Most taxpayers have probably worried about an audit at some point in their lives. However, they have probably not worried that they would be facing an audit because of something they posted on social media. Washington State University professor Kimberly Houser has conducted an extensive report on how the IRS has begun to turn to social media and data analytics for the enforcement of tax laws. Houser believes that these investigative efforts by the IRS are in violation of federal laws related to fair information gathering and privacy, and urges taxpayers to be aware of how the data they’re posting online might be used against them.
California taxpayers need to be aware that what they say and do online may be serving as evidence to warrant an audit or, even potentially, a criminal tax investigation from the IRS. If you find yourself facing an audit or criminal tax investigation, it is essential to contact an experienced California criminal tax defense attorney. The Tax Law Offices of David W. Klasing can deliver strategic guidance and aggressive advocacy on a broad range of California, Federal and International Tax Matters. Our team of professionals are available to represent those who have strayed from tax compliance. To schedule a consultation with one our Tax Attorneys, CPAs or EAs, call (800)-681-1295 today or contact us online.
Houser’s 55-page report, published in the Vanderbilt Journal of Entertainment and Technology Law, provides numerous examples of how the IRS has used social media to mine data in search of taxpayers to audit. Most notably, the report made reference to a 2013 fraud case in which a Florida woman was convicted of tax evasion after bragging about being the “Queen of Tax Fraud” on Facebook.
In 2011, the IRS created a new “Office of Compliance Analytics” division due to the huge toll tax evasion was having (and continues to have) on the U.S. government. After losing an estimated $3 trillion between 2000 and 2009, the IRS began to make use of big data and predictive algorithms to track down tax evaders. The agency uses data analytics based on “highly detailed profiles” of taxpayers created from sources other than tax returns. Hauser’s report claims that the IRS mines commercial and public data from a variety of sources, including Facebook, Instagram and Twitter. She suspects that the IRS has created an algorithm to verify information taxpayers have provided on their returns.
It is plainly evident to this author that an IRS auditor or criminal tax investigator could draw a fairly accurate depiction of a couple’s lifestyle depending upon how much of their lives they share online. Think about how many people share relevant and real time information on the car they purchased, the meals they ate, the concerts and sporting events they attend, the house they purchased etc. – Online.
Hauser has many trepidations about this practice, mainly that it is in violation of U.S. privacy laws. “We have laws in place to prevent the government from doing certain things with our data,” she said, “and it doesn’t seem like the IRS is complying.” A recent federal case decision held that citizens do in fact have a right to a reasonable expectation of privacy in their emails, but Hauser is concerned that the age of most other privacy statutes limits their applicability. Since many of these statutes were written before social media existed, the law is not worded as broadly as it could be to cover these situations. It would not be surprising in our post 911 world, that if this issue was ever challenged in court, a finding that the public has no expectation of privacy in their freely shared online lives, could be arrived at.
Another big concern for Hauser is the unreliability of social media. It’s no secret that people often exaggerate, make errors, or flat-out lie on the Internet. Hauser believes that federal law requires the IRS to be transparent about the types of information it collects and to provide taxpayers a chance to review and correct any errors.
Tax payers may be surprised and discomforted to learn that they may be subjecting themselves to an audit or criminal tax investigation in this way, but they need to be prepared for the possibility nonetheless. Auditors and Criminal Tax Investigators are typically aggressive by nature and have been extensively trained to investigate and interrogate. Auditors often reach detrimental determinations based on inconsistent or unreasonable facts, even when a taxpayer adamantly believes they have done nothing wrong.
If you are being audited or investigated, it’s essential to take the proper steps to protect your net worth and your liberty. Even taking the first step of determining how and why you are being audited can be difficult without the advice of an experienced tax attorney. Your taxes can be audited for a variety of reasons (specific unusual activity on your return; automatic flags; random selection) and an attorney can help narrow your focus and allow you to start gathering the relevant documents. There are also several different types of tax audits (correspondence audits, office audits, field audits, taxpayer compliance measurement program audits) and representation from an attorney is critical to protecting your rights while the audit is being conducted. When the attorney you hire is also a CPA with a Master Degree in Taxation, optimum results are often more readily achievable.
The thought of being cyber stalked by the IRS might sound laughable at first, but there is a real likelihood for certain high-risk taxpayers. Being audited or criminally investigated by the IRS is a nerve-wracking and unpleasant experience, at best, and permanently life changing, at worst, and should be avoided at all costs. Whether you are facing an audit or criminal tax investigation, or have already been charged with tax fraud, an experienced tax attorney can provide help. The Tax Law Offices of David W. Klasing can deliver strategic guidance to comply with tax laws and avoid an audit by the IRS. Through the IRS’s domestic voluntary disclosure program, our firm can even remove the risk of criminal prosecution where a pattern of fraudulent current and prior year tax returns currently exists. Our team of Tax Attorneys, CPAs and EA’s can provide representation to protect your interests and reduce or eliminate civil and criminal tax penalties. To schedule a reduced rate initial consultation with one of our tax professionals, call (800)-681-1295 today or contact us online.
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