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IRS Uses Social Networks for Tax Probes

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March 17, 2010

The Internal Revenue Service has been making good on its promises to step up its audits of wealthy taxpayers, and sites like Facebook could be a big help.

The agency released statistics last week indicating that its audits of those earning between $5 million and $10 million increased 16 percent in 2009, while audits of taxpayers who earned upwards of $10 million climbed 8.5 percent, as The New York Times noted.

The IRS has also stepped up its enforcement efforts, initiating 4,121 criminal investigations in fiscal 2009, compared to 3,749 in fiscal 2008. Incarcerations totaled 1,810 last year, compared to 1,583 in 2008.

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What kinds of tools is the IRS using to uncover tax evasion? One of them is social networks. The Electronic Frontier Foundation has released documents uncovered from Freedom of Information Act requests, showing that the IRS as well as the FBI and other government agencies have been using social media sites like Facebook to collect information for investigations.

The EFF posted a 2009 training course that describes how IRS employees could use various Internet tools — including social networking sites, search engines and Google Street View — to investigate taxpayers.

However, the EFF commended the IRS for prohibiting employees from using deception or fake social networking accounts to obtain information. IRS policies generally limit employees to using publicly available information. The EFF also found that the IRS does not allow employees to use government computers to access social networking sites like Facebook or MySpace for personal communication, and cautions them to be careful to avoid any appearance that they're speaking on behalf of the IRS when making personal use of social media.

That’s good advice in general. Be careful what you say on Facebook or Twitter, particularly when it comes to your personal finances.

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