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Expanded IRS Net Raises Privacy Issues

By    |   Monday, 13 May 2013 02:38 PM

The Internal Revenue Service is tapping into Facebook and eBay, and monitoring credit card and web transaction payments in a new bid to catch tax cheats.

U.S. News & World Report reveals the new strategy is being used as the agency attempts to recoup an estimated $300 billion it loses every year due to tax evasion and errors.

Financial experts say the expanded effort to get information could push the boundaries of privacy.

"I am sure people will be concerned about the use of personal information on databases in government, and those concerns are well-taken,'' Edward Zelinsky, a tax law expert and Cardozo School of Law and Yale Law professor, told the publication.

Congressional staff sources told U.S. News's Richard Satran the expansion will be a "key issue'' when the next IRS chief is up for approval in front of the Senate.

As part of its modernization, the IRS has hired private industry experts to help them digitally track financial transactions. The experts are given access to Social Security numbers, health records, and credit transactions.

Other methods of keeping tabs on taxpayers, U.S. News says, include analyzing Facebook, targeting audits by matching filings to social media or electronic payments, and tracking Internet addresses and emailing patterns.

The publication reports that U.S. Tax Court records show information gathered from Facebook and eBay postings have been used by the IRS in defending tax challenges.
But It all may not be as bad as it sounds.

U.S. News says that "in practice, the third-party data has been used only if the irregular returns merit more attention.''

One example of that is zeroing in on prisoners who were filing false claims for energy tax credits for window replacements.

Congressional aides on the House Ways and Means Committee and the Joint Committee on Taxation told the publication the panels plan to study the possibility of errors in the so-called "robo-audit'' monitoring and storage of data on millions of taxpayers.

Paul Schwartz, a University of California law professor and co-director of the Berkeley Center for Law & Technology, said social media can "make people testify against themselves. They provide a counter-narrative."

He told U.S. News one example might be a businessperson going to Florida for five meetings over a week who also visits family. A casual posting to friends about "visiting my mother in Florida" would raise a red flag as to the true nature of the deduction.

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The Internal Revenue Service is tapping into Facebook and eBay, and monitoring credit card and web transaction payments in a new bid to catch tax cheats.
Monday, 13 May 2013 02:38 PM
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