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The IRS is Using Data Analysis to Catch Tax Cheats

IRS Criminal Investigation Division Establishes New Initiatives

In Aug 2017, the IRS announced the creation of two new investigation initiatives:

  • International Tax Enforcement Group
  • Nationally Coordinated Investigations Unit

These will both report directly into the Criminal Investigation division’s executives.

The International Tax Enforcement Group is tasked with investigating international tax enforcement cases. The group will be headquartered in Washington, DC, but will use agents throughout the United States and overseas. The group will focus on taxpayers who haven’t reported all of their global income and overseas assets.

Where does the IRS get their data?

The IRS has their fingers all over the globe. Information sharing with financial institutions have increased the amount of taxpayer data available for the IRS to find those underreporting or misreporting tax information. In addition, the increased use of Big Data is allowing the IRS to find holes that need to get plugged.

For tax purposes, the definition of a US person is any United States citizen, a holder of a Green Card, or a partnership, corporation, or organization that has been established under US law. All US persons must file a variety of income tax forms and information reporting forms, both to the IRS as well as to the Department of the Treasury. Because of these forms, the Internal Revenue Service already has a significant amount of data on US taxpayers.

Recently, the IRS began receiving taxpayer data from overseas financial institutions. This is a requirement of the Foreign Account Tax Compliance Act, or FATCA. As additional countries begin to comply with the IRS’s requests under various tax treaties, more taxpayer data will become available.

Whole Story at TFX.

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