The Internal Revenue Service (IRS) has engaged Palantir for $1.8 million to enhance its custom tool aimed at identifying the "highest-value" audit and investigation targets from its array of outdated systems. This step is critical as the IRS currently operates over 100 business systems and employs around 700 methods for selecting cases, a process that has grown increasingly unwieldy and inefficient over the years.
The IRS noted that this fragmented system has led to several complications, such as duplicated efforts, high costs, and a lack of clarity regarding coverage gaps, resulting in less than optimal case selections.
The newly developed platform by Palantir, called the "Selection and Analytic Platform" (SNAP), is currently in a pilot program. This tool is designed to streamline the process of identifying potential fraud cases. It appears that Palantir has been associated with the IRS since 2014, having secured more than $200 million in contracts.
While the specifics of how SNAP will integrate with existing IRS technology remain unclear, the intent is for this software to enhance the detection of anomalies in tax filings that may have otherwise been overlooked. The IRS is looking to update its technology and is seeking Palantir’s expertise in modernizing its software.
Palantir’s SNAP is tasked with developing specific “case selection methods” for various segments of the tax code, including disaster zone claims and tax relief for natural disaster victims, as well as credits for residential clean energy investments.
Experts suggest that SNAP could analyze unstructured data from various sources, such as money transfer apps and public records, which could help the IRS in evaluating the legitimacy of reported transactions. However, the IRS confirms that SNAP will only utilize "existing data."
Traditionally, the IRS has used a Discriminant Information Function (DIF) score to determine potential audit candidates. This measurement assesses the likelihood of audit based on past filing behaviors. While the methodology behind the DIF score is somewhat opaque, it traditionally looks at similarities in tax filings that led to previous audits.
Despite various initiatives to upgrade its technology over the years, challenges persist. Public perception of the IRS is generally negative, complicating efforts to secure the necessary backing for significant modernization projects. The agency has suffered staff reductions and resource cuts in recent years, particularly during the Trump administration. As of mid-2025, the IRS experienced a substantial turnover in personnel, which has made it difficult for long-term projects to be completed.
The IRS’s historical struggles with technology upgrades and its unfavorable public image have created an environment where substantial improvements remain challenging.
