The US Tax Inspectorate uses data mining and predictive analytics.

In Russia and the CIS countries, tax crimes are not considered something extraordinary for an individual. Underpaid tax? Well, pay as much as you need - and free. The situation is completely different in the USA. There, for concealing taxes, you can go to prison for a long time, this is one of the most serious crimes against the state, along with high treason and espionage in favor of another state. So with the IRS (the so-called local tax inspectorate) is better not to joke.



But the IRS itself is becoming more intelligent. She begins to apply modern technology to identify those citizens whose expenses do not correspond to the officially received income. This writes the publication Vanderbilt Journal of Entertainment and Technology Law , citing the report of Associate Professor of Business Law at the University of Washington Kimberly Hauser and Professor of Accounting at the University of Washington Debra Sanders.



Reportedly, the IRS is now engaged in data mining of public and commercial data sets (including from social networks) in order to create detailed taxpayer profiles through which tax specialists perform data analysis.



The report's authors say that the methods of work of the tax inspectorate remain largely unknown to the general public. At the same time, there are doubts about their legality. According to some lawyers, the collection of data from social networks and the profiling of users with the data mining of their income can itself violate the law. Although users themselves post information for everyone to see, but the tax inspectorate begins to collect a profile on them before the audit begins . The existence of data brokers (companies that collect information on users and resell it to interested parties) and the ability to buy information through the Internet on almost any person creates a situation where a person loses control over his personal data. This is especially dangerous if the interested party is the state in the person of the tax service.



The lack of transparency and accountability in this process raises even more serious questions. Secretive actions of the state in such a collection of the state are illegal, and also can lead to discrimination.



The authors of the report list all the methods of collection that the IRS uses, as well as the articles of the law that the tax authorities may violate in the process of data collection and data mining.



So, the sources of tax information:

• Forms W-2 from the employer (standard practice).
• Telephone recordings . According to the American Civil Liberties Union, the IRS was among the customers of equipment for wiretapping cell phones (the so-called Stingray devices) in 2009-2012.
• Email Inquiries under the Freedom of Information Act in 2013 showed that the tax administration was looking through the personal mail of taxpayers without a warrant .
• Social networks . Upon request, in accordance with the Freedom of Information Act, the IRS confirmed that it collects information from social networking sites. The seven-year-old IRS tutorial lists Facebook, MySpace, and YouTube as sources of taxpayer information.
• Data mining involves analyzing large data sets that were collected for a purpose other than the one with which they are analyzed. The goal is to identify previously unknown relationships in the data. The use of data mining is reported in the internal documents of the IRS . Independent sources say that the tax administration thus specifies the taxpayer profiles.

The following potential violations of the law are possible:

• A. Violation of the practice of fair treatment of information .
  
  
  1. No notice.
  2. Secret data collection system (violation of the Personal Rights Protection Act of 1974 (Privacy Act of 1974)).
  3. Lack of taxpayer consent to contact the IRS with a third party (violation of section 7602 of the Internal Revenue Code).
  4. Loss of user control over the use of personal information.
• B. Lack of transparency in the algorithm .
  1. Violation of the Law on Administrative Procedure (Administrative Procedure Act).
  2. Data mining errors: inaccurate taxpayer profiles.
  3. Potential discrimination. After self-learning, prediction algorithms will begin with a prejudice put to people, given the color of their skin, place of residence, and other discriminatory signs.
  4. The arbitrary and bizarre actions of the agency. For all the above reasons, the use of data mining and self-learning algorithms can lead to an automated state decision-making system making incomprehensible to the human mind decisions.
• C. Data collection .
  1. Violation of the Electronic Communications Privacy Act (1986) - here are obvious violations in connection with wiretapping of phones and unauthorized reading of email.
  2. Searches without orders (viewing mail on a server that has been stored for more than 180 days).
  3. Inadequate legal procedure.
  4. Self-agreement - people actually give unfavorable testimony for themselves, denounce themselves, and forcing such testimony is prohibited by the Fifth Amendment to the Constitution.
• D. Other federal violations .
  1. Violation of the Law on the Protection of the Rights of the Person of 1974.
  2. Violation of the Computer Comparison and Privacy Law Act 1988 (Computer Matching and Privacy Protection Act 1988).
  3. Violation of Section 6013 of the Internal Revenue Code, which states that information relating to taxes must be kept confidential and not disclosed in any way. We are talking about the relevant rules for storing and protecting this information from the IRS, and there are penalties for IRS employees for breaking the rules.
  4. The Data Quality Act requires federal agencies to take action to verify the quality of the data collected.

In general, the actions of the American IRS may already violate a number of federal laws. It is quite possible that in the coming years, their advanced data mining methods will be taken over by their Russian colleagues, especially since there is a big deficit in the budget - and it is imperative for the state to increase tax revenues from citizens.



Then it is better to think twice before posting photos from a Cayman vacation or a snapshot of a new car that you bought by dragging an online poker tournament in a “contact”. We thought that the tax will not know about it? Now find out.