3 Common Ways the IRS Discovers Tax Frauds

Tax Fraud Alerts

According to a survey, the gap between the tax collected by the IRS and what it should rightfully collect is around $450 billion. It is a huge problem for the IRS knows and even threats of penalties and IRS tax investigation are not always enough to dissuade taxpayers from defaulting or committing tax frauds. To try and overcome this problem, the IRS uses a number of investigative techniques to identify tax evaders. If you are under any kind of IRS tax investigation, it is advisable to connect with a tax resolution attorney or IRS tax lawyer. Nick Nemeth can help you get the best resolution to all tax issues, should you qualify. Continuing on the topic, in this blog post, we present three common ways the IRS discovers tax frauds. Take a look.

Related Blog: Tax Problems that Call for an Experienced IRS Attorney

1. Computer Data Analysis

Employers and third parties send information to the IRS which is recorded in the Information Returns Processing (IRP) system. The IRS matches the information from individuals to the records stored in its system and filters out tax evaders. While some omissions are plain mistakes, most of those identified are people that are not paying their taxes. It is believed that the IRS also uses the information from credit card transactions and medical records to find tax frauds.

2. Social Media Footprints

The use of social media by the IRS is just conjecture as the government agency never discloses much about the issue. Social media is used to gain insights into the lifestyles of individuals that are under IRS investigations. Keep in mind that under the Electronic Communications Privacy Act, the federal agency can look into your personal emails when conducting an investigation without the need for a warrant.

Related Blog: Who Should File a Tax Return: Explained by Nick Nemeth

3. Whistle-Blowers

A whistle-blower is someone that gives valuable information to the IRS about tax fraud. They can be anyone such as a former spouse or a disgruntled employee. They help identify the fraud and in carrying out proper IRS tax investigation usually in anticipation of some reward. The IRS pays a mandatory reward of 15 to 30% of the amount recovered from whistleblowing if the disputed amount is more than 2 million.

Wrap Up

If you are the subject of an IRS investigation, you need to consult an experienced tax attorney immediately. The Law Offices of Nick Nemeth, a team of professional tax lawyers with a history expertly representing and advising taxpayers facing IRS investigations. Whatever your IRS tax problems, the lawyers at the Law Offices of Nick Nemeth, PPLC, in Dallas will help you understand your situation and get the best resolution. Feel free to call (972) 484-0829 or fill out our contact form and we will take it from there.