Meta, Google, and giant tax preparer H&R Block are being accused of conspiring to illegally use spyware from the tech giants to collect and share tax return information from hundreds of taxpayers that could be used to generate targeted online ads.

The three companies – along with Google parent Alphabet – are the targets of a proposed class-action lawsuit filed this week in California alleging they participated in a “massive” racketeering operation to use “tracking pixels” to scrape the information from the tax returns of H&R Block customers without their consent.

That consent is a key point in the 49-page lawsuit. Millions of websites use tracking pixels from Meta, Google, and other companies. Tracking pixels are web codes that run silently in the background of the websites, which the plaintiffs say act as “spy cams” to collect huge amounts of data of the sites’ users and transmit the data back to – in this case – Meta and Google.

The tech companies then use the data to build profiles – or “dossiers” – on users, understand consumer behaviors, measure the performance of ad campaigns, and directly send more ads to consumers.

Vague Consent Language

H&R Block used tracking pixels from both companies on the tax returns it would prepare, according to the lawsuit. As a tax preparer, it’s illegal for H&R Block to share the data – which allegedly included names, birth dates, Social Security numbers, addresses, incomes, deductions, and refund amounts – with third parties without the consent of the customer.

According to the complaint, H&R Block looked to get around federal law through vague language in the consent agreement given customers and failing to identify any of the third parties – including Meta and Google – that could receive the data.

“H&R Block’s choice of language was intentional and was designed to mislead consumers … into a false sense of security regarding the transmission of their” tax return information, the lawsuit reads. “It also misrepresented the legal obligations which H&R Block was obligated to adhere to.”

Meanwhile, Meta and Google conspired the tax preparation giant to mislead users about the information that businesses like H&R Block could access and send via the tracking pixels.

The three companies “entered into an agreement explicitly and intentionally violate the privacy rights, protections, and expectations of taxpayers by illegally collecting, intercepting and transmitting [tax return information] to further the end goal of maximizing profits through direct-to-consumer advertising,” the lawsuit claims.

Meta’s and Google’s Tracking Pixels

Meta offers businesses its Meta Pixels software, which the complaint says can track the information that tax preparers enter into the online portal for their returns. The software creates a profile of the user through a digital identifier, which Meta can then give to advertisers. For its part, Google’s pixel system is called Google Analytics, which the lawsuit said it on about 70% of websites. Some companies – including H&R Block – can collect more information about consumers by using Google Tag.

The lawsuit stresses the money that collecting personal data and online advertising generates for Meta and Google. At $113.6 billion, advertising accounted for 97% of Meta’s 2022 revenue. For Google, $224.47 billion of its 2022 revenue of $279.8 billion – about 80% – came from ads.

Online tax filing also is big business. According to the lawsuit, more than 200 million Americans filed their taxes electronically last year, spending an average $250 each year to do so. In 2022, H&R Block reported revenue of $3.46 billion.

Scrutiny from Congress, Regulators, Courts

The collection of taxpayer data via technologies like tracking pixels has come under scrutiny by some in Congress. In July, a report pulled together by Democratic Sens. Elizabeth Warren (MA), Ron Wyden (OR), Richard Blumenthal (CT), Tammy Duckworth (IL), and Sheldon Whitehouse (RI), Bernie Sanders (IND-VT) and Re. Katie Porter (D-CA) built on a study that found that H&R Block and two other online tax preparation firms, TaxAct and TaxSlayer, were sharing taxpayer data with Meta and Google.

The politicians’ investigation found that the three firms has been using the tracking pixels from both tech firm for years and that they “recklessly disclosed and misused the personal tax return information of potentially millions of taxpayers.” They urged the Department of Justice, the IRS, and other agencies to investigate.

One of those agencies, the Federal Trade Commission, listed the three tax firms and two others – Intuit and The Lampo Group (dba Ramsey Solutions) – as companies facing penalties if they don’t get consumers’ permission before using their data for ads.

The lawsuits are starting to make their way into the courts. Along with the latest one, a similar suit was filed against Google and H&R Block in July.