US tax office investigates tax fraud using social media

Revenue agents in the US have begun using social networking sites such as Facebook and MySpace to target people accused of tax fraud.

According to a report in the Wall Street Journal, both state revenue agents and the federal Internal Revenue Service are now using the sites in order to gain information on people who are avoiding paying their fair share of tax.

In the northern state of Minnesota, state authorities were able to identify a tax evader after he announced on his MySpace page that he would be returning to his home town and even named his previous employer.

In Nebraska, tax agents were able to collect $US2,000 from a DJ when he posted on his MySpace profile page the location of a party at which he would be working.

A Nebraska state official told the WSJ that while agents are restricted to using information that is only publically available on the internet, MySpace is a good first step because its default setting allows public access to profile pages. On the other hand, rival Facebook has a default setting that keeps profile pages private.

In California, agents are beginning to use social networking to find tax evaders as the state suffers from a plummet in revenue. When one alleged evader was listed in an official file as a “sail rigger”, an agent searched his name online and found a discussion about the rigger’s shop.

Another member replied that the alleged evader had shut up shop and “moved across the bay”, which led the office to find the man and collect a four-figure payment.

Another Minnesota tax official said agents also use other websites to determine whether a subject is revealing the truth about their tax status, citing a case where one tanning salon business asked the government for money but claimed on its website to supply equipment for a local body-building contest.

Another agent used Google to collect $US30,000 in unpaid tax bills from one evader, as a quick search showed he worked as a marketing executive for a local firm.

The trend is catching on in other states. Jessica Iverson, a spokesman for the Wisconsin Department of Revenue told the WSJ that “using social media is something we will explore”, while a spokesman for Oregon’s revenue agency said the state is “considering it”.

“These new supplements are often far more efficient than the older ones, such as reading the local newspaper or making inquiries at barbershops and church meetings,” said Jim Eads, director of the Federation of Tax Administrators.

But the trend isn’t taking off everywhere, with a Massachusetts state revenue service spokesman telling the paper it has “no systematic program” for using social media.

The ATO did not specify whether it uses social media to identify tax evaders, but a spokesperson says it uses “various means” of identifying people as per its compliance program.

Meanwhile, a new report from a British insurance agency claims users of social media websites will face higher insurance premiums because they are more likely to be robbed of their possessions.

The report from Legal & General says its customers should be warned that criminals often use social networking sites to locate targets, and the company is now considering questioning its customers about their internet usage.

Report author Michael Fraser told the Daily Mail: “There is absolutely no doubt in my mind that burglars are using social networks to identify likely targets”.

“I call it ‘internet shopping for burglars’. It is incredibly easy to use social networking sites to target people, and then scope out more information on their actual home using other internet sites like Google Street View, all from the comfort of the sofa.”

Additionally, the report, which surveyed over 2,000 users of social networking sites, found 40% have updated their profiles with holiday plans and about 50% were unconcerned about online security on social sites.