WASHINGTON — Worried the Internal Revenue Service might target you for an audit? You probably should be if you own a small business in one of the wealthy suburbs of Los Angeles.
You might also be wary if you’re a small-business owner in one of dozens of communities near San Francisco, Houston, Atlanta or the District of Columbia.
A new study by the National Taxpayer Advocate used confidential IRS data to show large clusters of potential tax cheats in these five metropolitan areas. The IRS uses the information to target taxpayers for audits.
The taxpayer advocate, Nina Olsen, runs an independent office within the IRS. She got access to the data as part of an effort to learn more about why some taxpayers are more likely to cheat than others.
The study also looked at tax compliance in different industries, and found that people who own construction companies or real estate rental firms may be more likely to fudge their taxes than business owners in other fields.
This whole concept resonates with me. In my line of work I’m pretty aggressive in trying to sift through data to find root causes and trends. I get this idea. On the other hand, is it legal? Can certain citizens face increased scrutiny, based only on what might be arbitrary profiling?
What is the difference between profiling wealthy citizens in certain industries that live in certain regions with, say, profiling certain people by age, race, nationality and religion?
Or, for a more pertinent subject, profiling citizens in order to reduce gun violence?