How to pay your federal income taxes
Entrepreneurs who are cheating taxes with online stores, beware: The IRS is looking for new ways to catch suspected tax cheats over social media.
Specifically, the IRS wants a new tool to help it check public social media feeds and websites for details on people already suspected of not complying with the tax code, the tax-collecting agency said in a Dec. 18 request for information from vendors.
Social media could provide investigators with a treasure trove of data, showing where taxpayers live, what they drive and what they’re selling online. That data could be useful to the IRS as it tries to catch people cheating on their taxes — if the agency can figure out how to collect and use it without running afoul of its own internal rules.
The IRS said it doesn’t want to comb through every taxpayer’s social media — just those they’re already investigating, according to the request for information.
“Businesses and individuals increasingly use social media to advertise, promote, and sell products and services,” the agency said, explaining its desire for the tool. “But the IRS currently has no formal tool to access this public information, compile social media feeds, or search multiple social media sites.”
The IRS estimates that United States businesses pay $125 billion less in taxes each year than those businesses actually owe, according to Quartz, the news site that first reported the IRS request for new social media tools.
Setting up shop on a social network like Facebook is often free, and what’s posted on online stores is “is unrestricted, allowing the public, businesses and various governmental agencies to discover taxpayers’ locations and income sources,” the IRS said.
But IRS employees themselves can’t just log onto a Facebook account and peruse suspected tax cheats’ online stores, the agency said.
“For work purposes, the IRS generally bars most employees from logging into any social media site with a user ID and password,” the agency said. “In addition, IRS cybersecurity limits employees’ ability to view or access publicly available information on social media sites.”
Employees aren’t allowed to create fake or work-related social networking accounts to make sure taxpayers are complying with tax rules, according to the IRS.
The request for information itself appears to anticipate that social media users may be nervous about the IRS poking around on Facebook, Twitter, Instagram or other social networks.
“The IRS emphasizes that this tool, if the agency decides to pursue the use of it, would be done to assist with previously identified tax compliance cases,” the agency said. “The IRS respects taxpayer rights, and such a tool would not be used to search the internet or social media sites for purposes of identifying or initiating new tax audits.”
The IRS did not respond to a request for comment.
The request requires that vendors be able to provide “real time, customizable reports of publicly available social media information” that would be “easily explainable in court,” among other requirements. The IRS also wants a tool that is “streamlined, professional, and easy to read and interpret for all users, from low level employees to upper management.”
Even four years ago, reports suggested the IRS (which closely guards its investigative tools) might be using what’s publicly available from social media to keep tabs on tax evaders.
“It’s hard to believe that anybody who puts anything on Facebook has any legitimate expectation of privacy,” said Edward Zelinsky, a professor of tax law at the Cordozo School of Law, according to a Marketplace story in 2014.
Other federal agencies are using social media to enforce the law, too.
Eight New York and New Jersey therapists were arrested and charged this year after federal investigators said they stole more than $600,000 in government funds by billing for counseling sessions with disabled kids that never happened.
Prosecutors said one therapist can’t have been doing counseling sessions because a photo posted to Facebook showed her on a Caribbean beach vacation, holding an iguana and smiling, when she said she was in the office, McClatchy reported in October.