The Use of Big Data Analytics by the IRS: Efficient Solution or the End of Privacy as We Know it?

Abstract

This paper examines the privacy issues resulting from the IRS’s big data analytics program as well as the potential violations of federal law. Although historically, the IRS chose tax returns to audit based on internal mathematical mistakes or mismatches with third party reports (such as W-2s), the IRS is now engaging in data mining of public and commercial data pools (including social media) and creating highly detailed profiles of taxpayers upon which to run data analytics. We argue that current IRS practices, mostly unknown to the general public are violating fair information practices. This lack of transparency and accountability not only violates federal law regarding the government’s data collection activities and use of predictive algorithms, but may also result in discrimination. While the potential efficiencies that big data analytics provides may appear to be a panacea for the IRS’s budget woes, unchecked, these activities are a significant threat to privacy. Other concerns regarding the IRS’s entrée into big data are raised including the potential for political targeting, data breaches, and the misuse of such information. This article is intended to bring attention to these privacy concerns and contribute to the academic and policy discussions about the risks presented by the IRS’s data collection, mining and analytics activities.

Keywords: Big Data, IRS, Predictive Analytics