More Electronic Snooping - IRS Can Issue Summons for Metadata

The chief counsel in CCA 201146017 has given examiners the green light to issue a summons for metadata.  I found this disturbing for two reasons.  One was just the general principle of the IRS being able to issue a summons for something new. Last month the chief counsel told them they could not go issuing warrants to internet service providers. That was good.  This month the chief counsel is giving the OK to issue summons for metadata.  That�s not good � just on general principles.  The other thing that was disturbing is that I did not have a clue as to what metadata is.  Wikipedia was not much help:

I actually took a course in data base concepts and have abrotherwho worked in the field who used to try to explain it to me.  There is something called the third normal form. It is very important.  I never figured it out.  Fortunately the chief counsel�s office explained what they mean by metadata:

That I can understand.  I can also make a reasonable inference as to why they might find it interesting.  Many years ago when I was starting in accounting and dinosaurs roamed the earth, manual and mechanical accounting systems were still quite common.  With manual journals and ledgers you can see the order that things were entered and you really can�t change it.  Things cannot just disappear.  If they need to be corrected you need to make an entry of some sort to correct them.  The general ledger was a single tangible book. I remember when data base concepts were first being introduced to small business accounting systems.  The systems were sometimes focused on operational issues and had general ledgers thrown into them more or less as an after thought.  If you did not run reports at the right moment, the state of subsidiary ledgers could never be recaptured.  It was like never being able to step into the same river twice.  I once was on the phone with a software support person, I explained that I had a number for accounts payable as of December 31 and I would like to have a list of the payables that made it up.  The �answer� I received was a question � �Why would you want something like that ?�

So why might metadata be so interesting to the IRS ?  In a computer environment the general ledger is not a single tangible book.  It is a report that you run.  The individual items can be sorted in any order that you want.  So you pick the transaction date.  If four months after the year end you find some invoices that should have been entered in November, you enter them with a Novemeber transaction date.  If someone foolishly entered some items that were obviously repairs as items to be capitalized you don�t have to make an embarassing journal entry that sticks out like a sore thumb.  Just recode the invoices and rerun the general ledger.  It is conceivable that there are people who might do things like that with less than pure intent.  If all the IRS gets is a printout of the final reports, they will not be able to tell how many times it changed, who changed it and when they changed it.  The metadata will tell that story, which might not always be such a pretty story.  With the metadata and a lot of patience you might be actually be able to step into the same river twice.  If the older river was heading to a higher tax, the IRS might like that river better.