Its April 15. Do You Know Where Your Tax Information Is?

How much security do tax preparation websites promise? Not as much as you might expect, and a lot less than you would hope for.

By Sarah D. Scalet

April 14, 2004 — CSO — April 15, 2004Every year around this time, my husband and I drop a thick envelope in the mail that contains information about us that even our best friends dont need to know. Social Security numbers. Dollar amounts of charitable contributions. And, of course, those most sensitive of numbersour salaries. Yes, Im talking about the 1040. And while I know youd like to forget about it for another year (you have filed your tax return, right?), let me bend your ear for a moment about what seems to be an unfortunate barometer of how websites approach their responsibility for customer security.

The story began when I set out to select income tax software. The IRS encourages taxpayers to file their taxes electronically, a service that vendors are promoting as more secure than snail mail. Market leader Intuits TurboTax for the Web is cheaper than the shrink-wrapped version, gets high marks for usability and offers a free trial. I figured I had nothing to lose.

I was wrong.

When it came time to agree to Intuits site license, I did something unusual. I read it. (OK, so I skimmed itits almost 3,000 words long.) It seemed to be the generic legalese, until I got to this statement:

Although Intuit has taken reasonable measures to protect the security of your tax return information, Intuit (i) does not guarantee the security of information collected during your use of the Services, (ii) shall not be liable in any way for a compromise of your data. &

This is the kind of disclaimer that the phrase C.Y.A. (cover your ass) was invented for. So much for customer liability forcing corporate America to invest in information security.

But heres the worst part. The only thing unusual about the license was the fact that I read it. When I read the disclaimer to attorney William Cook, he said simply, Thats routine. And its probably enforceable, too, since taxpayers have other options for completing their taxes.

Cook, a partner for Wildman, Harrold, Allen & Dixon in Chicago, has a special interest in cases involving software liability. Yet as a user, he himself has stopped reading software licenses. Life is too short for some things, he says. I have read them before, and frankly, I assume theyre all the same and that theyre going to disclaim all liability for everything.

To test his assumption, I decided to look at the license agreements for each of the sixteen companies that offer online tax preparation through the IRSs Free File Alliance. Among this group, two othersOnLineTaxes.com and Taxslayer.comhad disclaimers nearly identical to Intuits. Many simply had statements warning users that they were responsible for their own account names and passwordsfair enough. A few had no license agreements at all (at least none that were viewable before you hand over your Social Security number, which I opted not to do). And two of the sitesEfile Tax Returns Inc. and Intuits top competitor, H&R Blockhad license agreements that did not even include the word security.

• Print