Monday, September 26, 2022

The Facebook world is really quite a strange universe when you sit back and think about it. The average sentence written by a female inexplicably contains 17 exclamation points. Apparently a normal response to a picture posted of a young child is to state how you want to “eat them” or “squish them,” both equally disturbing in their own right. If an alien landed on earth today and just looked at Facebook, it would assume the female species is a group of overly hyper cannibals. But it’s not just females’ behavior that’s odd on social networking sites; we are all guilty of this.

We “challenge” each other to perform various tasks such as pouring ice water on our heads and telling everyone what we are grateful for. We “check in” when we go somewhere because everyone needs to know the second I entered the restaurant. And then when the waiter brings my entree I need to post a picture of the food because how else will everyone know what I am about to eat? We also post pictures from our parties, vacations, social events, and everywhere we can think of. We make sure the whole world knows exactly where we are at all times. We have become a nation of stalkers, essentially. Just 10 years ago we were only capable of stalking people when they got engaged or married, thanks to Onlysimchas. Our kids will wonder what we used to do before. How did we keep up with everyone’s lives? The truth is we didn’t, and yet somehow we were still able to survive without knowing what my friend thinks of the person sitting next to him on the bus or what time he checked in at the gym. But besides for our friends following our every move, there may be someone else—the IRS.

As of two years ago, the IRS began collecting data from the internet, including sites such as Facebook, Twitter, and even eBay. Under pressure from the government to collect an estimated $300 billion in uncollected revenue due to evasions and errors, the IRS began employing a new technique called robo-audits. While the name “robo-audit” sounds cool and it makes you want to be a part of it, I assure you that it’s as nerdy and annoying for taxpayers as most things the IRS is involved with. Essentially, a robo-audit not only has the capability of scanning an e-filed return within moments for missing information or fraud, it also has the capability to cross-reference taxpayers’ online activities with their tax information. Before you start thinking this is just paranoia about Big Brother watching every move we make, records from US Tax Courts already have shown the IRS has used information gathered from Facebook and eBay postings during cases. In fact, the IRS has a 38-page manual used to train its auditors how to search internet addresses, Facebook postings, and other social media sites during tax audits.

It still remains unclear how much the IRS will use data mined from social media sites in collecting revenue. So far it has only been used in conjunction with tax audits for taxpayers that have already raised a red flag due to another matter. But before you file that return with $10,000 of income while bragging on Facebook about that Porsche you just purchased, you may want to think twice. But it’s not just in fraud cases that your postings can harm you. Let’s say for example that a businessman travels twice a week to Las Vegas for legitimate work purposes and he claims these travel expenses as a deduction. If the IRS decides to audit his travel deductions and he has a Facebook posting that says, “Off to Vegas to catch Carrot Top and Celine Dion” then besides for questioning his taste in entertainment, the IRS also has a pretty good case to disallow some of those travel deductions. In reality, he may have really gone to Vegas for business and the Carrot Top show was just some tasteful entertainment he needed at the end of a hectic work day. But from the IRS’s point of view, this businessman just became the chief witness against none other than himself.

While it still remains to be seen whether the IRS will ever use data from social networking sites for the average return not already red-flagged, it’s best to use precaution before posting your whole life to the world. Feel free to continue posting about eating/squishing little babies and letting me know how your dinner tastes, but just know that I’m not the only one who may be reading it.

Daniel Magence, CPA, Esq. is a principal at Pristine CPA Solutions, LLC (www.pristinecpa.com). Pristine CPA Solutions offers tax and accounting services to individuals and businesses of all sizes. He can be reached at [email protected] or 201-326-6908 if you have any questions, comments, or are interested in using Pristine CPA’s services. It’s tax season now, so feel free to contact us for a free consultation.

By Daniel Magence

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