IRS plans to expand its secret-data files

January 20, 1995|By Frank Greve | Frank Greve,Knight-Ridder Newspapers

WASHINGTON -- In an effort to catch more tax cheats, the Internal Revenue Service plans to vastly expand the secret computer database of information it keeps on virtually all Americans.

Likely to be included are credit reports, news stories, tips from informants, and real estate, motor vehicle and child-support records as well as conventional government financial data.

"Any individual who has business and/or financial activities" can expect upgraded agency computers to put such information before IRS auditors promptly, according to an IRS notice filed last month.

Although agency officials concede some of the data collected will be inaccurate, taxpayers will not be allowed to review or correct it.

Only when undergoing audits -- which the system is designed to target and assist -- will taxpayers be able to rebut the system's inaccuracies, explains Phyllis DePiazza, chief of the agency's Privacy and Education Branch.

Even then, she acknowledges, taxpayers will not be permitted to see actual raw data about them.

The purpose of the system, Ms. DePiazza says, is to shrink the $100 billion annual gap between IRS estimates of federal taxes due and tax revenues actually collected. Specifically, the system will help the IRS identify patterns of tax evasion and devise better lists of audit candidates.

The taxpayer database, begun in the 1970s, is being expanded and enhanced as part of an $8 billion IRS computer and software upgrade due to be completed in 2008.

Ultimately, the IRS may obtain enough information to prepare most tax returns, ventures Coleta Brueck, the agency's top document processing official.

"If I know what you've made during the year," she reasons, "if I know what your withholding is, if I know what your spending pattern is, I should be able to generate for you a tax return so that I only come to you and tell you, 'This is what I think you should file for the next year, and if you agree to that, then don't bother sending me a piece of paper.' "

But the prospect of an intimately detailed federal taxpayer database appalls privacy advocates. "They're creating dossiers on everybody in America," protests David Banisar, a policy analyst at the Electronic Privacy Information Center.

The IRS wants to "wipe out the line between the private sector and government," claims Evan Hendricks, publisher of Privacy Times, a biweekly Washington newsletter.

The IRS intends to match and compare tax returns with consumer information in computerized databases.

Database-aided auditors will generally be more productive, adds Phil Brand, the IRS's chief compliance officer. "If you have an individual claiming $20,000 in taxable income, yet what you're seeing is real estate and autos worth way more, you know there's got to be more income or a gift," he says. " Now, you'll have the records on-line."

Just what records is a little unclear. But they are likely to include tax, motor vehicle and real estate records, child-support data, building permits and licensing information.

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