Data analysis is something, which has been going on for ages. But its only recently that the federal agency –IRS (Internal Revenue Service) and other state taxing authorities have started increasingly started implementing the use of emerging digital technologies and trends such as big data analytics and machine learning to analyze the huge amount of taxpayer data.
The IRS began implementing new technologies, as early as 1962, by bringing in computers for audit, since then they kept bringing in new technologies to identify the probability of error or fraud. Over the years their ways have only become more and more sophisticated, bringing fruitful results without any kind of human intervention.
The agency in its quest to un-earth fraud in this age of technologies, invested in many data analysis pilots, which also includes the establishment of the Nationally Coordinated Investigation Unit (NCIU), focused on using IRS and external data to identify areas of non-compliance.
Last year in September, IRS signed a 7-year pact with Palantir Technologies, to build a platform to seamlessly search and analyze the huge amount of taxpayer data, allowing investigators to completely automate the investigation procedure to identify complex patterns of noncompliance that a human can’t interpret.
The agency apart from detecting and investigating criminal frauds from data mining uses data analytics to pursue a civil audit. Following the IRS trail, many state authorities have started making investments in data analysis pilots to detect tax frauds and irregularities.