Tax Faux Pas: Why You Should Think Twice Before Instagramming Your New Mercedes. The IRS has started using Facebook and Twitter to see if tax returns match lifestyles.
The difference between what the Internal Revenue Service believes taxpayers owe and what they actually pay is referred to as the tax gap. Given the strained financial position of the U.S. Federal Government, the agency is now turning to a new resource to make it more difficult for taxpayers to perpetuate this fraud. It is reviewing social media accounts of alleged tax cheats to determine if there is any information that helps them make their case.
The IRS estimates that it loses billions of dollars in revenue as a result of taxpayers underreporting income and overreporting expenses in an attempt to reduce their liability. Someone reporting $22,000 in income who then proceeds to share images on Facebook of their new Mercedes-Benz S65 AMG would certainly have some explaning to do. Given the lack of consumer understanding of the intricacies of privacy controls on social media sites, it’s likely that many people don’t realize they are oversharing with the IRS. Privacy advocates are concerned that this practice—while legal—is a rights violation.