August 19, 2022
Could your social media posts trigger a tax audit?
For most of us, social media has become part of our daily lives. We live publicly – broadcasting to our friends and family every achievement or exciting piece of news in our lives. It has become so commonplace, that many of us don’t give a second thought to how public our posts really are – and who all could be accessing them.
The IRS has access to a wide range of information about you – far beyond what you file in your tax return each year. They know what kind of car you own, and what house you live in and can even access your financial accounts. With the annual tax collection gap at around $300 billion, IRS employees have started employing new data-mining tactics in recent years to help identify individuals who may be hiding income. One of these strategies involves reviewing taxpayers’ social media activity.
What does the IRS look for?
Examples of suspicious posts may include:
- A parent who is behind on their loan repayment posting a picture of the new car they just bought for their teenager
- A business owner who wrote off a lavish family vacation to Bora Bora as a business expense – but the photos do not reflect a business trip
- A software developer who boasts about their high-earning new freelance gig on LinkedIn but does not claim any income from this on their return
Am I at risk?
It’s worth noting that the IRS does not examine every taxpayer’s social media account. This is a labor-intensive process that would require far more manpower than the agency has. However, if the algorithms and number crunching used to initially review your tax return show irregularities, then an IRS agent may investigate further – and this can include looking at your social media.
It’s also important to point out that forgetting to report a couple of sales from your Etsy business is not likely to trigger an audit. The IRS tends to target high-income tax evaders for audit in order to help make a dent in the tax collection gap.