Tax Office The Service paid Palantir $1.8 million last year to improve a custom tool designed to lend a hand tax authorities identify “highest value” cases for audits, collection of unpaid taxes and potential criminal investigations, according to documents obtained by WIRED through a public records request.
When agreement was signed into law, the IRS said it used “more than 100 business systems and 700 methods” built over “decades” to select cases where people may have misreported their taxes or owed money to the IRS. As identifying potential tax discrepancies became more convoluted, the agency found that its systems were becoming increasingly incapable and a solution needed to be found.
“This fragmented landscape may lead to a number of undesirable outcomes, including, but not limited to, duplication of effort and costs, poor understanding of coverage gaps, and suboptimal case selection,” the IRS wrote in a document obtained by WIRED, describing the scope of the agreement.
The custom tool Palantir built to address this problem, called its “Selection and Analysis Platform” (SNAP), is intended to lend a hand the IRS improve its identification of potential fraud cases. The documents show that for now the software is only being used as part of a pilot program. Palantir and the IRS did not respond to requests for comment.
It’s unclear how long Palantir has been working on SNAP, but the IRS has bought in technology implemented by the company since 2014, according to government procurement documentation. In total, Palantir received contracts and mandatory payments to the IRS worth more than $200 million. The documents show that the agency is now interested in deepening its relationship with Palantir.
It is unclear how SNAP would fit into existing technology systems at the IRS. Like Palantir’s other tools, it would likely sit on top of widely dispersed IRS databases and lend a hand auditors identify red flags in tax returns that they might otherwise miss. The agreement indicates that the IRS is interested in modernizing its software and is seeking assistance from Palantir. According to one document, Palantir’s SNAP pilot aims to extract “key contract, vehicle and supplier information” from “unstructured data from supporting documents.”
The IRS asked Palantir to develop three “case selection methods” related to parts of the existing tax code. Options included disaster zone claims, a form of tax relief for victims of natural disasters, Immaculate energy loans for households, a tax relief program that offset the costs of installing things like solar panels or wind turbines, and a Form 709 tax return for gifts people may have to bloat when they give away valuable things like art, stocks, or corporate entities.
Mitchell Gans, a professor at Hofstra University who studies gift and estate taxes, says that if SNAP analyzes unstructured data from supporting documents, it may examine forms containing “appropriate disclosureThe IRS stipulates that these disclosures must include a “detailed description” of how the value of the property was determined and the relationship between the donor and recipient.
Gans says that if, for example, a person gives someone else a private business, the disclosure will require additional information about how it was valued, such as “balance sheets and statements of net income, operating results and dividends.”
Erica Neuman, a professor of accounting and finance at Youngstown State University, adds that public logs from money transfer apps like Venmo, as well as public storefronts on sites like Etsy and Depop, may also contain unstructured data of interest to the IRS.
If Palantir’s SNAP tool included Venmo or Depop data when selecting cases for audit, the IRS would already need to have it. Contract documents show that the agency wants Palantir to use only “existing data in SNAP.”