Individuals rely on social media to broadcast numerous bits of news and updates to their family and friends scattered across the globe. While many see it as a harmless bit of self-promotion, they can potentially get themselves into financial trouble they might have otherwise avoided.
Unfortunately, these individuals don’t often realize that the IRS uses numerous methods to identify taxpayers who will get flagged for an audit. Additionally, the use of social media posts can be used to build or strengthen a case against the taxpayer.
Why does this happen?
Like any organization, the IRS often faces budget cuts and employee attrition. In response, they must adapt and develop methods that help them accomplish more with fewer resources. In recent years, this was largely accomplished through their access to digital information and the use of artificial intelligence and computer algorithms to identify financial inconsistencies. Social media posts can draw the attention of the IRS in numerous ways, including:
- A business owner struggling to make ends meet posting about the expensive new car they purchased.
- A taxpayer short on funds who can somehow scrape together enough money for a costly international vacation.
- An individual who posts about a new job on LinkedIn but does not claim income from it on the tax return.
- A business owner who posts nothing but personal adventure stories from a vacation that was written off as a business trip.
A single post or a history of information does not necessarily lead directly to a tax audit or serious consequences. It is wise, however, to realize that information posted online is readily accessible to nearly everyone. Social media information now represents a significant amount of data for the IRS whether they are identifying audit targets or building their case.