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Facebook, Twitter… E-Trak? How the IRS is Using Modern Technology to Catch Taxpayers

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    It has been over 65 years since George Orwell’s 1984 introduced the idea of “big brother”, a notion that has become increasingly realistic with the explosion of technological innovation over the past 30 years. Another trending belief is that the government is behind in the times, from an information technology standpoint. What many Americans don’t know is that the latter may be not completely accurate. As it turns out, the IRS is using the same technology that social media sites such as Facebook and Twitter use, everyday. If you’ve been selected for an IRS tax audit, you should know about the new software the government is using to catch tax evasion.

    The IRS: Fighting Tax Evasion With Technology

    While an average American may guess that the operations of the IRS are slow and inefficient, the reality is interestingly reversed. Where our minds envision a room packed with overworked IRS agents, there actually sits a technologically advanced and powerful computer system that is responsible for detecting and compiling information about taxpayers that may have offshore bank accounts that haven’t been disclosed to the government. And unlike a human workforce, it will work 24/7 at a rapid pace to help determine who will eventually be prosecuted by the Department of Justice.

    How Does E-Trak Work?

    The software, known as E-Trak, takes information from a variety of sources and performs functions that act as both a file clerk and a detective. When a taxpayer enters the Offshore Voluntary Disclosure Program, they provide a myriad of information to the IRS. All of that data is entered into E-Trak and used not only to help in the processing of your case, but also to identify other potential undeclared accounts overseas.

    E-Trak also uses data mining, a type of technology that Facebook and Twitter users are likely very familiar with. Often times, social media sites will suggest that you “connect” with other people that it thinks you may know. Social media websites look at your connections and match them up with connections of others to put together possible matches. The IRS is accomplishing the same thing with E-Trak. Information such as foreign banking contacts, known foreign and domestic associates and account characteristics are among the many types of data being analyzed by the Service. This process allows the E-Trak system to come up with a list of taxpayers that potentially haven’t disclosed foreign accounts and alert revenue agents.

    Once You’re Identified, The End Could Be Near

    Once your name is in the hands of an IRS employee, “big brother” can go to work, gathering as much information about you as possible from its own resources, in addition to a civil examination. If a revenue agent feels that you have foreign accounts that are undisclosed, your case will be referred to the IRS Criminal Investigation Division (CID). After CID agents complete an investigation of your affairs, they will contact the Tax Division of the Department of Justice.

    The existence of E-Trak means one thing for taxpayers with foreign accounts that remain undisclosed: your time to come forward without facing the full wrath of the IRS and DOJ is winding down. Americans are utilizing the Offshore Voluntary Disclosure Program more than ever and each new participant brings along a plethora of new, raw data that may eventually be used as evidence against you in a criminal proceeding.

    However, E-Trak isn’t the only thing to worry about. As a final matter, it is important to understand that E-Trak doesn’t solely acquire its data from OVDP applications. E-Trak resources can also include information learned from investigations conducted by the IRS or the DOJ. When U.S. law enforcement agencies question bankers at offshore financial institutions, they are likely to spill the beans about all of the U.S. taxpayers that they helped, in an attempt to be treated with leniency by the feds.

    A common mindset shared among taxpayers with undisclosed accounts is that waiting the government out is the best option. It should be noted when the government makes the determination that a taxpayer willfully failed to disclose their foreign accounts, they will also generally bring tax evasion charges for attempting to evade the taxes associated with those accounts. When the dust settles, penalties for failing to disclose your foreign bank accounts can be both civil and criminal. Civil penalties can (and regularly do) exceed the balance of your foreign account. The more serious ramification is the possibility of spending several years in a federal prison.

    Take Steps To Mitigate Your Damage While You Can

    The Offshore Voluntary Disclosure Program can be your greatest ally in an attempt to come clean with the government about your undeclared foreign accounts. But keep in mind, if the government begins to investigate you before you participate in the program, you become ineligible and are at the mercy of the Service. This makes speaking with an experienced tax attorney imperative.

    At the Tax Law Offices of David W. Klasing, our tax professionals have years of experience assisting taxpayers with the Offshore Voluntary Disclosure Program and many other tax-related issues. When the penalties for noncompliance could have such a significant impact on your life, an experienced Irvine tax attorney is the best advocate to have in your corner. Contact the Tax Law Offices of David W. Klasing today at (800) 681-1295 for a reduced-rate consultation.

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