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When using a paid tax preparer or tax preparation software in the United States, can the preparer or software vendor use any of your financial information for any purpose other than simple creating the return and filing it? In other words, when using a tax preparer or tax software, is the strict privacy of your submitted information legally assured to the same extent as if you had submitted your taxes directly to the IRS by filling out printed forms?

Company privacy policies are so vague as to be useless. I'm more interested in solid legal protections than any vague guidance the tax prep [software] company may provide. I'm interested in knowing, for example, if anything prohibits tax prep [software] companies from sharing any demographic and/or financial information with other marketers or data brokers, or even within their own family of companies for marketing or other purposes. This information is highly sensitive, and I've found no definitive answers on what they legally can or cannot do.

  • Pseudon, I hope you realize that you can edit your posts to clarify or add extra information to your question. Please use this feature, as not everyone may see your comments, and they are frowned upon since they clutter the post. I've edited your comments into your question for you. Thanks! :D – Zizouz212 Mar 29 '16 at 1:05
  • Zizouz212, thanks for the edit, still working on those nuances. – pseudon Mar 29 '16 at 2:32
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The use (and possible misuse) of your personal information has to do with the fine print in the TOS you click-and-agree-to on the web-based tax software, the TOS in the PC/Mac version you click and install or the agreement you sign with the hard-copy tax preparer at their office.

In those agreements, each website or company will make their privacy policies clear as to what they can do with your return and how they protect your financial information in their software, on their webservers or in their office, and who they share with, and how they may use or distribute your information to other companies. In an example, from the H&R Block website:

We do not sell or rent your information without your consent. We may, however, share your information with your consent or as permitted by law. http://www.hrblock.com/universal/digital-online-mobile-privacy-principles.html

They will also assure you to the best of their ability that your information is safe. But they clearly release themselves from liability due to information loss from different scenarios. In the same TOS, from the H&R Block website:

We follow generally accepted standards to protect information submitted to us, both during transmission and once we receive it. Nevertheless, no method of transmission over the Internet, or method of electronic storage, is 100% secure. Therefore, we cannot guarantee its absolute security.

We maintain physical, electronic and procedural safeguards that comply with applicable law and federal standards and that are designed to restrict access to your information. These safeguards include programs and specifications for physical security and records retention and disposal; computer and communication security measures reflected in system design, password protection, and data management practices; and other measures to restrict access to the data we hold in physical and electronic forms. http://www.hrblock.com/universal/digital-online-mobile-privacy-principles.html

And, the federal laws that govern information sharing and security are outlined in a linked TOS:

Tax return information that H&R Block collects from you is controlled by Section 7216 of the Internal Revenue Code, the Gramm Leach Bliley Act of 1999, certain other laws, and H&R Block policies. http://www.hrblock.com/iphone/privacy.html

There are no firm guarantees when using a commercial tax preparer or webservice. They adhere to current laws and technologies, and realize that any breaches will negatively impact their business. Even with the IRS there are no guarantees; check the recent news for stories of the IRS losing personal information due to hacks, not fully verifying returns due to identity theft, and on and on. Things happen. Caveat Emptor.

Company privacy policies are so vague as to be useless. I'm more interested in solid legal protections than any vague guidance the tax prep [software] company may provide...

Company policies are all anyone gets in this world. They seem vague because there are no absolute protections. There are laws to follow in terms of information sharing and security, but that's as far as they can go, and as far as your protections go, too.

If you suffer damages from a company - either from a web security breach or a rogue grandma working in an office - your recourse is legal in nature, i.e. talk to a lawyer and take them to court.

  • Your comments on security of taxpayer information are spot on. However, my question has more to do with privacy of taxpayer information than security. In other words, what, if any, legal protections are in place to protect taxpayers from having their personal information used, shared, sold, aggregated by the tax preparer or software vendor or to/by data brokers they may be affiliated with... especially as compared to privacy of mailing manually filled out returns directly to the IRS. – pseudon Mar 28 '16 at 18:45
  • There is no way to do a fully online return directly through the IRS. Taxpayers are steered to external service providers (or alternatively to online or downloaded tax prep software). So I'm interested in the privacy differences between the approaches. I know the tax industry spends huge amounts of money lobbying for tax laws in their favor, so this is a possible vector for reducing privacy of those who don't manually fill out and mail their returns (i.e., probably most Americans). – pseudon Mar 28 '16 at 18:48
  • "what, if any, legal protections are in place to protect taxpayers from having their personal information used, shared, sold, aggregated by the tax preparer..." Those protections are clearly outlined in each TOS and limit what the company can do with your information. If you find that the TOS has been violated and your info has been shared, etc., against the TOS, find a lawyer; that's your legal protection. Taking legal action against the company is your only recourse. – BlueDogRanch Mar 28 '16 at 18:56
  • TOS and Privacy Policies are useless though. They are vague to the point of being content-free. I am asking about law. Whether, and what, laws govern privacy of taxpayer information, and how that privacy may vary depending on whether returns are submitted through a 3rd-paty compared to submitting directly to the IRS. – pseudon Mar 28 '16 at 18:59
  • TOS and Privacy Polciies may sound vague, but they are not; they are legal documents. "Tax return information that H&R Block collects from you is controlled by Section 7216 of the Internal Revenue Code, the Gramm Leach Bliley Act of 1999, certain other laws, and H&R Block policies." hrblock.com/iphone/privacy.html – BlueDogRanch Mar 28 '16 at 20:31

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