A Washington State University (WSU) professor has asked an interesting question in the Vanderbilt Journal of Entertainment and Technology Law: Is the IRS use of social media to establish IRS audit targets legal or does it violate established law? Revelations that the IRS researches social media and other large data sets in order to identify IRS audit targets might make one rethink posting about the purchase of a new vehicle or information regarding their vacation. “People should be aware that what they say and do online could be used against them by the IRS,” says Kimberly Houser, an associate professor of business law in WSU’s Carson College of Business.
Ms. Houser’s new 55 page report is filled with examples of the IRS use of social media to establish audit targets including a recent case in which a Florida woman was convicted after boasting of being the “Queen of Tax Fraud” on Facebook. The report states the IRS mines freely available commercial data and social media sites such as Facebook, Instagram and Twitter. The “big data” accumulated from many sources is accumulated and associated with individual taxpayers in IRS databases, and internal IRS algorithms are used to identify potential tax evasion and IRS audit targets.
Many taxpayers do not understand the burden of proof is upon the taxpayer and not the IRS when tax questions, practices, data or information is in question. While a recent case in federal appeals court affirmed the IRS’ responsibility to seek a court order before reviewing private data such as emails, the amount of information available and the power of the IRS is beyond the understanding of most taxpayers.
Another example is communication between a taxpayer and their accountant, CPA, tax preparer and even financial planners. All of these communications and discussions and the notes of associated professionals can be subpoenaed by the IRS and used against the taxpayer. Allen Barron’s experienced IRS audit and tax attorneys are able to extend the protections of the attorney-client privilege to provide additional protections guaranteed by US law which are unavailable to other financial and tax professionals. This allows us to have a full and candid discussion and for our clients to disclose information in a confidential manner protected from the reach of the IRS.
The IRS use of social media to establish audit targets is one more example of why it is important to work with the experienced tax attorneys and integrated accounting and legal professionals at Allen Barron. If you have been contacted by the IRS for an audit we invite you to contact us for a free consultation at 866-631-3470.