With another tax filing and estimated tax payment deadline coming up, you may have spent the last few days thinking hard about your taxes, but the IRS has been doing so for years – positioning itself as a leader in using Big Data.
Each year, April 15th is a memorable date for those of us in the United States – this is the deadline to file our taxes or to file an extension to delay filing a tax return to October 15th.
It is clear that the IRS is the dominant government agency in the United States. After all if there are no taxes, there can be no government. Politicians know this and over the decades have ensured that the IRS has all the powers it needs to raise federal taxes from the citizens, residents, and even tourists who stay long enough in the United States.
U.S. citizens cannot even escape U.S taxation by leaving the country because the tax law requires U.S. citizens who currently earn more than $9,750 to file even if they don’t live in the country. Even if you renounce your citizenship, as 3,805 did in 2011, you still have to pay an exit tax of 15% on all your assets including investments, homes, and even your personal possessions.
Extensive data collection
To keep track of this, the IRS has one of the most extensive data collections in the world. Traditionally its power to enforce has come through the matching of data. For example, you received a W-2 Form from your employer showing how much you earned. That same form is submitted by your employer to the IRS. Now the IRS can match your return to that form to make sure you are reporting the income. The same thing goes for 1099 forms showing your earnings from miscellaneous income, gambling winnings, interest and dividend income, sales of assets, deductions, and so on.
But the IRS is not stopping here. The IRS has signed a $650 million ten-year contract with Unisys to further develop Big Transaction Processing Data whereby the IRS is using Unisys ClearPath Dorado Servers running at an estimated 1,200 MIPS to process tax returns.
For those of you who are not techies, “MIPS” is a measure of a computer’s central processing unit performance and its stands for “Million Instructions Per Second”. These servers will reside selected IRS Data Centers alongside several IBM z/196 mainframes, capable of running at an estimated 8,000 MIPS. Along with all this processing power are extensive data storage capabilities which will be managed in the IRS’ private cloud. It is estimated that IRS has 7.5 Petabytes of data. By the way just one Petabyte is equivalent to 1 quadrillion bytes.
Data from social media
But the IRS is not just stopping with Big Data Transactions, the IRS is now pursuing Big Data Social Media Analytics just like Google.
But unlike the normal corporate big data analytics, the IRS has one big advantage: It knows everyone’s social security numbers, as well as all the tax information from the firms we as taxpayers interact with, and as such the IRS can join the dots between Google, EBay, LinkedIn, Facebook, Yelp, Twitter, and perhaps your PayPal and credit card accounts along with your emails to overseas bankers.
The IRS has access to every social media posting going back to 2008 so deleting your posts does not make them go away. The IRS has bragged that their computer can make DNA blueprint of each of our behaviors. Amazingly, the IRS’ supercomputer can read all 200 million e-Filed returns in just ten hours!
All this will allow the IRS to refine its algorithms to more effectively identity those taxpayers to be selected for audit or investigation.
So while none of us enjoys doing or paying our taxes we as taxpayers can be comforted by knowing that the government is at the forefront of the big data revolution. And despite the use of these new technology skills to make the government itself more efficient, there are still two certain things in life – death and taxes!
Protect yourself from excessive fines and possible jail time. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Los Angeles, San Diego, San Francisco and elsewhere in California defend you from the IRS.
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