff during the busy tax season can introduce additional risks. Inquire about the background checks and data access policies for these temporary employees. How is their access to sensitive information controlled and what training do they receive on data privacy?

A firm’s transparency in responding to these questions can be a good indicator of their commitment to data protection.

Privacy-First Tax Preparation/Filing Software

For those opting to file taxes independently using software, the choice of platform can significantly impact your data privacy.

  • Look for software that explicitly states its commitment to user privacy in its policies. This includes details on data encryption, how data is stored and assurances that your information will not be sold or shared without consent.
  • Evaluate the software’s privacy settings, ensuring you have control over what information is shared and with whom. Some platforms may offer enhanced privacy options for an additional fee.

Choosing software from a company with a strong privacy policy not only protects your data but also aligns with best practices in digital security.

Opting Out

Removing your information from data broker lists and opting out of data tracking are proactive steps in taking control of your privacy.

  • While specific opt-out procedures vary by company, many data brokers and tracking services offer mechanisms to remove your information from their databases. This can prevent your data from being sold to advertisers or other third parties.
  • Investigate and make use of online resources dedicated to privacy protection. These websites often provide guides and links to opt-out pages for numerous data brokers and tracking services.

Taking these steps can reduce unsolicited marketing and decrease the risk of your information being used in ways you did not intend.

Make Informed Decisions

Data privacy laws lag behind technological advancements so making informed choices about tax preparation services is more important than ever.

  • Investigating a service’s privacy policy, understanding their data handling practices, and asking pointed questions about data protection will tell you how your information is treated.
  • Pay attention to red flags, such as vague policies or reluctance to provide detailed answers about data security measures.

An informed choice involves selecting a service that meets your needs and respects and protects your privacy.

Alternative Options

Exploring alternatives to mainstream tax preparation services can offer paths to greater data privacy.

  • Consider services that prioritise client confidentiality and data security, possibly at a premium. These providers often make privacy a cornerstone of their business model, differentiating themselves through rigorous data protection practices.
  • Local tax professionals or firms with a strong privacy focus can offer personalised service with a commitment to keeping your data secure and not sharing it without explicit permission.

These alternatives might require additional research and potentially higher costs but can provide added peace of mind regarding data privacy.

Vigilance is Key

The IRS's emphasis on vigilance against scams and fraud highlights the ongoing challenges in protecting sensitive data.

  • Tax professionals and taxpayers alike must be aware of the evolving tactics used by cybercriminals, from phishing emails to more sophisticated social engineering attacks.
  • Continuous education on the latest security threats and best practices for data protection is essential. Implementing robust security measures, such as two-factor authentication and regular security audits, can fortify defenses against data theft.

Staying informed and maintaining a proactive stance on data privacy are critical in navigating the complexities of today’s digital landscape.

Conclusion

It's important to stress that many tax professionals provide ethical services and prioritize client privacy. Paid tax preparation can be the best choice, particularly for those with complex tax situations where expert guidance is invaluable.

However, the allure of "free" tax preparation obscures the true cost – your personal data. This data isn't just used for targeted ads; it fuels a vast industry that profits from profiling and potentially sharing your information with businesses outside the tax sphere.

Ultimately, knowledge is power. This article aims to equip you to make informed choices about tax preparation.  Weigh the convenience of "free" against the potential long-term consequences of relinquishing control over your most sensitive financial details.

There are two key points to remember:

  • Investigate Before You File: Don't choose a tax preparation service blindly. Ask direct questions about how your data is stored, who has access and if it's ever shared with third parties.
  • Alternatives Exist: DIY software with clear privacy policies can be an option. Seek out paid tax preparers with a commitment to protecting your information.

We’re not trying to instil fear or raise the alarm. Our aim is to highlight the risks that are out there and provide recommendations on how to protect your personal data.. Our goal is to promote responsible decision-making and awareness of the trade-offs inherent in the digital age when it comes to your financial privacy.

[1] https://themarkup.org/pixel-hunt/2022/11/22/tax-filing-websites-have-been-sending-users-financial-information-to-facebook

[2] https://www.irs.gov/newsroom/irs-security-summit-partners-warn-of-surge-in-new-client-scams-aimed-at-tax-pros-as-2024-filing-season-approaches

[3] https://www.splunk.com/en_us/blog/learn/social-engineering-attacks.html#:~:text=98%25%20of%20cyberattacks%20rely%20on,access%20to%20sensitive%20business%20information.

[4] https://www.ibm.com/reports/data-breach

[5] https://www.taxslayer.com/policies/privacy/

[6] https://www.taxact.com/ffa/free-file/privacy-notice

[7] https://nature.com/articles/s41467-019-10933-3

[8] https://apnews.com/article/irs-taxpayer-tax-preparation-meta-congress-9315cfca7a0942ab89f765d183fbf822

[9] https://www.wsj.com/politics/policy/irs-cracked-down-on-access-to-tax-data-after-bezos-musk-leaks-fc3d9567