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Could IRS Plan Open Taxpayers To Identity Theft?

Opponents of an IRS plan to allow tax preparers to sell, with consent, personal information to anyone who wants it say paid preparers need to focus on advising, not selling.

Taxpayers would be exposed to identity theft if the Internal Revenue Service gets its way with proposed rule changes considered during a congressional hearing this week.

Opposition is growing in response to the plan, which would allow tax preparers to sell personal information with consent. At least 45 attorneys general have joined several members of congress, consumer advocacy groups and others urging the IRS to drop the plan.

"This is an attempt by the tax preparation services to fatten their bottom lines at the expense of their customers' privacy," New York State Attorney General Eliot Spitzer said through a prepared statement Tuesday.

U.S. Sen. Chuck Grassley also spoke out Tuesday during a U.S. Senate Committee on Finance hearing on tax preparation.

"I am concerned about trends suggesting that tax preparers are interested in selling taxpayer information to make a fast buck, rather than as proprietary information that should be held in confidence by a trusted advisor," he said. "We need to change the focus of paid preparers from selling to advising.

Supporters of the proposed changes, including IRS officials, point out that preparers would be required to produce a separate piece of paper or Web page requesting permission to disclose personal information, the request would have to be written clearly, in 12-point type, and outline each possible use.

The proposed changes were announced in December 2005 and categorized as "insignificant." They are part of a larger package aimed at updating tax rules for the Internet and electronic filing.

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