Big Brother IS Watching
According to a recently released special report by an IRS watch group, the agency has been targeting conservative groups.
Some of the tactics involved having the IRS create a list for the types of organizations to single out for closer scrutiny. Examples that appeared on this list were political sounding names like Tea Party, 9/12, and Patriots.
The Ohio office chief of the IRS's Exempt Organizations Division, Lois Lerner, actually not only admitted this occurred but also that it was politically motivated. Additionally, there is much speculation that the practice extended well beyond the Ohio office.
In fact, this list was active for a two-year period, during which time the IRS approved around a dozen applications for liberal and progressive groups. There was even an application for a charity run by President Obama's half brother. It was approved within a month.
Spillover Into More Unwarranted Audits & Surveillance
The IRS has recently expanded its watch into monitoring things like social media. It is looking for discussions that occur in cyberspace, especially on sites like Facebook, Twitter, and other social media.
One theory is that they have software which monitors these discussions based on keywords; anything using words such as taxes, cheating, underpayment, etc. will be flagged and then sent to an actual agent for physical review.
There is also speculation that the agency may even be watching online e-commerce sites like eBay and Amazon, as CNBC notes. If you are selling online (especially at any of the big retail channels), the IRS is capable of matching up your sale prices with income reported on tax returns. Discrepancies can bring unwanted attention.
There is also a lot of evidence to suggest that the IRS watches and monitors emails. This should not really come as any big surprise to those who have been paying attention to all the recent invasions of privacy by the IRS (along with other government agencies).
The FBI and DEA have even used GPS tracking devices to follow vehicles, listening in on phone conversations and pinpointing a physical location. All of this has been done, on many occasions, without warrants.
The ACLU has filed a lawsuit against the IRS to stop these and other warrant-less invasions of privacy. They alleged that recently released IRS documents have indicated reasons why their agents should feel free to read the emails of private citizens.
In these documents, the IRS Chief Counsel has stated the opinion that an email loses the expectation of privacy once sent from the original computer. The same goes for any type of Fourth Amendment protections.
All of these privacy invasions are being conducted on the basis of an old law. The Electronic Communication Privacy Act allows government agencies to obtain emails which are more than 180 days old.
Fortunately, there are several signs of hope on this front. First, the U.S. Senate is working on a total overhaul and re-write of this law in order to require government agencies to obtain warrants in order to open and read any type of email.
Louisiana Republic Representative Charles Boustany, the Chairman of the House Ways and Means Committee, has written a letter to the IRS, demanding an accounting on their email practices. Governor Bobby Jindall has also publicly called for the IRS to end these methods of surveillance and investigation.
Are You Being Monitored?
As far as protection, you should always assume that things are being monitored; it is always far better to be safe than sorry. Never discuss taxes or income/expense reporting in any emails or on any of your social media profiles.
Never brag about those expensive items you recently sold on eBay. If there is something to hide, never mention this in any public forum online. (Avoid mentioning it all, even in places that would be assumed “safe”.)
The IRS is hatching a partnership with two of the largest computer companies, IBM and EMC. They will be employing state of the art technology to continue the expansion of their online surveillance programs.
These methods reportedly include charting and analyzing emails and social media, matching tax reports to social media and even electronic payments. They will also be tracking individual Internet addresses and email patterns, matching all of this data across high tech neural networks.
Basically, the best way to protect yourself is to not say or do anything online that does not match your tax filings and reports. This includes keeping track of what employers have paid you and knowing who is filing reports that mention your name. Make sure all of your online information matches your tax reports and both are accurate. Do not brag to friends about anything tax or income/expense related.
Preparing For An Audit
CNNMoney offers suggestions on what to do in the event of an audit. First of all, understand that your chances of being audited are very low. For the average taxpayer, this is about 1 percent. Those making incomes of $1 million or more have a much higher chance of being audited – approximately five times higher.
If selected, an audit is normally a fairly routine event. The IRS estimates that about 76 percent of these are correspondence only. This means there is usually a question about a specific part of the return (such as itemized deductions or medical expenses) and additional information is requested through the mail.
You will usually have 30 days to comply with this information 'request.' If you do not give an answer, the IRS will begin trying to collect on what they think you owe.
Obviously, it helps to be organized and focused. Keep all tax-related documents and records for at least three years. If you do not have what they are looking for or something to substantiate your filing or claim, then it will likely be disallowed.
Stay calm and focused, and recognize that it is nothing personal and that the agent is simply trying to do his or her job. If you are in a situation where there is significant money involved, do not hesitate to hire a CPA or other tax professional who can help. In most cases, they should be able to attend the audit with you.
Finally, make sure that you follow through on the result. This means pay promptly (usually within 30 to 90 days) or arrange a payment plan.
If you disagree with the result, talk with a manager who can conduct an internal review. If this still does not provide satisfaction, you can ask the Taxpayer Advocate Service for help.
You'll Never Be On the Inside!
After getting your report, you’ll begin receiving the Outsider Club e-Letter, delivered to your inbox daily.