If you are choosing to post windows onto your life online, tax authorities are watching.

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How the IRS Uses Social Media to Find Crypto Tax Cheats

Does your Twitter, Reddit, Facebook, Instagram or other social media feed feature photos of your new sports car, boat, fabulous vacation or the beach house that you bought with your crypto gains? Do you also report a low income on your taxes?

You wouldn’t be alone if you were bragging about your crypto riches on social media. But you should know that the IRS is watching. They want their piece of your crypto gains and they’re stepping up their search.

Testifying before the Senate Finance Committee, IRS Commissioner Charles Rettig said that the country is losing about a trillion dollars every year in unpaid taxes. He credits this growing tax gap, at least in part, to the rise of the crypto market.

However, as an accountant with a specialty in crypto taxation, I can vouch for the fact that the IRS hasn’t exactly made it easy to understand how to report this information without professional assistance.

Ever since 2013 when it was reported that the IRS was tracking private emails and social media, the IRS has been somewhat coy about their methods. Back then, they said they were monitoring in order to glean any information that might lead to or support an audit. A public outcry predictably arose and the IRS initially denied these reports.

But currently, their own documents, including IRS social media policy,IRM 10.8.27, make clear that they do, in fact, monitor social media along with medical records, credit card statements, property ownership and more.

The IRS also pays a reward of up to 30 percent of the government’s recovery for certainwhistle-blowing.

What IRS agents are allowed to search

IRS employees are allowed to search for publicly available information on the internet, including publicly-available social media information, to perform tax compliance-related work. This research may include locating taxpayers, identifying assets subject to seizure or levy actions, and identifying other possible unreported sources of income.

While they can search, and read social media content, they can’t be logged into their personal or government social media account while doing so. They may not obtain information from websites for compliance-related work by registering with a fictitious identity. They also aren’t allowed to “friend”, “like”, “follow” or “connect” with a person or business.

That’s a far cry from preventing IRS or Treasury Inspector General for Tax Administration (TIGTA) employees from monitoring your social media. They are free to look as long as they do not log in to your social media account with their personal or government computer or phone. They also are not required to disclose that any type of investigation is underway. Rules change to become even more permissive when there is an active criminal investigation relating to a possible referral from the audit division.

If, for example, your website or blog links to and displays your latest Tweets, an IRS agent can access the information without being logged into Twitter. He/she may obtain information that is available from the Tweets

Or, if a Google search on your business name shows a social media account with your name, the agency can look at the profile and social feed. Just put your name into Google search and if you are active on Twitter, you’ll see your most recent Tweets high up in the results.

One does not need to be logged into Twitter to read the rest of your feed. If the feed contains a hashtag, #crypto for example, the agent can click on the hashtag to see if any other relevant information turns up.

If all of this has not curled your hair, you should know that in addition to the Internal Revenue Service , many federal agencies monitor social media, including the SEC, DHS, the FBI, the state department, the Drug Enforcement Administration (DEA), the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), the US Postal Service, , the US Marshals Service and the Social Security Administration (SSA), etc.

The Tax Hardship Center reports:

How the IRS Uses Social Media to Track Tax Evasion

IRS Surveillance: Social Media and Digital Footprints

The IRS has evolved beyond traditional audits and financial records. Today, tax enforcement extends into the digital world, where social media activity can serve as evidence in investigations. Taxpayers who flaunt lavish lifestyles online while reporting minimal income may find themselves under IRS scrutiny. In this article, we break down how the IRS monitors social media for tax evasion, what types of activity raise red flags, and what taxpayers should do to remain compliant.

How the IRS Monitors Social Media for Tax Evasion

Digital Clues: What the IRS Looks For

Social media accounts reveal far more than users realize. IRS investigators analyze photos, status updates, and transactions to spot inconsistencies. When a taxpayer posts frequent luxury purchases, international vacations, or high-end lifestyle choices, yet reports a modest income, it raises immediate suspicion. Similarly, business owners who promote sales and services online but report negligible earnings can come under scrutiny. The IRS cross-checks such posts with tax filings to identify unreported income or misrepresented financial situations.

AI and Data Analytics in IRS Monitoring

The IRS leverages artificial intelligence and machine learning to track potential tax fraud. Advanced software tools scan vast amounts of publicly available data, flagging discrepancies between reported income and lifestyle indicators. By automating these processes, the IRS can quickly detect patterns of potential evasion. Investigators then focus their efforts on high-risk cases, ensuring that enforcement resources are used efficiently.

IRS Collaboration with Other Agencies

The IRS doesn’t operate in isolation when monitoring social media. It collaborates with state tax authorities, the Department of Justice, and financial institutions to compile supporting evidence. These partnerships allow the IRS to cross-reference bank transactions, tax filings, and social media activity. In some cases, agencies may subpoena private account details if there’s strong evidence of fraudulent reporting.

Staying Compliant in a Digitally Connected World

The Importance of Reporting All Income

Many taxpayers unintentionally commit tax violations by failing to report earnings from side hustles, freelancing, or digital sales. Income generated through gig platforms, YouTube ad revenue, OnlyFans subscriptions, or e-commerce ventures must all be reported to the IRS. Whether earnings come from PayPal, Venmo, or cryptocurrency, all taxable transactions must be accounted for. Failing to disclose online income can lead to unexpected tax liabilities, penalties, and audits.

Record-Keeping for Financial Accuracy

Maintaining accurate financial records is essential for preventing IRS scrutiny. Taxpayers should track all transactions, document business expenses, and store invoices or receipts. Using accounting software or consulting a tax professional ensures proper tax reporting. Business owners must align online revenue with tax returns to avoid inconsistencies that may attract IRS attention.

How Tax Hardship Center Helps Taxpayers Stay Compliant

Expert Tax Solutions for Individuals and Businesses

At the Tax Hardship Center, we assist taxpayers in resolving IRS issues and staying compliant with tax laws. Whether it’s navigating an audit, resolving back taxes, or structuring payment plans, our team ensures that clients meet their tax obligations while minimizing penalties. Digital financial transparency is increasingly critical, and we educate clients on best practices for tax reporting in the online economy. By staying informed and proactive, taxpayers can avoid IRS complications. Learn more about how we assist taxpayers at the Tax Hardship Center.

What Happens If the IRS Flags Your Social Media Activity?

IRS Audits and Investigations

When the IRS identifies suspicious activity through social media tracking, it may initiate an inquiry. Taxpayers flagged for inconsistencies may receive an official IRS notice requesting documentation. If discrepancies persist, the IRS may launch a full audit or open a tax fraud investigation. Those who fail to respond or provide insufficient documentation risk additional penalties and legal repercussions.

Consequences of Tax Evasion

Misreporting income or hiding financial transactions can result in significant penalties. The IRS has the authority to impose fines, seize bank accounts, and in severe cases, pursue criminal charges. Tax evasion convictions can lead to hefty fines and, in extreme cases, imprisonment. Beyond legal consequences, a taxpayer’s financial reputation may suffer, impacting credit scores and business opportunities.

How Social Media Has Led to Tax Investigations

The Lavish Lifestyle Trap

Several high-profile tax evasion cases have stemmed from social media activity. A taxpayer who reports a minimal income while sharing images of designer purchases, five-star hotels, and expensive jewelry may inadvertently trigger an IRS inquiry. One case involved Rashia Wilson, a Florida woman who flaunted wealth on Facebook while failing to report a multimillion-dollar tax fraud scheme. The IRS used her social media posts as key evidence, resulting in a lengthy prison sentence and significant financial penalties. Source.

Social Media Influencers and Tax Compliance

Influencers who earn sponsorship income, receive free products, or monetize content without proper tax reporting are prime candidates for IRS audits. In 2019, influencer Alexis Ohanian was caught underreporting income from brand collaborations. The IRS discovered discrepancies by tracking online sponsorship deals and cross-referencing reported income. The case served as a warning to digital entrepreneurs who fail to disclose earnings from promotional activities. Source.

Crypto Traders Under IRS Scrutiny

Cryptocurrency traders have also been targeted through social media investigations. In 2021, the IRS pursued tax evasion cases against individuals openly boasting about crypto gains on Twitter and Reddit. High-profile cases, such as that of John McAfee, highlighted how digital assets must be reported accurately. McAfee’s public statements on social media about avoiding taxes were used against him in a federal indictment. Source.

UK

Noah Eastwood reports (August 11, 2025) for the Daily Telegraph

HMRC uses AI to spy on social media posts

https://www.yahoo.com/news/articles/hmrc-uses-ai-spy-social-182420470.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAJUU9OO5wA_WGPf7NovHQgnO570X2XAlRCwC7QImi06k_ZbSwOK307hk5zcwgtu93cftWh4Lrq_M8A3REvdbyhZuSrqtLYYJtJMIdY5bWommDMwfQIqmxAf0O_6hCt3QC6VxfUEYkAegKdbpE9xoA8gS7GGc15juup4n_FzsJTPs

HMRC has admitted for the first time that it uses artificial intelligence (AI) to spy on taxpayers’ social media posts.

The tax authority examines workers’ financial records, spending habits and tax returns to look for evidence of cheating – as well as posts on the internet.

Social media posts about a large purchase or expensive holiday could trigger a red flag if the user seems to be spending beyond their means.

A spokesman insisted the tools were only deployed for social media monitoring in criminal investigations with “robust safeguards in place”. It is understood this has been the case for a number of years, and that all uses of the controversial technology by the tax office are within the law.

However, advances in AI are likely to raise concerns about whether HMRC could in future deploy the technology more widely.

Bob Blackman, a senior Conservative MP, said: “If they suddenly start taking legal action against individuals based on that, it seems draconian and very challenging – to put it mildly.

“You’ve got to have a check and balance. The risk is that AI gets it wrong and someone is pilloried – it seems a bit strange if they start doing that with AI. Without a human check, you can see there’s going to be a problem.”

The tools used to examine social media in criminal cases exist alongside Connect, a separate IT system used by HMRC to examine financial data for routine tax investigation.

The Connect system was first developed over a decade ago, but is thought to be increasingly important as HMRC tries to save money by relying less on human beings to carry out its investigations. It uses billions of data points – including information to spot signs of tax evasion.

Rachel Reeves is hoping to make up £7bn of the £47bn “tax gap” by identifying those who have not paid enough into the national purse.

Improvements to the AI software could hold the key to achieving this, after officials last month unveiled plans envisioning its use in “everyday” tax processes at HMRC.

In a 63-page document, HMRC said its staff will use AI to identify suspected tax evaders and send out “automated nudges” asking them to pay what they owe.

The report suggests use of AI within HMRC will become increasingly widespread, with staff currently using chatbots to summarise calls with customers and perform basic administrative tasks.

Risks of ‘Horizon Post Office-type scandal’

The groundwork for the embrace of AI technology appears to have been laid in May, when Labour changed the department’s privacy policy.

A statement that appears to have been removed said: “HMRC’s use of AI does not replace human judgement when collecting taxes or determining benefits, and our customer services processes always involve human agents.”

It now states: “Where the use of AI could impact customer outcomes, HMRC makes sure that the results are explainable, there is human involvement [and] we are compliant with our data protection, security, and ethical standards.”

Senior MPs raised concerns that troves of personal data could be used to make important tax decisions without human judgement – possibly leading to errors.

Sir John Hayes, a former security minister and chairman of the Common Sense Group of Tory MPs, said: “Where confidential or sensitive material is concerned, people need to be assured that human beings with experience, common sense and judgement are making decisions.

“Automated processes remove human interactions. I would be very concerned that we will end up with a Horizon Post Office-type scandal.”

Sir John, who has raised questions in Parliament about the use of AI by the HMRC, added: “The idea that a machine must always be right is what led to the Post Office scandal. I am a huge AI sceptic.”

The lesson is: if you are posting – they are watching.