Social media’s relentless increase in popularity over the last two decades is unquestioned. Most people rely on some sort of outlet to share thoughts, images, videos or career aspirations. Often, an individual will post numerous times a day on various social networking sites. Unfortunately, these people can place themselves in harm’s way when it comes to the IRS.
In an effort to reduce the gap between what they calculate as owed versus how much they receive, the IRS runs audits on a certain percentage of the tax returns that are filed. Numerous red flags can trigger the audit process. These can include incorrect deductions, missing income, math errors and unrealistic donations. In many instances, the IRS will use a computer algorithm to analyze returns to determine which ones demand a closer look. In some cases, the IRS employs detective work to identify inconsistencies in an individual’s return.
Does this include a social media post?
In short, yes. The IRS maintains significant access to digital information and the flow of data. Information posted on various social networking sites can draw attention to an individual’s tax return in many ways, including:
- An individual who posts about a lucrative freelance gig on LinkedIn but does not claim any income from it on the tax return.
- A business owner who claims to barely break even while posting photos on Instagram about an expensive new car or lavish home.
- An individual who claims a modest income with huge donations and then posts a series of photos on Facebook about a costly vacation to an exotic locale.
- A business owner who boasts about ways to save money by claiming a pricy vacation as a business expense … and then posting photos on Twitter depicting non-business adventures from said lavish vacation.
Whether it is a single status update or a history of posts, social media activity might not necessarily trigger an IRS tax audit. However, individuals should remember that all this information is taken into account by the IRS algorithm and investigators. It is wise to seek guidance as soon as the IRS mails a letter of notification regarding an audit.