Are IRS Agents watching you....or your blog?

Question

Recently Jon K. posted on another thread his observation:  "I've said this before. An ambitious IRS agent can go find money by reading forums like this one."

For those of you who don't know about or remember the Charlie Engle story, this is a great read about IRS agents, the Feds, and mortgage fraud.

http://www.nytimes.com/2011/03/26/business/26nocera.html?pagewanted=all

Note the investigation "strategies" of the IRS agent involved in this case.  For those of you posting purportedly real profits on your websites and blogs: does it make you wonder or doubt putting that much income info in such a public place?

J Scott · Answer

If you're being honest on your blog about your earnings and are declaring everything on your taxes, what's the concern?  In my case, what I state on my blog matches perfectly with what I declare to the IRS.

Mike Denham · Answer

I worked for one of the "good lenders," Wells Fargo, during the subprime rise and fall. I was on the wholesale side for the lender selling their products to brokers. I dealt with investors a lot and saw hundreds of "stated, no-ratio, and no-doc" loans go across my desk. That entire division is now gone but the way people still talk about subprime and Alt-A mortgages is frustrating.

That article, from the NY Times, talking about stated loans, said "...which did untold damage to the economy."

That's a distortion of the truth, at best. The "mortgages" and those who sold them are demonized, but a basic understanding of how mortgage products are developed shows who the real culprits are: the big banks who turned around and got bailed out by the government.

The banks not only supply the money to the lenders, but they say what GUIDELINES can be used in order for that product (mortgage) to be sold. The biggest banks in the US created those mortgage products. They weren't created by brokers and they weren't created by lenders.

There are some bad apples in EVERY business, but blaming the demise of the economy on a PRODUCT, which is what a mortgage is, is insanity.

Remember the Firestone scandal a decade ago? Tires were unraveling on the interstate. If the driver of an SUV was in an accident and someone else died because the tires were defective and installed wrong, would the driver be prosecuted for manslaughter? Of course not. This man being in jail is nuts.

Banks playing God is what "did untold damage to the economy."

Eric M. · Answer

Paranoia will destroy ya.  This post title implies that the guy was found by his blog or online postings.  He wasn't.  Nothing to do with his online activity at all.

In the end, this is simply 1 story.  Not a trend.  Crazy things that happen once or even a few times can't be what you worry about on a day to day basis.  With 7 billion people on the planet things that are 1 in a billion can happen 7 times every day. (ok, probably not completely statistically accurate but you get the point)
Unfortunate for this guy but he wasn't innocent either.  I never got a liar loan but have read many, many blog posts from people who admitting doing so.  I don't know any of them who are in jail.

I'd bet there is more to this story than is being told here as it seems to be told only from the perspective of Engle.  No comments from the IRS.  This agent targeted him for some reason.  Maybe the movie, but seems deeper than that since he kept pursuing this one guy.

Ned Carey · Answer

I think as big or even a bigger risk is all the people who solicit money online. Searching online to verify income means putting together a lot of pieces. SEC violations on the other hand are pretty obvious in and of themselves.

James Vermillion · Answer

When the IRS is reading my blog and trying to find money, I will consider myself successful!  And like J said, they will be wasting their time if you are following the rules, so I would just consider them another reader.

Account Closed · Answer

Eric:  the reason I posted the story wasn't because of Engle's conviction for mortgage fraud.  Putting false information on a mortgage app?  That's dumb and it was a slam dunk for the feds.  "Everyone was doing it" wasn't used as a defense in Engle's case; that was something the journalist wanted to bring into the discussion based on the severity of the penalty.

The more interesting thing is the IRS investigated Engle's income based on an agent's hunch that he must be high income if he was training full time.  And if he was high income, he must be cheating the IRS.  The agent said that driving a Ferrari triggers his interest and will investigate based on that.  Engle was never convicted of IRS fraud, because the agent didn't find any IRS fraud. I think many public forums and blogs about real estate deals put a lot of easy-to-misinterpret information out there.

Mike Denham · Answer

Well, since the topic of the post had to do with the IRS, I assumed you were referring to federal taxes.

Ken Latchers · Answer

Try owning a construction company and doing things honestly.  You get eaten alive by the COMPEITION of owners who pay under the table, avoid getting permits, don't pay OT, want to be "paid in cash", etc.  It is very difficult to compete with these "jacklegs" and it is entirely unfair.

The uncollected taxes nationwide, statewide, county and locally is enormous.

I entirely disagree with you in every sense of the word.

Mike Denham · Answer

Ken, competition and fairness have NOTHING to do with tax rates. Don't get me started.

Bill Gulley · Answer

As I recall, we have at least one member here on BP that invests and who is an IRS auditor.

For those of you who have been in goverment, you know that few government offices roll at the pace of private enterprise. Lots of breaks, down time, sometimes work is done and you still have to be there. Getting on line I'm sure is done by all kinds of government employees.

I see posts here sometimes and I do wonder who they really are. The question posed vs the terms used and nature of the writings, especially when the subject is concerning a particular state or area. You just never know!

OTH, I'd think many regulators are too busy to go fishing for violations, but if they see some grand errors and intentional violations they could very well start making notes in a file. IMO!