With the turn of the calendar, many Americans find themselves slogging through piles of paperwork in order to figure out how much is needed to pay off the demands of the Internal Revenue Service for the previous year. The IRS is eager to turn this paperwork into bytes and bits so that their agents and other agencies can more easily comb through their databases looking for folks to audit or otherwise hammer down the nail that sticks out.

To encourage this digitization of personal data, the IRS established something called the Free File Alliance. The Alliance is a consortium of the IRS and a number of private accounting firms. The way it works is that each accounting firm establishes certain criteria for eligibility for the free e-filing. Age, income, residency, and other factors may all be criteria that each firm uses to determine elgibility. In return,the IRS agreed not to offer its own free e-filing services. (So there's a chance the new free customers will become paying customers of the firm in the future.)

But the IRS has added a new wrinkle in this, the second year of the program. IRS wants each of the participating forms to flag the returns they prepare for free. Some of the accounting firms, aware that privacy is an issue to the consumers of their services, have balked.

As Bob Kamman, a Phoenix tax preparer and lawyer, told The Arizona Republic, "The problem is that the IRS collects data like this and then doesn't tell anyone the 'formula' for identifying returns for audit. . . So there is no assurance that it isn't used now or won't be used later."

One company withdrawing from the program due to the IRS' action is TaxBrain. TaxBrain's owner told USA Today, "Taxpayers should not have their records flagged and segregated simply because they choose to use the IRS Free File program," said Leroy Petz, whose company publishes the TaxBrain software."

Intuit, publishers of Turbotax, has said it will continue to participate in the Free File program, but will refuse to flag any returns prepared thusly.

These companies are just following the lead of their customers in their well-justified distrust of the IRS when it comes to privacy.

Why should an agency that loses computers and files containing sensitive information, that hires people who fraudulently appropriate taxpayer identities, that keeps political enemies lists of persons and organizations, be given access to even more information? This is not to mention the agency's other insecure practices and unceasing quests for more personal information. For changing the rules in the middle of the game for reasons that may remain cryptic, the IRS is again the Privacy Villain of the Week.

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