The Internal Revenue Service is using technology more than ever to go after taxpayers who are cheating or delinquent on their taxes. Their favorite tools are robo-audits and data mining. However, The U.S. News reports most of this technology so far has been used to catch “the minnows,” not the big fish.
The Service estimates there are $400 billion goes uncollected because of taxpayer gamesmanship each year. Some of the tools they use to battle are matching millions of people’s accounts on line against their digital files elsewhere. However, the area in which robo-audits have had the biggest impact on tax returns is for low income taxpayers who claimed the earned income tax credit.
In total, IRS fraudulent claims exceed $2 billion, and the earned income tax credit is the single biggest compliance problem.
The Service stated it will increase the use of data mining to include the personal data of millions more taxpayers. The Service uses very sophisticated software to match the data with other files stored online. The technology is referred to as pattern recognition technology. It was developed by IBM over the past decade. The Service promises that it will reach higher up the income ladder to include more middle income and small business taxpayers who itemize deductions. However, it is unlikely to have an impact on the complicated tax filings of those folks in the upper five percent of income earnings.
Real-time audits: The next step in the IRS high tech tax collection process will be to create a real-time check on tax returns “to match them to third-party information,” said U. S. Treasury Inspector, General J. Russell George in testimony before Congress. For example, the IRS software will be able to track all credit card transactions.
Furthermore, the Agency has begun to instruct their agents on how to utilize social media and e-commerce sites, including e-Bay. The IRS general counsel has said the IRS could look at
e-mails without warrants, but the IRS said it will not use this power.
The Service hasn’t given a lot of detail on what they can actually do, but it has told government and industry groups that its computers are capable of scanning multiple networks at the same time to collect matching profiles for every taxpayer in America. These profiles most likely include shopping records, travel records, and other information generally not available to the public such as health records and files from other government investigators.