IRS Says It Will Move Away From Requiring ID.me Facial Recognition

from the good-move dept

Last month, we wrote about how the IRS and other federal agencies were starting to require the use of private facial recognition from a somewhat sketchy private company, for people to access their own government's services. The main company in question, ID.me, had made some... questionable decisions that raised serious questions about why the government was forcing people to make use of such a private service.

Earlier this morning, Senator Ron Wyden sent a letter to the Treasury Department calling on them to drop the facial recognition requirement, and within hours the Treasury Department told Wyden it would be "moving away" from that plan, and then the IRS put up a more official statement:

The IRS announced it will transition away from using a third-party service for facial recognition to help authenticate people creating new online accounts. The transition will occur over the coming weeks in order to prevent larger disruptions to taxpayers during filing season.

During the transition, the IRS will quickly develop and bring online an additional authentication process that does not involve facial recognition. The IRS will also continue to work with its cross-government partners to develop authentication methods that protect taxpayer data and ensure broad access to online tools.

"The IRS takes taxpayer privacy and security seriously, and we understand the concerns that have been raised," said IRS Commissioner Chuck Rettig. "Everyone should feel comfortable with how their personal information is secured, and we are quickly pursuing short-term options that do not involve facial recognition."

The transition announced today does not interfere with the taxpayer's ability to file their return or pay taxes owed. During this period, the IRS will continue to accept tax filings, and it has no other impact on the current tax season. People should continue to file their taxes as they normally would.

Last week the Treasury Department had said it was "reviewing" the matter, but today's announcement is a big deal. It's rare to see a government agency move this fast, so kudos to Treasury/IRS for acting quickly (though, it can be argued that it never should have gotten this far in the first place). But also kudos to Wyden for helping make this happen as well.

Filed Under: facial recognition, irs, privacy, ron wyden, security, treasury department
Companies: id.me

ID.me Finally Admits It Runs Selfies Against Preexisting Databases As IRS Reconsiders Its Partnership With The Company

from the CEO-Blake-Hall-finally-understanding-bluster-can-only-take-you-so-far dept

Tech company ID.me has made amazing inroads with government customers over the past several months. Some of this is due to unvetted claims by the company's CEO, Blake Hall, who has asserted (without evidence) that the federal government lost $400 billion to fraudulent COVID-related claims in 2020. He also claimed (without providing evidence) that ID.me's facial recognition tech was sturdy, sound, accurate, and backstopped by human review.

These claims were made after it became apparent the AI was somewhat faulty, resulting in people being locked out of their unemployment benefits in several states. This was a problem, considering ID.me was now being used by 27 states to handle dispersal of various benefits. And it was bound to get worse, if for no other reason than ID.me would be expected to handle an entire nation of beneficiaries, thanks to its contract with the IRS.

The other problem is the CEO's attitude towards reported failures. He has yet to produce anything that backs up his $400 billion in fraud claim and when confronted with mass failures at state level has chosen to blame these on the actions of fraudsters, rather than people simply being denied access to benefits due to imperfect selfies.

Another claim made by Hall has resulted in a walk-back by ID.me's CEO, prompted by increased scrutiny of his company's activities. First, the company's AI has never been tested by an outside party, which means any accuracy claims should be given some serious side-eye until it's been independently verified.

But Hall also claimed the company wasn't using any existing databases to match faces, insinuating the company relied on 1:1 matching to verify someone's identity. But this couldn't possibly be true for all benefit seekers, who had never previously uploaded a photo to the company's servers, only to be rejected when ID.me claimed to not find a match.

It's obvious the company was using 1:many matching, which carries with it a bigger potential for failure, as well as the inherent flaws of almost all facial recognition tech: the tendency to be less reliable when dealing with women and minorities.

This increased outside scrutiny of ID.me has forced CEO Blake Hall to come clean. And it started with his own employees pointing out how continuing to maintain this line of "1-to-1" bullshit would come back to haunt the company. Internal chats obtained by CyberScoop show employees imploring Hall to be honest about the company's practices before his dishonesty caused it any more damage.

“We could disable the 1:many face search, but then lose a valuable fraud-fighting tool. Or we could change our public stance on using 1:many face search,” an engineer wrote in a message posted to a company Slack channel on Tuesday. “But it seems we can’t keep doing one thing and saying another as that’s bound to land us in hot water.”

The internal messages, obtained by CyberScoop, also imply that the company discussed the use of 1:many with the IRS in a meeting.

Those messages had a direct effect: Blake Hall issued a LinkedIn post that admitted the company used 1:many verification, which indicates the company also relies on outside databases to verify identity.

In the Wednesday LinkedIn post Hall said that 1:many verification is used “once during enrollment” and “is not tied to identity verification.”

“It does not block legitimate users from verifying their identity, nor is it used for any other purpose other than to prevent identity theft,” he writes.

Hall's post hedges things quite a bit by insinuating any failures to access benefits is the result of malicious fraudsters, rather than any flaws in ID.me's tech. But this belated honesty -- along with the company's multiple failures at the state level -- has caused the IRS to reconsider its reliance on ID.me's AI. (Archived link here.)

The Treasury Department is reconsidering the Internal Revenue Service’s reliance on facial recognition software ID.me for access to its website, an official said Friday amid scrutiny of the company’s collection of images of tens of millions of Americans’ faces.

Treasury and the IRS are looking into alternatives to ID.me, the department official said, and the agencies are in the meantime attentive to concerns around the software.

This doesn't mean the IRS has divested itself of ID.me completely. At the moment, it's only doing some shopping around. Filing your taxes online still means subjecting yourself to ID.me's verification software for the time being.

A recent blog post on ID.me's site explains how the company verifies identity as well as names the algorithms it relies on to match faces, which include Paravision (which has been tested by the NIST) and Amazon's Rekognition, a product Amazon took off the law enforcement market in 2020, perhaps sensing the public's reluctance to embrace even more domestic surveillance tech.

This may be too little too late for ID.me. Its refusal to engage honestly and transparently with the public while gobbling up state and federal government contracts has expanded its scrutiny past that of the Extremely Online. Senator Ron Wyden wants to know why the IRS has made ID.me the only option for online filing.

I’m very disturbed that Americans may have to submit to a facial recognition system, wait on hold for hours, or both, to access personal data on the IRS website. While e-filing returns remain unaffected, I’m pushing the IRS for greater transparency on this plan.

But e-filing is affected. As the IRS's spokesperson noted in a statement to Bloomberg, ID.me is still standing between e-filers and e-filing.

[IRS spokesperson Barbara] LaManna noted that any taxpayer who does not want to use ID.me can opt against filing his or her taxes online.

It may be true that people with existing accounts might be able to route around this tech impediment, but new filers are still forced to interact with ID.me to set up accounts for e-filing. If spotty state interactions created national headlines, just wait until a nation of millions starts putting ID.me's tech through its paces.

Filed Under: blake hall, facial recognition, irs, privacy
Companies: id.me

Biometric Tech Company ID.Me Continues To Swallow Gov't Agencies, Cause Problems For People Trying To Access Their Gov't Benefits

from the questionable-claims,-extremely-limited-accountability dept

A private company, that leveraged a bold (unproven) claim about $400 billion in pandemic unemployment fraud into government contracts allowing it to (mistakenly) lock people out of their unemployment benefits, is hoping to use both of these dubious achievements to secure even more government contracts.

Here's the claim:

Blake Hall, CEO of ID.me, a service that tries to prevent this kind of fraud, tells Axios that America has lost more than $400 billion to fraudulent claims. As much as 50% of all unemployment monies might have been stolen, he says.

Here's at least one immediate reaction to Halls's claim.

“The greatest theft of American tax dollars in history has risen unabated to $400 billion, with nearly half of all pandemic unemployment spending lost to fraud by criminals,” declared Kevin Brady, the top Republican on the House Ways and Means Committee.

And here's the reality:

In December, California, by far the largest state payee of benefits, said it had identified $20 billion in fraudulent unemployment payments during the pandemic, 11% of what it paid out overall. California was responsible for a quarter of all pandemic unemployment payouts in the U.S.; if its fraud experience held nationally over the past two years it would translate into roughly $95 billion. That’s a big sum, but still only a quarter of what Hall was estimating. And other states like Ohio and Texas have reported lower levels of fraudulent payments than California.

But it made for a hell of a sales pitch. ID.me is currently used to verify the identity of unemployment benefit recipients in 27 states. It also secured a $1 billion contract from the Department of Labor to modernize state systems used to handle dispersal of these benefits.

All of this snowballed into ID.me's biggest get: the Internal Revenue Service.

If you created an online account to manage your tax records with the U.S. Internal Revenue Service (IRS), those login credentials will cease to work later this year. The agency says that by the summer of 2022, the only way to log in to irs.gov will be through ID.me, an online identity verification service that requires applicants to submit copies of bills and identity documents, as well as a live video feed of their faces via a mobile device.

That's from Brian Krebs of Krebs On Security. His experience with the verification process was far from painless. The process requires users to take a live, video selfie from the same device being used to apply for the account. This means users can't use a laptop/desktop computer and take the selfie on their phone, even though that would be the most convenient way to accomplish both tasks (apply and verify).

In Krebs' case, the application process got stuck when ID.me came to a halt during the phone verification process, prompting a request for Krebs to reupload three identification documents. Then it told him to wait:

After re-uploading all of this information, ID.me’s system prompted me to “Please stay on this screen to join video call.” However, the estimated wait time when that message first popped up said “3 hours and 27 minutes.”

The system has glitches, as is to be expected from any system engaging in identification verification over the internet. But the problems experienced here are far from abnormal, and that's going to cause lots of people lots of problems with tax filing season now underway. This only adds the IRS to the list of government entities that have discovered it's not performing as well as advertised.

A log of complaints for California’s Employment Development Department (EDD), which signed up with ID.me in September 2020, details issues ranging from a transgender person being blocked from accessing benefits because the gender on their driver’s license didn’t match their passport to an applicant who went through ID.me’s verification process only to find their claim still on hold six weeks later. In a January 2021 letter to the EDD, California state Senator Anthony Portantino complained that his staff had been “inundated with urgent pleas” from constituents whose benefits were on hold as a result of problems with ID.me. “This recent purge has put thousands of legitimate claims in limbo, with no instructions for how to get out of ‘ID verification jail,’ ” Portantino wrote.

Some of these problems can be traced back to ID.me's facial recognition AI, which has yet to be independently tested, despite being the only option for many people seeking access to their unemployment benefits or tax information. There has been some sort of testing, but not with any results ID.me is willing to share with the public.

Hall says the company isn’t running images through a preexisting database, the way law enforcement does, and that it selects facial-recognition vendors that comply with federal standards, though he wouldn’t name them. The company also says ID.me put its facial-recognition software through two separate tests for racial bias in 2021 and found no evidence of discrimination.

And CEO Blake Hall continues to insist ID.me is stopping billions of dollars of unemployment and tax fraud, even though it would appear that a lot of what Hall considers to be thwarted fraud may just be the inadvertent thwarting of legit benefits claimants.

For example, between Jan. 28 and March 8, 2021, ID.me had 654,292 users start its verification process in California, according to data Hall provided. Just half of those users completed ID.me’s checks. Hall argues that any users who didn’t complete the process were clearly scammers.

[...]

On Nov. 17, 2020, for example, ID.me reported that the prior week, 101,050 people in California attempted to verify their identities with ID.me. Of those, just 40% succeeded. But you could see the frustrations unemployed workers and their advocates complain about playing out in the data: Almost a quarter of the people ID.me dealt with in California that week tried to get on a video call with a company rep, but only 10% of that group succeeded. More than 7,000 people also abandoned the ID.me process by either closing their browser midway through or having their session time out. Both situations are as easily attributable to tech glitches as fraud.

This isn't very comforting. ID.me's CEO seems willing to declare failures of the company's system as victories against fraudsters. This unwillingness to even consider the possibility the system has flaws that might separate users from benefits or tax information isn't something you want to see in someone running a company that has already nailed down more than half the country's unemployment payments business. Becoming the point of entry for IRS accounts will just make local issues national issues.

It's also not exactly comforting that one company holds so much biometric and personal data. That makes it a tempting target for malicious hackers, especially now that it's also home to Internal Revenue Service data. It's going to make people start asking for some sort of biometric data federalism -- one that keeps the federal government from intermingling its sensitive info with state data stashes by using the same vendor to collect ID verification info.

Presumably, ID.me will get better at what it does. And it does appear to be doing everything it can to secure the information it's collecting on behalf of several government agencies. But it's being led by a CEO who is unwilling to allow independent inspection of its AI, who built his company's business on a questionable assertion about pandemic-related benefits fraud, and who has an alarming tendency to blame system issues on end users or to portray ID.me's failures as successful direct hits on benefits fraud.

That's a lot of buck-passing for someone who is being entrusted with the financial, personal, and biometric information of millions of Americans. And it suggests if the shit ever really hits the fan, the CEO is going to ghost a bunch of taxpayers who were never given any input or options when it comes to accessing benefits that are rightfully theirs.

Filed Under: access, biometrics, facial recognition, irs, logins, privacy, taxes
Companies: id.me

Treasury Oversight Says IRS Should Consider Getting Warrants Before Buying Location Data From Data Brokers

from the everyone-reads-Carpenter-differently dept

Last October, Senators Ron Wyden and Elizabeth Warren asked the IRS's oversight to take a look at the agency's use of third-party data brokers to obtain cell site location info harvested from phone apps. This new collection of location data appeared to bypass the Supreme Court's Carpenter decision, which said cell site location info was protected by the Fourth Amendment.

This means warrants were needed to obtain this information from cell service providers. Multiple government agencies -- including the CBP, DEA, and Defense Department -- appear to believe approaching data brokers a couple of steps removed from the location data collection process aren't affected by this warrant requirement. While both cell site location info from cell providers and bulk data from brokers can accomplish the same long-term tracking of individuals, the latter tends to be less detailed since it sometimes requires apps to be in use to produce location data, rather than just connected to a cell tower.

The IRS may have believed no warrants are needed to buy bulk data from brokers, but its oversight disagrees. The Treasury Department Inspector General says the 2018 Supreme Court ruling may cover this data as well.

A new Treasury Department watchdog report warns that law-enforcement agencies may not be on firm legal footing when they use cellphone GPS data drawn from mobile apps without obtaining a warrant first.

In a review of the Internal Revenue Service’s use of a commercial platform that allowed the agency to track cellphones, the Treasury Department inspector general for tax administration said that a landmark 2018 Supreme Court case might preclude the warrantless tracking of criminal suspects through location data generated by weather, game and other apps. The report encouraged stricter controls on use of the data.

But it's only a "may." The report [PDF] says the IRS should consider seeking a warrant before obtaining this data in the future. However, the IRS hasn't purchased data for a few years now because it doesn't consider it useful. And its only utilization of data broker Venntel occurred before the Supreme Court's Carpenter decision was handed down.

According to the purchase order, the subscription was for one year from September 9, 2017, through September 8, 2018, at the cost of $19,872. CI stated that the single-user license subscription was used exclusively by a single field office in the Cyber Crimes Unit, and Venntel was only utilized on a few specific occasions and did not produce effective results. According to CI, the last use of this database was in March 2018…

That would be two months before the Carpenter decision, which would make it a good faith effort if anyone were to challenge this evidence. But if anyone was going to, they'd likely already have done it. And the IRS's limited use (at least of this vendor) reinforces the IRS's claims that bulk location data from brokers doesn't help it with investigations.

Even given the Supreme Court's 2018 decision, IRS officials still seem to believe if the agency make use of this in the future, agents still wouldn't need to seek a warrant.

Carpenter v. U.S. was decided in June 2018. The last known attempt to use the Venntel product was March 2018, before the Supreme Court decision. Nevertheless, it is our understanding that the Carpenter decision concerned historical Cell Site Location Information which is distinct from the opt-in app data available on the Venntel platform.

Ah, but that's the same argument the government made to attempt to avoid a search warrant requirement: that the location data was voluntarily obtained from cellphone users. The Supreme Court disagreed, saying the data was collected continuously, even when owners weren't actively using their cellphones. If US government agencies continue to seek this data without a warrant, they're likely going to start generating caselaw contradicting their presumptions.

Treasury Oversight suggests warrants. The IRS suggests they aren't necessary. For now, the only thing preventing internal conflict is the IRS's determination that this particular form of cell location data is mostly useless.

Filed Under: 4th amendment, csli, data brokers, elizabeth warren, inspector general, irs, location info, oversight, privacy, ron wyden, treasury department, warrant

DEA Ditches Location Data Vendor Currently Being Investigated By Congress

from the convenient-corrective? dept

The Supreme Court ruled that law enforcement agencies needed a warrant to obtain cell site location info. The ability to turn third parties (like telcos) into proxy long-term tracking devices concerned the court, which decided this wasn't permissible under the Fourth Amendment. Every American carries a cellphone. But just because they do doesn't mean they agree the government should be able to track their movements with them.

No problem, said federal law enforcement agencies. We'll just get the same data from new sources -- ones not specifically mentioned in the Carpenter decision. Data brokers harvesting location data from phone apps sell access to government agencies, allowing them to bypass the warrant requirement.

This new source of data location has become a concern for some legislators, which have demanded answers from agencies like the IRS and CBP about their acquisition and use of this data. One company -- Venntel -- is currently facing a Congressional investigation of its data selling practices. This hasn't stopped CBP from buying data to track immigrants. But it has perhaps led to one agency -- one with a long history of bulk collection violations -- to ditch its contract with Venntell. Joseph Cox fills in the details at Motherboard.

The Drug Enforcement Administration abruptly cancelled its contract with Venntel, a U.S. contractor that sells location data harvested from ordinary apps installed on people’s phones around the world.

The news signals that although Venntel's smartphone location data may be popular with some federal agencies, including Customs and Border Protection (CBP) which Motherboard found spent nearly half a million dollars to access the data, other law enforcement bodies may have less use for such technology.

As Cox's report suggests, this may not be an indicator of reluctance to engage with a vendor currently under investigation. Instead, it may indicate some agencies find the harvested data less useful than others. The data CBP accesses allows it to track people's movements on both sides of the border, which is far more useful than scattershot data that may not deliver anything of value to DEA agents seeking to make a drug bust.

The DEA's cancellation was rather abrupt, suggesting it didn't feel like paying for something it didn't see itself using.

Keith Chu, communications director for the office of Senator Ron Wyden, described to Motherboard a conversation that his office had with the DEA.

"On DEA, they told our office: '[The Venntel contract was] terminated on our end before the first 30 days of the one year period of performance after determining it would not fit our needs,'" Chu said.

Then again, the DEA may have just cancelled this contract temporarily. The company is being investigated by Wyden and the senator has asked a lot of questions agencies may not feel like answering. Perhaps the DEA may re-engage when the heat dies down. Or it may seek to obtain this data from a different broker -- one not currently targeted by a Congressional investigation. Given the restraints on collecting location data from service providers, any parallel source of data is still preferable to seeking a warrant.

If it's not useful now, there's a chance it will be in the future. That's why Congress needs to act. And if it doesn't, the courts need to examine this data collection under the constraints of the Carpenter decision and decide whether it's ok for law enforcement to dodge warrant requirements that would seem to apply to ANY tracking of individuals, even if the data is sourced from third party data brokers.

Filed Under: 4th amendment, cbp, congress, dea, irs, location info, privacy
Companies: venntel

Forget TikTok. IRS Inquiry Shows The Continued Abuse Of Location Data Is The Real Scandal.

from the every-step-you-take dept

We've noted a few times now that despite all the pearl clutching over TikTok, the use and abuse of user location data makes concerns about TikTok look like a grade school picnic. That should have been made obvious by the Securus and LocationSmart scandals, which showed that cellular carriers had been selling access to data (including 911 data) on your every movement to any nitwit with a nickel. This data was then abused by everyone from law enforcement, to folks pretending to be law enforcement, to idiot stalkers.

And while cellular carriers have pinky sworn this sort of thing won't happen again, regulators and lawmakers haven't really bothered to confirm this because basic oversight and accountability simply isn't in vogue. Meanwhile, location data is also being collected and sold by a universe of apps and third parties, then repackaged and sold across a universe of governments, dubious middlemen, data brokers, and intelligence organizations.

This week, reports revealed that the IRS is now investigating itself for buying access to this data harvested from user phones, and using it to identify and track U.S. residents without a warrant. The data comes from a company named Venntel, which sells this sort of data to a wide variety of clients, including U.S. Customs and Border Protection. ICE and CBP are still busy buying this data despite a Congressional inquiry into how this probably isn't, you know, legal.

And it's not just ICE and CBP. Last month, Senators Ron Wyden and Elizabeth Warren wrote a letter to the IRS suggesting the IRS Criminal Investigation (CI) division might just want to investigate the agency's use and purchase of this data since they're treading on thin legal ice:

"The IRS is not above the law and the agency’s lawyers should never provide IRS-CI investigators with permission to bypass the courts and engage in warrantless surveillance of Americans. We also urge you to examine the legal analysis that IRS lawyers performed in order to determine how such an obvious violation of Americans’ privacy rights was approved."

This month, a letter obtained by Joseph Cox at Motherboard indicates said investigation has begun:

"You requested that TIGTA investigate CI's use of commercial databases in the performance of its duties, and that TIGTA examine the legal analysis IRS lawyers performed to authorize this practice. Your concern is that CI's use of the data described above may not be consistent with the holding of the Supreme Court in the case Carpenter v. United States."

"Upon compilation, to the extent allowable under the law, we will advise you of the results," the letter adds.

Of course there's no guarantee that the U.S. government's investigations of itself result in absolutely anything of note. Motherboard also obtained documents highlighting the width and breadth of the data being purchased by Customs and Border Protection. Together they show just how deep this rabbit hole goes. And while the government and companies like to suggest that buying and selling this kind of sensitive data with reckless abandon is no big deal because that data is often "anonymized," researchers have repeatedly made it abundantly clear that means absolutely nothing in practice.

It should be pretty clear by this point that the United States has prioritized money over any kind of genuine oversight of location data or consumer privacy. As a result there's an absolute ocean of often sketchy, interconnected industries from adtech and telecom to data brokers and tiny app makers, all hungrily crowding around a mammoth trough with absolutely no meaningful oversight. When there is oversight, it usually involves the kinds of flimsy wrist slaps and fines so small as to be meaningless in full context of the money being made off your every waking behavior.

The sheer volume of access to this data also continues to highlight the stupidity of the TikTok ban and the obsession with the app. We're purportedly super concerned that Chinese intelligence could get access to data from lip-syncing teens, yet we refuse to pass even a basic privacy law, or bring anything even remotely close to oversight to a vast international network of adtech companies, intel operations, governments (including China), and data brokers all buying and selling significantly more data with reckless abandon.

Filed Under: data, data brokers, irs, privacy, surveillance

Audit Indicates Intuit Made $1 Billion By Hiding Free File Program From The Public

from the dr-evil-shit dept

It's been quite a long and frustrating walk for us in covering the lengths to which Intuit went to hide the free to file tax program. This is the program that it is legally mandated to offer. If you're not caught up, the IRS struck a deal with the big tax prep companies out there, promising not to offer and expand its own free file programs, but only if companies like Intuit offer their own free file programs. Intuit did as instructed with its TurboTax product, except that the company then went about hiding the website for the free to file program from search engines and the internet, all while dropping the word "free" into as many places on the website for the paid services site it also runs. Then, because evil is an addictive drug, Intuit went ahead and lied to a bunch of customers to avoid refunding their money when it got caught in all this, informed its own employees that it bilked the public for their own good, and was even eventually found to have wrapped itself in the American flag while swindling active duty soldiers as well.

So, now you're caught up. But perhaps you're wondering why Intuit would risk all of the bad PR that comes with treating tax prep services like a game of three card monty. Well, the answer, according to a recent audit by the Treasury Inspector General, is because one-billion dollars.

More than 14 million taxpayers paid for tax prep software last year that they could have gotten for free, according to a scathing audit released Wednesday by the Treasury Inspector General for Tax Administration. That amounts to roughly a billion dollars in revenue for TurboTax maker Intuit, H&R Block and other tax software companies, according to a ProPublica analysis of tax prep fees.

The audit, which was launched following ProPublica’s reporting last year, explores why so few taxpayers use the Free File program, a public-private partnership between the IRS and companies such as Intuit and H&R Block. Among the reasons, the audit found: the confusing design and complexity of the program and persistently lax oversight by the IRS.

I suppose if Intuit was asked precisely how much its soul was worth, we now have our answer. And, yet, this is still all very stupid in the end. Because now, thanks to ProPublica's reporting, the IRS has scrapped its moratorium on offering its own free to file program. So, by being so immensely greedy, Intuit turned what could have perhaps been a minor revenue generator instead into a combination of a PR shit sandwich and a competitor in the IRS. Well done?

But, in case you thought Intuit would finally be in a place where it recognizes its misdeeds and is ready to turn this PR boat around, nooooooope.

In a statement, an Intuit spokesman said the company “consistently and publicly supported recommendations and efforts to strengthen the [Free File] program as part of our commitment to free tax preparation and our mission to empower individual taxpayers to manage their finances and receive every dollar they earned and deserve.” He added that “the majority of eligible tax filers using DIY software filed for absolutely free through the Free File Program or using commercial products.”

Around 104 million taxpayers were eligible for Free File last year, according to the audit. Of those, just 2.4% actually used the free government program. Of the remaining 101.5 million, 67 million did not use tax software (most going to bricks-and-mortar tax prep services). The remaining 34.5 million used software to do their taxes, and of those, 14 million paid for tax prep they could have received for free.

So Intuit would rather play games in representing its numbers than simply admit to the truth. Not exactly the sort of thing you might want out of a tax prep service.

Filed Under: free file, irs, scams, taxes, treasury department, turbotax
Companies: intuit

Getting Better, Finally: Intuit's Shady Actions For Free File Program Lead To Change In IRS Deal

from the free-as-in-taxes dept

Going through the history of our posts on Intuit and TurboTax will give you an incredibly frustrating recent history of Intuit's bullshit actions regarding its free tax filing program for low-income households. This all stems from a deal the IRS cut with several major tax preparation companies, which amounted essentially to the IRS promising not to offer its own free file program so long as these companies, Intuit being the largest, provided free tax filing programs to the public themselves. The outcome of this naive deal cut by the IRS was to have companies like Intuit do everything possible to hide its free file sites from the public internet by delisting it from searches, then lying to customers to avoid refunding money when they complained that they could have filed for free, and finally Intuit similarly fooling veterans into paying for services that would otherwise be free all while wrapping itself in the American flag.

ProPublica did a bevy of fantastic reporting on all of this, leading to a fair amount of public outrage at how blatantly cynical Intuit behaved. It would be easy to be equally cynical in thinking that the IRS would simply sit and watch all this without taking any action. Perhaps to the surprise of many, however, it appears that the shining of the light on Intuit's actions has led the IRS to significantly change the deal it struck with tax prep companies in a way that should be very, very positive for the public.

The IRS announced significant changes Monday to its deal with the tax prep software industry. Now companies are barred from hiding their free products from search engines such as Google, and a years-old prohibition on the IRS creating its own online filing system has been scrapped. The addendum also expressly bars the companies from “engaging in any practice” that would exclude their Free File offerings “from an organic internet search.” ProPublica reported in April that Intuit and H&R Block had added code to their Free File pages that hid them from Google and other search engines, diverting many users to the companies’ paid products.

“The improved process will make Free File stronger and give taxpayers another reason to consider this valuable software option,” IRS Commissioner Chuck Rettig said in a statement. The agency hopes the changes will make the free option more accessible for taxpayers in the 2020 filing season, he said.

It may seem a bit much to expect the IRS to flip the script and offer its own fleshed out free to file program to compete with private companies in the span of a year or so. Still, reading the quote above, it sure sounds like that's the IRS' plan. It's something that absolutely should happen, as for most lower and middle income taxpayers, the IRS already has everything it needs to prepare simple tax returns. There is zero reason why anyone not filing a complicated return should pay any amount of dollars to Intuit instead of just verifying the information that the IRS needs to process a return.

It should be noted that the prohibition on the IRS offering its own free file program was the result of intense lobbying by the likes of Intuit. That makes it all the more funny to see how the company is pretending to react publicly to these changes.

In a blog post on the Intuit website, the company said, “Intuit strongly supports these changes to the Free File program and associated Free File offerings because they increase the focus on the taxpayer experience.”

That would be hilarious if it weren't so infuriating. Intuit and its peers had every damned opportunity to make the taxpayer experience the focus of its own efforts. Instead, these companies took every measure to hide its free file programs and websites and to trick the taxpayer into paying for a service that was supposed to be free.

That is, if nothing else, certainly some kind of customer experience.

Filed Under: free file, irs, taxes
Companies: intuit

TurboTax Did Everything It Could To Hide The Free-Filing Its Supposed To Offer

from the hide-and-seek dept

For years, advocates for the non-wealthy public have put forward plans to simplify the tax-preparation process by having the IRS pre-prepare a tax filing with the information it already has, sending it to citizens, and allowing those citizens to either sign and return it or do their own tax preparation if they think there are errors. Several politicians have put versions of this plan forward, including Elizabeth Warren. The idea is that, for the vast majority of Americans, the IRS already has all the information it needs for the tax filing. Why make most people do tax prep when they don't have to?

Well, for just as many years, the companies that make money by doing this tax prep work have lobbied heavily in Congress to keep this from becoming law. Intuit, makers of TurboTax software, has been particularly active on this front, with novel arguments that amount to, "But if you make this law, then we'll make less money." When that messaging became a PR disaster, the company tricked a bunch of mouth-pieces to say all this for it.

Now, if all of that seems like shady shit, you ain't seen nothing yet. One of the ways companies like Intuit hand-wave concerns that its lobbying efforts are coercing the poor and middle class to pay for tax prep that is so simple it should be free is by pointing out that it entered into an agreement with the IRS to offer their own free-to-file programs for anyone that makes less than $66k in a given year. While that's true, ProPublica has a nice write up of just how far Intuit in particular goes to hide this program from the very public it's supposed to be serving.

Intuit and other tax software companies have spent millions lobbying to make sure that the IRS doesn’t offer its own tax preparation and filing service. In exchange, the companies have entered into an agreement with the IRS to offer a “Free File” product to most Americans — but good luck finding it.

Here’s what happened when we went looking.

Our first stop was Google. We searched for “irs free file taxes.” And we thought we found what we were looking for: Ads from TurboTax and others directing us to free products.

Spoiler alert: those products didn't end up being free. Despite ads that mentioned "free" several times over, the researchers that created a profile of a house cleaner making $29k for the year, TurboTax's site declared that free to file wasn't an option because the fictional citizen was an independent contractor. Instead, the tax prep would cost $119.99. ProPublica continued:

Then we tried with a second scenario. We went back to TurboTax.com and clicked on “FREE Guaranteed.” This time, we went through the process as a Walgreens cashier without health insurance, entering personal information and giving the company lots of sensitive data.

Again, TurboTax told us we had to pay — this time because there’s an extra form if you don’t have insurance. The charge? $59.99.

Per the article, both instances are not kosher based on the agreement with the IRS. That agreement is quite simple: if you make less than $66k in the year, you get to file for free, period. From there, the researchers dug into TurboTax's source code.

Even though we clicked on the “FREE Guaranteed” option and met all the requirements to file for free, the company had tagged us as a potential paying customer. In the source code, TurboTax had branded us as “NONFFA.” That stands for “Non Free File Alliance.” In other words, we were not on track to file for free after all. Even though TurboTax could tell we were eligible to file for free, the company never told us about the truly free version.

It turns out that if you start the process from TurboTax.com, it’s impossible to find the truly free version. The company itself admits this.

So, despite that site being laced with as many "free"s as could be mustered, you can't actually get to free filing at all. How many folks using the site to file for free do you think make it all the way to the FAQ page and realize their mistake compared with how many accept what the site tells them and pay up to file instead? Especially when "free" appears all over the sites on which you cannot file for free, but the actual free filing site is called, sigh, TurboTax Freedom?

But let's pretend most people do get to that FAQ. The researchers threw "turbotax freedom" into Google to see what popped up.

The first link was from TurboTax and said “Free File Program” right in the text. We clicked, and it brought us to this new page. While the orange “See If You Qualify” link did take us to the real Free File program, the blue “Start for Free” link brought us back to the version of TurboTax where we ended up having to pay.

Whatever this is, it clearly isn't Intuit comporting with the spirit of the agreement it signed with the IRS. All of these shady tactics are quite obviously designed to keep people from ever finding the free to file site, to trick the lower classes into paying for tax prep work when they should not be, and depressing the number of people that actually use it as much as possible.

The reward for all of that shady behavior are calls from the same Congress that receives Intuit's lobbying dollars to end the program as it's not achieving its goals. And, it seems Congress is also considering legally barring the IRS from offering any free to file program itself, because that certainly serves common people.

Congress is now moving to put the Free File program into law, including its restriction on the IRS creating its own free service. We wrote about that earlier this month and the opposition to this provision by freshman Democratic Reps. Katie Hill, Katie Porter, Alexandria Ocasio-Cortez and others. The House ultimately passed the bipartisan Taxpayer First Act, which also contains some provisions that consumer advocates support, such as restrictions on private debt collection of unpaid taxes.

Now the Senate is considering the bill. Its sponsors have argued that it doesn’t tie the IRS’ hands, but outside legal experts we’ve spoken to disagree. The text in the bill codifying the Free File program has long been sought by lobbyists for Intuit.

In addition to all of this, to make matters way, way worse, more information has come to light since the original ProPublica post and the original writing of this piece. In a follow up post, ProPublic has unearthed that Intuit specifically and actively de-indexed the free-to-file website from Google's search engine with the robot.txt file.

The code on TurboTax’s Free File site says “noindex,nofollow” — instructions for it not to show up in search results.

In contrast, the TurboTax page that puts many users on track to pay signals to Google that it should be listed in search results.

Sen. Ron Wyden, the ranking Democratic member of the Senate Finance Committee, said in a statement that he plans to raise Intuit’s misleading marketing with the IRS. “Intuit’s tactics to reduce access to the Free File program and confuse taxpayers are outrageous,” he said.

Don't expect Wyden to be the only member of Congress to get into the act. Several of the Democratic Presidential candidates are members of Congress as well, and you can bet that this is the kind of subject many of them will be all over. Elizabeth Warren in particular, as one of those pushing the IRS to do its own free to file program via legislation, should be an interesting watch here.

What the end result of all of this is unknown at the moment, but it looks very, very bad for Intuit. Again, Intuit signed an agreement with the IRS not only to offer free to file itself, but to take action to increase the use of it. Delisting the website where it can be done is about as counter to that promise as can be had.

Filed Under: congress, free tax filing, free taxes, irs, low income, search engines, tax prep, taxes, turbotax
Companies: intuit

Investigation Finds IRS Seized Millions Of Dollars From Innocent Individuals And Business Owners

from the IRS-Criminal-Investigations:-A-Cash-Only-Business dept

The IRS's Inspector General has confirmed what many of its victims have known all along: the Criminal Investigations' asset forfeiture program isn't really for "disrupting criminal enterprises." It's for taking money from innocent people.

The Treasury Inspector General for the Tax Administration (TIGTA) took a look at forfeitures tied to the IRS's so-called "structuring" cases. If you deposit more than $10,000 into a bank account, the IRS is notified and you, the depositor, have extra paperwork to fill out. This fulfills IRS reporting requirements and is generally a headache for the depositor and the bank.

If you deposit less than $10,000 in cash, it's perfectly legal. Do it often enough and the IRS starts to believe your cash deposits are the product of criminal activity. Even if you never have enough on hand to clear the $10,000 mark with a single deposit, a string of smaller deposits makes the IRS suspicious IRS's eyeballs turn into dollar signs.

The IRS is allowed to investigate suspected structuring. The problem is, the IRS has very little interest in investigations. It likes taking money from people's bank accounts, but has no stomach for the rest of the legwork. The IRS IG pulled a random selection of structuring cases and discovered a large majority of them had no business being called "cases." In 9 out of 10 "cases," there was no illegal activity discovered. [TIGTA Report PDF]

In 26 (9 percent) of the 278 structuring cases, we were able to establish that the funds came from a Title 18 illegal source or involved any other illegal activity. In the other 252 (91 percent) of the 278 cases, we did not find evidence that the structured funds came from an illegal source or involved any other illegal activity. Businesses that deal with currency transactions (retail, wholesale, service, automobile, restaurant, gas station, etc.) were primarily (210 of the 252 legal source cases) affected by the structuring seizures.

The IRS was able to get away with this for so long because it moved fast. It processed seizures quickly and pressured asset owners into taking settlements, rather than risk turning easy money into trickier criminal prosecutions where actual evidence might be needed.

All told, the IRS took more than $17 million away from US citizens without ever establishing the funds were the result of criminal activity or the asset owners were engaged in structuring. And that's just in the ~300 cases sampled for the TIGTA report.

The report also notes the streamlined stripping of money comes bundled with the streamlined stripping of rights. It's even worse with the IRS than it is with regular law enforcement, where assets are presumed "guilty" and it's up to owners to prove the innocence of property no longer in their possession. While it's understandable the IRS would find advance warning an impediment to its forfeiture efforts, the lack of investigation beforehand means the agency's seizure warrants were likely seriously deficient.

Interviews were conducted only after the seizure warrant was signed by a judge and the property was seized; therefore, judges did not possess information from interviews with the property owner when making their probable cause determination. This could have provided the judge with a possible explanation for the banking transactions to consider before signing the seizure warrant. We are not suggesting that CI should always conduct interviews of subjects prior to obtaining a seizure warrant. In fact, CI indicated that seizures are often conducted before the interview to protect the interest of the Government by ensuring that the assets are not moved. However, when 91 percent of the property owners are not believed to be conducting any illegal activities (other than structuring), conducting the interviews after the seizure leaves judges without relevant information about what subjects knew about CTRs and what their intent was behind their currency transaction patterns...

In IRS seizures, the money is taken first. Any investigation follows after accounts are frozen or drained. Once owners are finally made aware of the situation, the CI division does what it can to ensure the IRS maintains control of the seized assets. The Inspector General found IRS agents aren't apprising citizens of their rights and remedies.

For 106 of 229 cases, the agents did not state the purpose of the interview or we did not find evidence they did. IRM procedures in Title 26 cases require special agents to advise the property owner regarding the purpose of the contact. For 62 cases, the special agents did not identify the purpose of the contact, and for 44 cases, the interview does not document whether the special agent explained the purpose of the interview to the property owner…

For 181 of 229 cases, we identified a problem with the information provided to the property owner about the seizure. In 110 cases, the property owners were not informed until the end of the interview that a seizure took place. In 60 cases, the property owners were not informed that a seizure took place, and in 11 cases we could not determine if the property owner was informed that their funds had been seized.

[...]

In only five of 229 interviews were property owners provided the noncustodial advice of rights prior to the interview.

This extreme indifference towards citizens and their rights and property inevitably leads to this sort of thing:

In the one case we can discuss publicly, the property owner alleged that special agents and local police arrived at the property owner’s place of business and used police search dogs in the search. The entrance and exit to the store were allegedly blocked, and it was alleged that the taxpayer was asked to answer questions. The property owner, who spoke limited English, was told that his account was seized, and he was presented with a Consent to Forfeiture to sign. He alleged that officers spoke in loud tones at him instructing him that he should sign.

Someone put money in the bank the wrong way... and they're met with police dogs, yelling, and borderline coercion. But I guess that's what's needed to get "criminals" to cooperate. Oh wait.

After the Institute for Justice was retained to represent the property owner, all of his funds were returned.

All of this leads to the following: the IRS's investigatory arm isn't in the "criminal disruption" business, but rather the simpler, more profitable forfeiture business.

Outcomes across the CI Asset Seizure and Forfeiture Program did not appear to be consistently determined by the facts of the cases but rather by property owners’ risk tolerance to the high costs of litigation...

If there's any good news to be had, it's that the IRS is (mostly) no longer pursuing alleged structuring cases if the deposited money appears to have come from a legitimate source. That was put into place after a couple of very uncomfortable Congressional hearings back in 2014. TIGTA says, for the most part, the IRS is following the new guideline. However, it still found five cases where the new rule appears to have been ignored and notes the IRS has still granted itself a sizable loophole to exploit.

Under the change in policy, CI will no longer pursue legal source structuring cases unless exceptional circumstances justify the seizure and the seizure is approved by the appropriate CI executive. CI has not yet defined what circumstances rise to the level of “exceptional.”

The other good news is that enough pressure -- applied by citizens and their representatives -- can get the government to severely scale back a program that brought in lots of easy money.

Filed Under: inspector general, irs, seizing, structuring