IRS Digital Footprint Enforcement – Use of Digital Evidence in Audits

Most people are not aware of the Internal Revenue Service’s tax enforcement initiatives as they relate to audits or that they even exist per the IRS’s Examination of Returns and Income guidelines with their internal manual. These tax enforcement initiatives are setup for purposes of gathering evidence and building tax cases based on . When people think of IRS audits, they initially think of bank statements and tax returns. However, in today’s AI-driven enforcement era, the IRS is actively using social media posts, luxury purchases, and even lifestyle indicators to detect tax fraud and Californian residents are prime targets.

California, commonly home to many popular influencers, entrepreneurs, real estate investors, entertainment professionals, and high-net-worth individuals, is often considered to be a high-discrepancy state, where lifestyle often exceeds what is being reported on tax returns. And, IRS is watching.

What is IRS Tracking through Social Media

IRS tax enforcement enlists investigators to review social media posts which showcase high-end travel, cars, private jets, designer goods, and events. Other online traceable items may include review of real estate records from California counties which can be cross-referenced against reportable income, review of cryptocurrency wallet activity connected to digital assets used for luxury purchases, and review of any unreportable income from Airbnb, Etsy, Poshmark, YouTube, or OnlyFans platforms.

Why Californians Face Extra Scrutiny

California is reported to have the highest number of cash economy businesses under audit by the IRS. Generally, IRS can collaborate with other regulatory agencies such as the Franchise Tax Board (“FTB”), California Department of Tax and Fee Administration (“CDTFA”), and Employment Development Department (“EDD”), for example, to create joint programs that allow real-time data sharing of taxpayer information amongst them all. Additionally, IRS now uses AI enforcement tools that can automatically flag lifestyle mismatches. All of this to say, that what you post online could be problematic based on whether income, business loss, or capital gains were properly and timely reported for that tax year.

Why this Matters

A common misconception by taxpayers is that they assume audits are triggered only by numbers on a tax return. However, this is not always the case. The IRS is increasingly building tax fraud cases from outside the tax return and turning to your digital footprint to build a narrative that negatively impacts your tax position.

What Californians Should Do Now

Remember to be socially aware of and cautious about posting luxury purchases if your reported income may not align. It is critical to track all digital revenue streams whether that is derived from influencer income, Venmo or Cash app payments, or crypto trades. Out of an abundance of caution, seeking advice from a local trust tax attorney is another opportunity to increase your line of defense should you receive a lifestyle audit letter. It is recommended that you do not respond on your own.

Final Thoughts

In this new era of AI enforcement, your lifestyle tells a tax story and you should be the writer of that financial, autobiographical story. Your tax story tells more than what you earned. It reflects how you live, how you invest, how you structure your assets, and how prepared you are for scrutiny. California residents, particularly those in business, real estate, or digital income streams, face a higher likelihood of lifestyle audits. If your Instagram story says, “Beverly Hills,” but your tax return says, “below the poverty line,” you can expect to receive a letter from the IRS. The smartest taxpayers do not wait for an audit to define their story, they work with a qualified tax attorney to write it first, with clarity, accuracy, and intention, while preserving their taxpayer rights.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

2026 Federal Inflation Changes Could Impact Your Tax Bill

The Internal Revenue Service (“IRS”) has announced the inflation adjustments for tax year 2026, and these changes are significant. These updates affect everything from the standard deduction and tax brackets to retirement contribution limits and credit thresholds. While the adjustments are designed to reflect the rising cost of living, they also introduce important planning opportunities and potential drawbacks for taxpayers and business owners.

At Wilson Tax Law Group, APLC, we understand how small changes in the numbers can have a big consequence for your overall tax strategy. Let us break down the highlights and what they might mean for you.

Key highlights of the IRS inflation adjustments include higher standard deductions for Married filing jointly ($32,200), Head of Household ($24,150), and Single/Married filing Separately ($16,100). These adjustments translate to fewer taxpayers having to itemize deductions but California may continue to make the decision to itemize complex; as it does not always align with Federal rules. It is recommended to have a strategic planner to help ensure you are not missing potential deductions at either level.

Another important highlight is the upward shift of income tax brackets which may be good news for most taxpayers. However, it is highly recommended to maintain tax planning efforts under the guidance of a trusted tax attorney, to closely monitor the timing of income and deductions. This is especially helpful in circumstances where there is variable income that needs to be reported. A third highlight, which we posted about previously, are the raised limits for retirement contributions (Sept. 18, 2025 blog post), health savings accounts (HSAs), and earned income credits. For anyone who is nearing retirement or managing multiple sources of income, these adjustments may provide opportunities to reduce taxable income while strengthening long-term financial plans.

Why You Need a Tax Attorney

Tax software cannot analyze strategy. Though your accountant can prepare your return, a tax attorney can protect, plan, and advocate for your long-term interests. A trusted tax attorney can translate Federal and California tax law interactions, identify opportunities to minimize liability across both systems, represent you before the IRS or FTB if issues arise, and help you structure your business, trusts or estates to adapt to new thresholds and preserve wealth. The 2026 inflation adjustments are more than just numbers; they are signals for change. Having an experienced advocate ensures that those changes work for you, not against you.

Final Thoughts

The IRS’s 2026 inflation adjustments highlight one truth: tax planning is never static. The rules evolve, your income shifts, and opportunities open and close every year.

Before filing season arrives, take time to review your tax position, discuss your goals, and craft a proactive plan with a trusted tax attorney.

At Wilson Tax Law Group, APLC, we help individuals and businesses across California navigate these changes with precision, confidence, and compliance. Schedule a consultation today to see how these new inflation adjustments may impact your tax strategy and how we can help you stay ahead of what’s next.

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.

When IRS goes Quiet: What Furloughs Mean for Taxpayers & Practitioners

The Internal Revenue Service recently announced plans to furlough nearly half of its workforce amid the current federal funding lapse and government shutdown. While this may sound like another bureaucratic hiccup in Washington, these furloughs could have real and immediate consequences for taxpayers, businesses, and professionals navigating already complex tax obligations.

What’s going on

Due to stalled federal budget negotiations, the IRS is preparing to suspend operations for thousands of employees, potentially impacting key functions such as processing mailed returns and correspondence, issuing refund checks or manual adjustments, responding to taxpayer inquiries or practitioner calls, scheduling and conducting audits or appeals, and/or handling collection actions and installment agreements. In essence, the IRS is entering a limited operations phase which means essential services like electronic payments and automated systems will continue, but human-handled matters may slow dramatically or stop altogether.

What this means for taxpayers

For individuals and businesses, the immediate impact depends on where you are in the tax cycle. If you’re waiting for a refund, expect longer delays with electronic refunds still moving but paper checks or manual reviews sitting in queue until a staff member returns. If you’re under audit or review, most audits, appeals, and case reviews will pause. However, this is temporary and taxpayers should continue locating essential documentation and may relieve the pressure for a short-period of time. If you owe taxes or are on a payment plan, collection may slow but interest and penalties will continue to accrue. If you’re facing enforcement or levy action, some automated notices may continue and system-related levies can still be issued. It is important to have updated contact information while closely monitoring your bank accounts.

Why IRS workforce changes matter

The IRS has been making real progress after years of backlog and underfunding which make the current furloughs detrimental in terms of minimizing such progress as it relates to: 2024 tax returns currently being corrected for credits and amended filings, reducing the effectiveness of the “Zero Paper Initiative” and making physical mailrooms critical, and continuing to reduce the size of the IRS workforce which has been decreased by approximately 20% since the pandemic.

This could cause major challenges for the 2026 tax year in regards to the processing of refunds, appeals, and even resolution of taxpayer disputes could be delayed for months.

Action Plan

We believe the best course of action for taxpayers is to stay proactive by keeping your filings, estimated payments, and documentation up to date. Your obligations are not paused while IRS action might be delayed. Be sure to document every communication attempt which includes mailings, faxed correspondence, and proof of submission. Don’t stop resolving issues. Attorneys and tax professionals can still work toward voluntary resolutions, prepare offers, or negotiate with automated systems. This downtime is an opportunity to get your case file in perfect shape. Call your trusted tax attorney to protect your financial future today. Lastly, be careful in relying on misinformation regarding waived penalties or tax holidays. The law doesn’t stop because the telephones do.

Final Thoughts

The IRS furloughs highlight the fragility of our tax infrastructure and pose as a reminder that IRS sits at the center of U.S. fiscal health. The IRS is constantly subject to political turmoil which further support the need for all taxpayers to build resilience into your tax strategy by staying digital wherever possible, keeping clean and accessible records, and planning for response delays when timing is essential.

If your tax matter is time-sensitive or if you’re uncertain how the furloughs might affect your case, we highly recommend not to wait until the IRS reopens. Seek guidance now and develop a proactive plan which may make the difference between a delayed response and a missed opportunity. We are here to help and invite you to call our firm today!

If you have any questions regarding your individual or businesses’ state and/or federal tax return(s)/tax liabilities or received a notice from the IRS, FTB, EDD, CDTFA or any other regulatory agency, please call or email Wilson Tax Law Group, APLC, to setup a consultation with our firm.

Wilson Tax Law Group, APLC is a boutique Orange County tax controversy law firm that specializes in representation of individuals and businesses before federal and state tax authorities with audits, appeals, FBAR, offshore compliance, litigation and criminal defense.  Firm founder, Joseph P. Wilson, is a former Federal tax prosecutor and trial attorney for the IRS and California Franchise Tax Board.  Wilson Tax Law Group, APLC, is comprised of former IRS litigators & Special Agents, and Assistant US Attorneys from the US Attorney’s Office, Central District of California, Tax Division, which at the time handled both civil tax lawsuits and criminal tax prosecutions on behalf of the United States of America.

For further information, or to arrange a consultation please contact: Wilson Tax Law Group, APLC

Tel: (949) 397-2292 (Newport Beach Office) 

Tel: (714) 463-4430 (Yorba Linda Office)

Disclaimer: This blog post is for informational purposes only and does not constitute legal, tax or financial advice. Please consult with a qualified attorney, accountant or financial advisor for specific guidance related to your circumstances.