The IRS is Following Your Digital Tracks

Here are two things you never want to see in the same sentence: “IRS” and “digital tracking technology.”

On Monday, with a week to go before the filing deadline, news began seeping out of the cesspool in the nation’s capital: The IRS would begin checking the Facebook and Twitter pages of taxpayers whose returns throw up red flags.

“Let’s say,” suggested Fox News legal analyst Andrew Napolitano, “you took a trip that you characterized as a business trip and you deducted the cost of the trip from your income — perfectly legitimate if true — and the IRS looked at your Facebook page and saw you dancing with a grass skirt and hula hoop and a hat and drinking whatever.”

Annoying as hell… but not at all surprising. You could make the IRS’ job harder by limiting access to your Facebook posts — friends only. You do that anyway. (You do, right?) Easy.

Then the story took a more sinister turn.

“The new technology,” according to a report at Accounting Web, “resembles the Internet ‘cookies’ that track movements of consumers and target them for advertisements. The IRS assembled a team of experts from the private sector to help develop a system with similar digital tracking.

“But the IRS has an added advantage of being able to access Social Security numbers, credit card transactions and other confidential information that is otherwise protected.”

Ick. Nor does this remark in the tech trade press inspire confidence: “Private industry would be envious if they knew what our models are,” bragged Dean Silverman, the IRS’ lead techie and one of those private-sector recruits.

Now the story is much, much worse. “The Internal Revenue Service doesn’t believe it needs a search warrant to read your email,” reads a new scoop by CNET’s Declan McCullagh.

The ACLU got its hands on an IRS Search Warrant Handbook from 2009. “Emails and other transmissions,” it says, “generally lose their reasonable expectation of privacy and thus their Fourth Amendment protection once they have been sent from an individual’s computer.”

Other documents reveal the IRS stuck to this position even after a federal appeals court ruled in 2010 that Americans do indeed have a reasonable expectation. A 2011 update to the manual says, “Investigators can obtain everything in an account except for unopened email or voice mail stored with a provider for 180 days or less.”

Alas, there’s no electronic equivalent of this doormat…

The IRS appears to be relying on a broad interpretation of the Electronic Privacy Communications Act — a law passed in 1986, when email was the province of hard-core techies and pointy-headed academics. Members of Congress are drawing up a bill that would bring matters into the 21st century.

Whether it actually reins in the IRS is another matter entirely…

Dave Gonigam

The Daily Reckoning