From the Tax Law Offices of David W. Klasing- How the IRS Uses Big Data Analytics to Catch (and Punish) Tax Evaders

IRVINE, Calif., Sept. 13, 2019 /PRNewswire/ -- Like government agencies all over the world, the IRS continually adapts its data analytics strategy in an effort to keep up with changing pace of technology – and by harnessing the power of Big Data, the IRS is getting better and better at detecting and investigating tax evasion effectively.

In 2018, the IRS was provided funding for approximately 1,700 new hires. At the same time, the IRS unveiled a five-year plan to upgrade its technology, not only to reflect advancements in computing, but also to account for the Tax Cuts and Jobs Act (TCJA), which brought major overhauls to the federal tax code.

Consider how well the IRS Criminal Investigation Division performed even when hampered by antiquated technology – in 2018, the tax conviction rate topped 91% – the planed technology upgrades are bound to yield impressive results, particularly since the IRS plans to increase its number of criminal referrals for tax evasion. For taxpayers who have failed to comply with the law (by, for instance, underreporting or concealing income), that means only one thing: danger.

The IRS draws data and information from a vast and varied network of sources, including but not limited to those listed below. Where relevant, our IRS tax attorneys have included links to additional information for readers:

• Foreign financial institutions (FFIs), which must report certain U.S. account holders under the Foreign Account Tax Compliance Act (FATCA)
• IRS John Doe summonses (such as the recent Coinbase summons)
• Tax whistleblowers
• The Financial Crimes Enforcement Network, or FinCEN, which is the federal agency responsible for reviewing FBAR submissions (i.e. online submissions of FinCEN Form 114)
• The Panama Papers
• The Swiss Bank Program

Through a combination of cutting-edge data analytics and tried-and-true investigative techniques, the IRS plans to focus its upcoming enforcement efforts on a set of specific problem areas. These areas include:

• Abusive tax return preparers, or tax preparers who help clients commit tax fraud in exchange for a fee – generally by claiming improper credits, underreporting the client's income, or making other willful errors to mislead the IRS
• Abusive tax schemes, such as schemes in which foreign entities are misrepresented as controlling assets which in fact belong to a U.S. taxpayer
• Bitcoin (BTC) and other cryptocurrencies, transactions with which must generally be reported
• Employment tax fraud, or payroll tax fraud, such as schemes in which employers intentionally fail to remit payroll taxes to the IRS

See a full version of this article here:

Public Contact: Dave Klasing Esq. CPA, [email protected]

SOURCE Tax Law Offices of David W. Klasing, PC

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