The agency’s plans for facial recognition might be abandoned for now, but its lust for data is never satiated.
The agency’s plans for facial recognition might be abandoned for now, but its lust for data is never satiated.
A bout two months ago I was on the phone with a revenue officer from the Internal Revenue Service, discussing a client’s situation. We got on the topic of the IRS’s backlog of unprocessed tax returns and the difficulty that the agency is having in working through the pile of mail that has accumulated because of the pandemic.
According to the National Taxpayer Advocate’s 2021 Annual Report to Congress, the IRS had a backlog of nearly 12 million tax returns left over from the 2020 filing season. It took the agency until June 2021 to process those returns. Meanwhile, in March 2021, the agency began to receive another 17 million paper returns — in addition to another 9.8 million returns in its error processing system. The agency’s protocol requires that each return in that system be processed by hand.
According to the NTA, it is now taking the IRS about eight months to process paper tax returns that are properly filed. Who knows how long it’s taking to manually process returns with errors.
During the 2021 calendar year, the IRS mailed millions of letters and notices to taxpayers. Most letters carry a time deadline under which taxpayers must respond. If they do not, the IRS can take adverse action without further notice. For example, if the IRS mails a “Final Notice of Intent to Levy and Notice of Your Right to a Hearing,” the taxpayer must respond to the notice within 30 days. If he does, the case goes to the IRS’s Appeals Office without enforcement action; if he doesn’t, the IRS can levy a paycheck or bank account.
That process is obviously complicated by the IRS’s taking six months or longer to process incoming mail. In the case of a final notice, a taxpayer may well have filed his request for a hearing on time, but because of processing delays, the IRS wouldn’t be made aware of that for five or more months after the letter was physically received. In the meantime, the agency’s computer-driven Automated Collection System would have kicked in and potentially issued a wage or bank levy against the citizen.
The IRS revenue officer insisted that many of the agency’s processing problems are due to its antiquated computer systems — what he referred to as “1960s technology.” He said that without more money for updated computers, nothing would change.
That statement got me to thinking. How could the IRS process over 200 million business and personal tax returns with its electronic-filing system using 1960s technology? How could the agency process more than 3.8 billion information returns — e.g., W-2 and 1099 forms — received in machine-readable format using 1960s technology? The IRS has a website on which taxpayers can make payments instantly through direct debits; it also has developed its own facial-recognition software. How, then, could the agency be operating off 60-year-old technology?
It’s worth further scrutiny. Let’s first consider that last note — the agency’s facial-recognition software. The IRS began using the technology in a limited way in 2021 and intended to roll it out to all citizens this summer. By then, if you wished to gain access to your IRS account online, you would have to jump through a few extra hoops. Under the pretense of combating identity theft, the IRS intended to add facial recognition as a new “security filter.”
Under the program, taxpayers were to create an account with ID.me, which advertises itself as a secure digital-ID network designed to provide identity authentication and verification to users. According to the IRS’s website, the ID-verification elements needed to access your account included your name, email address, SSN, and a photo ID, such as a driver’s license or passport. In addition, you would be required to provide — get this —“a selfie,” which would then be cross-checked with the photo ID on file.
Make no mistake about it. This is not just about ID-theft protection. The IRS document describing the program confirms that the system uses, among other things, GPS and biometrics technology “in the event of an investigation into a user.” Apparently there is no limit to the scope of that investigation; once the IRS has your selfie, the agency can use it as it pleases.
Consider just this one possibility, for example. Imagine you are under a “routine” tax audit. Questions arise regarding the frequency, location, and duration of the trips or vacations you might take. The auditor is probing into these areas because he’s testing the veracity of the income you claimed on the tax return in question. The auditor believes that trips and vacations might potentially suggest that you earned more income than was reported. (This is a common audit technique I discuss in my book, How to Win Your Tax Audit.)
Now suppose that like many Americans these days, you have an active social-media presence and regularly post photos of your journeys and experiences. By the time the agent asks you about the frequency, location, and duration of your vacations, he has already used facial-recognition software to scour the Internet for any evidence of your recreational and other activities. He has a pretty good idea of your lifestyle before he even asks you the first question.
As you might imagine, this idea was met with considerable pushback once it was proposed. Senators and congressmen from both sides of the aisle lodged objections. Republicans cried out about the invasion of privacy. Democrats complained that facial-recognition software is — you guessed it — racist.
The IRS has since backed off the idea — at least for now. On February 7, 2022, the agency released a statement, suggesting that it will “transition away” from using facial recognition for ID-confirmation purposes. Commissioner Charles Rettig said, “We are quickly pursuing short-term options that do not involve facial recognition.”
Knowing this, recall my questions about the IRS’s technological capabilities and the answers are clearly obvious. The IRS most certainly is not using 1960s technology; it’s merely overwhelmed. It has spent tens of billions of dollars just since 2000 alone upgrading computers. Now those systems include the power to track you across the Internet with facial-recognition software.
The agency is steadily working toward its goal of having real-time access to all the personal data of every American. And while the recent development is certainly positive, the IRS’s lust for data is never satiated. My guess is that over time, we will see this plan surface again.