Subscriber Login

Master Index of Newsletters and Special Reports

Looking for a specific topic?

Click here for
MASTER INDEX
of
Pilla Talks Taxes
and
Special Reports



$15.95 per downloaded issue 
Call us to order your copies
800-553-6458

Tax Amnesty

IRS Problem Solver

How To Win Your Tax Audit

Taxpayers Defense Manual


Designed by:
SiteGround web hosting Joomla Templates

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

VIRTUAL CURRENCY OWNERS CAN'T HIDE

IRS Already Has Thousands of Names

by Daniel J Pilla  

 

For years I’ve been arguing with the owners of crypto-currency, such as Bitcoin, also known as virtual currency, over: 1) whether gains derived from trading in such a currency are taxable, and 2) whether, in any event, the IRS can find out whether one traded in virtual currency. 

As to question 2, the IRS did find out because the agency served summons on various virtual currency clearing houses as part of their ongoing compliance initiative. As a result, starting the last week if July, the IRS will be sending letters to virtual currency owners who potentially failed to report income and pay the tax from virtual currency transactions or did not report their transactions properly. 

According to the IRS, “By the end of August, more than 10,000 taxpayers will receive these letters.” See: IRS News Release IR-2019-132 (July 26, 2019). IRS Commissioner Chuck Rettig warns that “Taxpayers should take these letters very seriously.” A copy of IRS Letter 6173 is attached following this article. 

As to question 1, as far as the IRS is concerned, virtual currency is property and is to be treated like any other property for tax purposes. That is, if you buy virtual currency for X dollars, and sell it for X-plus, the profit is taxable income. In 2014, the IRS issued Notice 2014-21, addressing the virtual current issue. Question 1 of the Frequently Asked Questions addressed in the notice reads: 

Q-1: How is virtual currency treated for federal tax purposes? A-1: For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency. 

I said repeatedly that the IRS would not look the other way on this issue. As far as the agency is concerned, any “accession to wealth” is taxable, and profit from trading in such currency is no exception. Now is the time to get help if you misreported for failed to report virtual currency trades.

 

This is  an article from the July 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN THIS 

PILLA TALKS TAXES ISSUE:

JULY 2019

HOW TO AVOID AN ASSESSMENT
OF THE TRUST FUND RECOVERY PENALTY
    Excerpt Dan's upcoming new book

 

DEMOCRAT CANDIDATES TARGET TRUMP'S TAX LAW
    Result? Middle Class Tax Hikes!

 

STATE WORKER RECLASSIFICATIONS
CAN BE APPLIED RETROACTIVELY
    Ninth Circuit Opens the Doors for Massive Liabilities

 

VIRTUAL CURRENCY OWNERS CAN'T HIDE
IRS Already Has Thousands of Names

  

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

COMPLETING FORM W-4, EMPLOYEES WITHHOLDING

ALLOWANCE CERTIFICATE

How Hard Can It Be?

by Daniel J Pilla  

 

The 2019 filing season brought into sharp focus—much more so than in past years—just how few Americans understand how to complete Form W-4, Employees Withholding Allowance Certificate. For example, the news media was apoplectic over reports in February showing that tax refunds were down about 9% over last year’s numbers. A hysterical cry went out that such data was proof that the Tax Cuts and Jobs Act was nothing more than tax cuts for the rich. After all, if your refund is down, it must mean your tax hit went up.

There were a number of problems with these reports. For starters, only about 25 million individual tax returns, out of the expected 152 million, were filed by the time the reports were issued. Thus, the sample size of returns was too small to draw any firm conclusions. Most notably, however, was the fact that effective January 2018 (one year before the filing season began) the IRS changed the withholding tables to reflect the fact that most taxpayers would in fact pay less tax in 2018 than they did in prior years because of the Jobs Act. Said another way, people were getting their tax refunds every month in their pay checks rather than at the end of the year.

Finally, by the time we were at the high tide of filing season and well over 100 million returns were filed, it came to light that the average tax refund was actually up a few points over last year. There was no corresponding celebration by the media to acknowledge that the Jobs Act indeed did cut taxes for most citizens.

In the background of this discussion is a point that I’ve been making for years: people either don’t pay attention to filling out their Form W-4, or they just don’t know how to do it. I rather believe more of the latter element drives the issue. In light of the firestorm of controversy, the IRS redesigned Form W-4 so people might more accurately set their withholding. Now there’s backlash over whether the IRS created a document that, like just about every other tax form, is way too complicated for the average person to read, comprehend and complete.

My response is that this just isn’t that complicated.

Understanding Exemptions and Allowances

Let’s start with understanding the very basics of the form. It is titled (and has been for decades), Employees Withholding Allowance Certificate. It calls for the citizen to inform his employer of the number of withholding allowances he wishes to claim for withholding purposes. The fewer allowances claimed, the more money is withheld. The opposite is also true. The greater the allowances claimed, the less is taken.

Likewise, a person declares on the form his tax return filing status, whether single, married (filing jointly or separately), or head of household. Your tax return filing status impacts whether more or less is taken. For example, if you are a single person with one withholding allowance, more will be withheld than if you are married filing jointly with one allowance. That is a function of the different tax tables that apply to the various filing categories.

Suppose you are married with two children. Prior to the Jobs Act, you were entitled to claim an exemption on your tax return for yourself and each dependent. Thus, in this example, you would get four exemptions on your tax return. These exemptions operated to reduce your tax liability because each exemption reduced taxable income by about $4,500. Since most people believe that exemptions and allowances are the same thing, they claimed only four allowances on their W-4. Because this misunderstanding caused over withholding, about 80% of all taxpayers overpaid their taxes, leading to a refund of about $3,000, on which the IRS paid no interest whatsoever.

But as I said, allowances and exemptions are not the same thing. An allowance is defined as any tax return item that reduces your tax liability. That certainly includes exemptions but is by no means limited to them. For example, standard or itemized deductions also reduce your tax liability. So do tax credits and retirement fund contributions. All of these (and more) need to be included in calculating allowances. I explain this further below.

IRS Redesigns the W-4

In the wake of the confusion and controversy of the 2019 filing season, the IRS redesigned Form W-4. Actually, it’s not the form so much as the worksheet that goes with the form that was redesigned. In my opinion, it’s for the better. The worksheet more clearly walks the reader through the process of figuring allowances. The new design is intended to get people closer to their ideal withholding amount so their withholding better matches their tax debt. That is to say, they do not over-withhold and thus und up with a big refund (and no interest); nor do they under-withhold and (worse) end up with an unfunded surprise tax debt they can’t pay.

A Walk Through the Form 

This is part of an article from the May 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN 

PILLA TALKS TAXES ISSUES:

JUNE 2019

PREVIEW DAN PILLA'S SMALL BUSINESS GUIDE
CHAPTER 18

How to Get the Most Out of Your Return Preparer

 

WHAT EVERY TAX PRO NEEDS TO KNOW
ABOUT MEDICAL MARIJUANA
Legal May Not Mean "Legal"
by Scott MacPherson, Attorney

 

MAY 2019

 

COMPLETING FORM W-4,
EMPLOYEES WITHOLDING ALLOWANCE CERTIFICATE
        How Hard Can It Be? 

W-4 FORM  

IRS WITH THE BURDEN TO PROVE MAILING
      Failure Will Lead to Abatement of Assessment 

 

LESSONS FOR DEMOCRATS
FROM THE SOCIAL SECURITY TRUSTEES' REPORT 

 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

  



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

WHY TAX REFUNDS ARE DOWN

No, It's Not Because of Tax Cuts for the Rich 

by Daniel J Pilla  

 

Democrats are up in arms over a recent Treasury Department report showing that tax refunds are down thus far in 2019 compared to last year. The report indicates that of the 27 million tax returns filed through February 8, the average refund is down about 9%.

Quite predictably, Dems—with the reliable help of the media—blame President Trump’s Tax Cuts and Jobs Act, which took effect on January 1, 2018. The Dems claim that the report is proof that the Jobs Act was nothing but tax cuts for the rich. The fact that lower refunds has been twisted into a claim that the middle class pays higher taxes because of the Jobs Act is proof that the Left has no regard for truth when it comes to tax policy.

It is also proof that the typical person has no idea what they actually pay in taxes.

First of all, a tax refund, by itself, is no measure whatsoever of whether your tax liability went up or down. The refund is simply a measure of what you overpaid. In my work as a tax litigator, I regularly ask people what they paid in taxes the previous year. The answer I typically hear is, “I didn’t pay anything. I got a refund.”

But when I examine that person’s Form W-2, Wage and Tax Statement or the tax return itself, I find that they paid thousands in taxes through wage withholding and received only a fraction of that back in a refund. Thus, they did in fact pay taxes but had no idea how much. That’s one of the key problems with our current tax system. Taxes, especially social security taxes, are hidden, and people just don’t know what their tax burden actually is.

The fact that refunds are lower this year is not necessarily a bad thing. You do not get a refund because government got religion and decided to do you a favor and send you free money. You get a refund only because you paid in too much to begin with. If your refund is down, that likely means you didn’t overpay as much as last year. And that’s a good thing.

The big reason the typical person probably paid in less in 2018 than in prior years is the fact that on January 1, 2018, the IRS adjusted the withholding tables in light of the changes made by the Jobs Act. Given that about 80% of Americans will see a tax cut (not an increase) for 2018, the IRS adjusted the tables so that employers would take less money out of the paychecks of their workers. But even at that, the data that is causing the alarm bells shows that the typical refund is down by just 9%, to about $2,730. The average refund was about $3,000. Due to the adjustment in the withholding tables, people got the remaining $270 in their paychecks every month. Your refund is smaller because the government didn’t have as much of your money to begin with.

About 75% of all tax filers get a refund every year. It happens for two reasons. First, people have no idea how to properly adjust their withholding so they don’t overpay in the first place—which means they overpay. Second, they treat the withholding system as some kind of savings account. Either way, it’s the world’s worst way to manage your money.

For one thing, the IRS doesn’t pay you a nickel’s worth of interest on your money when you overpay. For another thing, you can’t get your own money back until you file your tax return, and by the time you do that, you are three or four months into another pattern of over-withholding for the next year. As such, the IRS always has more of your money than you really owe.

When you manage your tax payments properly, you have the money in your hands, where it belongs. That money is available for you to use and enjoy in a manner that best suits you and your family. That way, you can save or invest in real wealth-building vehicles, or pay down debt, or fund business needs, or just pay for fun and recreation. In any event, you—not the government—is in charge of your own money. 

 

This is an article from the February 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN THIS 

PILLA TALKS TAXES ISSUE: 

WHY TAX REFUNDS ARE DOWN
No, It’s Not Because of Tax Cuts for the Rich 

THE UP-FRONT TAX SYSTEM  IN MOTION  
IRS Making Progress on Getting Out of the Business
of Talking to Taxpayers

WHAT’S HAPPENING WITH WAYFAIR
Will Congress Act on State Sales Tax Laws?

THE GREEN NEW DEAL AND A 70% TAX RATE
Who is She Kidding?

NINTH CIRCUIT DOUBLES DOWN ON BANKRUPTCY LIMITATION
Another Decision Against Discharge 
by Scott MacPherson

IRS ANNOUNCES NEW VOLUNTARY DISCLOSURE PROGRAM
Participants Face Higher Penalties

IRS WARNS OF NEW SCAM This One Uses Emails

FORMER U.S. TAX COURT JUDGE CONVICTED OF FRAUD
Sentenced to Nearly 3 Years in Prison
 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

 

AVOIDING PENALTIES UNDER OBAMACARE

 



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

FRAUD ALERT

Beware of Payroll Direct Deposit and W-2 Email Scams

by Daniel J Pilla  

 

The IRS has identified an uptick in two email phishing scams. One scam targets companies that use direct deposit strategies for their company payroll. The other is pointed at the Form W-2 information gathered by companies on their employees. So you won’t get rolled by these scams, I address each of them in turn.

The Payroll Scam

Under the payroll scam, the emailer impersonates a company employee. An email is sent to a company executive or to the company’s payroll or human resources department. The email purports to be from a legitimate employee. The email asks company authorities to change the bank account to which the “employee’s” pay check is deposited. The fake “employee” provides a new bank name, account number and routing number. However, the account is actually owned by the thief, not a legitimate company employee. If the scam works, an employee can lose one or two pay checks before the fraud is discovered.

The W-2 Scam

The W-2 scam has been in operation for years. This scam involves an emailer impersonating a company executive or other person in authority within the company. The email is directed at the payroll or human resources department. The emailer requests a list of the organization’s most recent Forms W-2 covering all of its employees. W-2 information contains a person’s name, address and social security number, along with the gross wages and tax withholdings for a given year. With this information, the thief files fraudulent tax returns seeking refunds based on the W-2 data. The refunds are directed to a bank account or PO Box that the thief controls. If the fraudulent return is filed before the citizen files a legitimate return, it will take months to sort out the fraud and to recover one’s legitimate tax refund.

What the Emails Look Like

The following is an example of an email working the W-2 scam. This is an email that was reported to the IRS. The brackets indicate where actual sensitive information was removed. Note that the grammar and syntax errors are as shown in the original emails.

From: [REMOVED] Sent: Monday, February 10, 2019 [REMOVED] To: [REMOVED] Subject: (no subject) Hello [REMOVED], I changed my bank and I will like my paycheck DD details changed. Do you think this change be effective for the next pay date? [REMOVED] Sent from my iPhone

Note that a very common “tell” in all scam emails is that they are generally rife with grammatical and spelling mistakes, as well as poor syntax and punctuation. They usually reek of having been written by someone with only a basic command of English.

How to Report Scam Emails

While most of these scam operations are centered offshore, that’s not always true. In recent years, the IRS and FBI have broken up a number of domestic fraud operations. For that reason, you should report any scam emails that you run across.

Forward suspected scam emails to the FBI’s Internal Crime Complaint Center (IC3) here: www.ic3.gov. Tax professionals and others should also report tax-related phishing emails directly to the IRS at This email address is being protected from spambots. You need JavaScript enabled to view it.. This account is monitored regularly by IRS cyber security professionals.

The IRS has a separate email set up for employers to report scam emails involving Form W-2 specifically. Employers concerned about potential W-2 email scams, or who may have actually been scammed by one, should report the event to the IRS at This email address is being protected from spambots. You need JavaScript enabled to view it..

Employers can also get more information on the reporting process and what do to if they were scammed by going to Form W-2/SSN Data Theft: Information for Businesses and Payroll Service Providers.

Practice Vigilance 

I encourage all businesses to carefully review their cyber security procedures. Make sure you have systems in place to protect your data as much as possible from these kinds of attacks. It seems every day that goes by there is some kind of new scam that cyber thieves are using to target your data.

 

This is an article from the March-April 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read complete articles as well as the rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN THIS 

PILLA TALKS TAXES ISSUE:

 

IS THE IRS MELTING DOWN?
     The Agency in Crisis 

SENATE DEMOCRATS INTRODUCE BILL
TO REGULATE TAXPAYERS

     Measure Would Require
Competency Test and Background Checks

CALIFORNIA FRANCHISE TAX BOARD UPDATE
     Power of Attorney Procedures Cause Delays  
     By Dana M. Ronald, Enrolled Agent

ANTI-ABORTION ADVOCATE WINS COURT BATTLE
     But What Does that Really Mean? 

DO YOU FEEL FREE?
     Tax Freedom Days was April 16 

 FRAUD ALERT
     Beware of Payroll Direct Deposit and W-2 Email Scams

 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

 

AVOIDING PENALTIES UNDER OBAMACARE

 



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

HOW THE IRS WILL LEVERAGE ITS
MASSIVE INFORMATION

Big Data Meets Big Government 

by Daniel J Pilla  

 

One of the reasons that identify theft is considered by the Treasury Inspector General for Tax Administration to be the crime of the century—and why I maintain that it cannot be stopped—is because of the IRS. The IRS makes more and more demands for more and more information about more and more aspects of people’s businesses and private lives every day. There is no such thing as personal privacy these days. That the IRS sends citizens a so-called Privacy Act Notice” in every one of its mailings is a farce. The IRS lays more of a claim to more of your data without court authority than any other government agency. And to make matters worse, they share the data with any other federal, state or local government agency claiming an interest, including foreign governments.

 
A River of Data

This year alone, there will be about 152 million individual tax returns filed with the IRS. There will be roughly another 100 million business tax returns filed. There will be millions more miscellaneous tax returns, including trust, estate and gift tax returns. And on top of that, over 3.6 BILLION information returns (Forms W-2, 1099, etc.) will be filed with the IRS over the next couple of weeks. There is quite literally a river of data flowing into the agency every year. The flow cannot be stopped, and what’s worse, as far as the IRS is concerned, they need even more data.

For example, one of the six Strategic Goals” presented in the IRS’s 2018-2022 Strategic Plan is to increase its access to data, and use that data more effectively to drive its agency-wide decision making, as well as case evaluations and selections for enforcement purposes. See: IRS Publication 3744 (4-2018). This is consistent with the previous five-year plan, which presented the overarching goal of becoming a data driven agency.”

Indeed, the IRS is awash in data. The 2018-2022 Strategic Plan boasts that the IRS’s volume of data was 100 times larger in 2017 than it was ten years prior. In 2018, the IRS Criminal Investigation unit alone collected 1.67 petabytes of data from various sources. A petabyte is 1,099,511,627,776 bytes, or 1,024 gigabytes of data. I’m told that approximately 900,000 plain text files can fit into a single gigabyte. The number of users in the IRS with access to that data has increased 23 times (Strategic Plan, pg 19) in the past ten years.

Managing Massive Data

How do you manage, process and assimilate such a massive amount of data to the point where it becomes usable? The 2018-2022 Strategic Plan expresses the goal to invest in analytics and visualization software and tools, and develop processes to support analytics in IRS operations” (Strategic Plan, pg 20). The end game is presented in these words:

Advancements in how data is collected, stored, accessed and analyzed will allow us to deploy data better. We’ll standardize our data processes and protocols and encourage collaboration among all IRS business units. Increased interoperability of data systems and sources will enhance the secure and seamless flow of data to enable greater authorized access to information. We’ll invest in training to develop more advanced analytics skill sets across the IRS, and use data to improve our business processes. Strategic Plan, pg 19.

The investment in analytics was recently undertaken—in a big way.


Big Government, Meet Big Data

On September 27, 2018, the IRS entered into a contract with Palantir Technologies of Palo Alto, CA, to handle the task of data assimilation. The contract calls for Palantir to provide hardware, software and training to IRS employees to capture, curate, store, search, share, transfer, perform deconfliction, analyze and visualize large amounts of disparate structured and unstructured data.” IRS Contract Proposal, Performance Work Statement, January 11, 2017, pg 1.

Palantir is to build and train the IRS to use a unified supercomputer to:

search, analyze, visualize, and interact with a wide variety of disparate data sets so users will be able to leverage the platform to perform advanced analytics, such as link, pattern, statistical, behavioral, and geospatial analysis on an investigative platform that is scalable and interoperable with existing IRS equipment and systems. Ibid, pg 2.

What kind of data are we talking about? The contract proposal specifies the following data formats:

·         Oracle, MySQL, and PostgreSQL databases;

·         Delimited files (.csv, .dsv, .log, or .txt);

·         Excel files (.xls, .xlsx);

·         GraphML files (.graphml, .xml);

·         IVML files;

·         Email files (.eml, .pst, .mbox, .msg, .ost, .txt); and

·         PCAP files (.pca, .pcap, .pcp). Ibid, pg 20.

Ingesting Massive Amounts of Data

The contract proposal goes on to state exactly what the IRS is looking for. The need is for an analytical platform with a strong storage and indexing power allowing for rapid integration and analysis of ultra-large scale data sources.” Ibid, pg 2. Specifically, the system must meet the following criteria:

·         Allow for the rapid ingestion of massive amounts of data.

·         Users should be able to immediately use the imported data in the imported format to perform queries, analysis and identify links.

·         Allow users to drill down on massive amounts of disparate data to find connections.

·         Provide algorithms and capabilities that identify the key players and their roles for the user.

·         Allow users to visualize connections from millions of records with thousands of links by grouping data visualization by the commonalities and roles. Ibid, pg 20.

This system is intended to allow the IRS to meaningfully link tens of millions of tax returns, billions of information returns, and trillions of bank and credit card transactions, phone records, and even social media posts. For example, if a U.S. citizen moves money from a Swiss bank to some other offshore bank, then uses credit or debit cards to spend the money in the U.S., Palantir’s software can link those transactions. It could also flag a person whose tax return shows relatively low annual income but whose social medial posts indicate something entirely different. A 2015 IRS privacy report reveals that since 2013, Palantir has had access to personal information including passport numbers, text messages, criminal histories, and mothers’ maiden names. Case Lead Analysis, PIA ID No. 1120, July 28, 2015.

This is exactly the kind of data analysis it will take to establish the IRS’s so-called up-front tax system,” which I describe at length in chapter 2 of How to Win Your Tax Audit. Under that system, the taxpayer is essentially removed from the tax preparation process because the IRS knows everything there is to know about your personal, business and financial affairs to the point where they prepare the return for you. How’s that for tax simplification?

The Cost of Spying

Since 2004, Palantir provided the federal government with various software platforms for the CIA, the Department of Justice, and the Department of Defense. All of it is related directly to enhancing the government’s data analysis capabilities.

The IRS began working with Palantir in 2013. The agency spent $30.8 million on a five-year contract, and at that time granted Palantir access to files for more than 1 million people, according to a July 28, 2015 audit report. That contract provides the IRS with access to spy software for use by Special Agents (criminal investigators) to generate leads, identify schemes, uncover tax fraud, and conduct money laundering and forfeiture investigative activities.” Case Lead Analysis, PIA ID No. 1120, July 28, 2015, pg 4. 

As far as the IRS’s September 2018 deal is concerned, the federal government will pay Palantir $98,750,546.94 over seven years to fulfill the contract. My question is, why the extra 94 cents? 

 

This is a portion of an article from the January 2019 issue of Pilla Talks Taxes Newsletter. Subscribers to Pilla Talks Taxes are able to read the full article and rest of the newsletter when they log into their subscription account on their non mobile device. http://taxhelponline.com/subscriber-login.html 

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

  

ARTICLES FOUND IN January 2019

PILLA TALKS TAXES ISSUE:

 

HOW THE IRS WILL LEVERAGE ITS MASSIVE INFORMATION
    Big Data Meets Big Government

WHAT YOU NEED TO KNOW ABOUT
DEDUCTIONS FOR 2018
The Tax Cuts and Jobs Act Affects Itemized Deductions

IRS ISSUES GUIDANCE ON BUSINESS MEALS
Meal Expenses for Businesses Remain Deductible

JOBS ACT GIVES SMALL BUSINESSES
MORE WRITE-OFFS
Section 179 Deduction Was Expanded
 

THE FRENCH GAS TAX MAY BLOW UP - IN OTHER COUNTRIES

                                       by Merrill Mathews, Ph. D.

 

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

END OF THE YEAR TAX PLANNING
  9 Simple Steps That Can Cut Taxes and Pain

 

AVOIDING PENALTIES UNDER OBAMACARE

 



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458

 

 

taxhelponline.com Copyright © 2015 Winning Publications. All rights reserved. Call us at 1 800-553-6458