Kimberly Houser & Debra Sanders (Washington State), The Use of Big Data Analytics by the IRS: Efficient Solutions or the End of Privacy as We Know It?, 19 Vand. J. Ent. & Tech. L. 817 (2017):
This Article examines the privacy issues resulting from the IRS’s big data analytics program as well as the potential violations of federal law. Although historically, the IRS chose tax returns to audit based on internal mathematical mistakes or mismatches with third party reports (such as W-2s), the IRS is now engaging in data mining of public and commercial data pools (including social media) and creating highly detailed profiles of taxpayers upon which to run data analytics. This Article argues that current IRS practices, mostly unknown to the general public are violating fair information practices. This lack of transparency and accountability not only violates federal law regarding the government’s data collection activities and use of predictive algorithms, but may also result in discrimination.
While the potential efficiencies that big data analytics provides may appear to be a panacea for the IRS’s budget woes, unchecked, these activities are a significant threat to privacy. Other concerns regarding the IRS’s entrée into big data are raised including the potential for political targeting, data breaches, and the misuse of such information. This Article intends to bring attention to these privacy concerns and contribute to the academic and policy discussions about the risks presented by the IRS’s data collection, mining and analytics activities.
The Spokesman Review, WSU Professor Says IRS Is Breaking Privacy Laws by Mining Social Media:
Those Facebook posts from your vacation on a white sand beach, or that purchase of a fancy new vehicle, could be attracting views from the federal government.
As its staff shrinks, the Internal Revenue Service has turned to mining social media and large data sets in search of taxpayers to audit, a Washington State University professor says in a recent report in the Vanderbilt Journal of Entertainment and Technology Law.
People should be aware “that what they say and do online” could be used against them by the IRS, said Kimberly Houser, an associate professor of business law in WSU’s Carson College of Business.
Her 55-page report is studded with examples of how the IRS has turned to social media and data analytics for enforcement, including a 2013 fraud case in which a Florida woman was convicted after bragging about being the ‘Queen of Tax Fraud’ on Facebook. ...
The IRS’s media office in Washington, D.C., did not respond to an interview request. But Houser’s report is creating a buzz among privacy and data experts. “It wouldn’t surprise me, that in an effort to save money, the IRS has created an algorithm to verify information on your tax return,” said Angie Raymond, associate professor in the business and ethics department of Indiana University’s Kelley School of Business. “It’s an almost elegant use of an algorithm,” said Raymond, who wasn’t involved in the research. ...
The IRS has a long history of using audits for political purposes, Houser said. One of the more recent examples is when the IRS was accused of targeting conservative organizations affiliated with the tea party. The IRS also has had major data breaches, she said. “The IRS is not the entity I want maintaining these records,” Houser said.
Hauser said she’d like to see an oversight office “watching what the IRS is doing with data.” “We have laws in place to prevent the government from doing certain things with our data,” she said, “and it doesn’t seem like the IRS is complying.”