• by Wendy Davis  @wendyndavis, September 18, 2023

Online tax preparation companies should avoid using consumers' data for ads or other commercial activity, the FTC is warning.

The agency said Monday it sent letters to five tax preparation companies, informing them that the use of confidential information for purposes other than tax services could result in fines of more than $50,000 per violation.

The letters also specifically warned against using tracking technologies -- including pixels, cookies, application programming interfaces and software development kits -- to collect, analyze or transfer confidential information, absent consumers' consent.

“In order to use information collected in a confidential context for purposes other than those explicitly requested by the individual (including to obtain a separate financial benefit or for advertising purposes), you and your company must obtain affirmative express consent from the individual,” wrote Benjamin Wiseman, associate director at the FTC's division of privacy and identity protect.

“Affirmative express consent means a freely given, specific, informed, and unambiguous indication of an individual’s wishes via a separate agreement,” he added.

Wiseman also told recipients the FTC was “aware of information” suggesting they had engaged in deceptive or unfair conduct.

The FTC didn't name the letter recipients.

The letters come two months after Senator Elizabeth Warren (D-Massachusetts) and other Democratic lawmakers reported that popular online tax preparation services had shared “millions” of consumers' sensitive information with Meta, Google and other tech companies. That report focused on tools like the Meta Pixel and Google Analytics, which tax preparation services including TaxAct, TaxSlayer and H&R Block installed on their sites.

Warren and other lawmakers began investigating the tax preparation companies after The Markup reported last year that Meta's tracking code was on several tax services' sites. After The Markup contacted some of the companies, they reportedly revised their practices: TaxAct stopped sending financial information to Meta, while TaxSlayer removed the pixel from their filing sites.

Some tax preparation companies, as well as Google and Meta, are currently facing consumer class-action privacy lawsuits over the alleged data transfers.