The IRS is reportedly going to get a lot smarter in spotting tax cheats, thanks to Palantir (PLTR). 

According to a Wired report, the tax agency is testing new software by the data analytics giant that’s tailored to identify the “highest-value” cases for audits, collections, and even criminal investigations.

That represents a pivotal shift in the IRS’s reliance on outdated systems that have struggled to connect the dots in the past.

For context, the IRS’s tax gap projection forecasted that taxpayers underpaid by an eye-popping $696 billion in tax year 2022.

Over the years, the agency has operated across a tangled web of over 100 different systems, along with a myriad of audit-selection methods. 

That mess has made it incredibly tough to spot tax cheats efficiently, allowing some cases to slip through the cracks.

However, Palantir’s new tool, called SNAP, aims to correct that by pulling in messy, unstructured data and underscoring patterns that human auditors might miss.

Palantir spent the past couple of months staying impossible to ignore.

The Iran war pushed AI warfare back in the center of the debate, and Palantir’s Maven system hogged all the spotlight, with Reuters reporting that the Pentagon wants to turn Maven into a program of record.

On the commercial end, Palantir continued racking up wins, growing its partnership with Bain, and teamed up with Nvidia (NVDA) on a sovereign AI operating system.

Most recently, it renewed and expanded its partnership with Stellantis (STLA) for another 5 years, including expanded use of its Foundry and AIP offerings. 

As of the time of writing, Palantir stock is trading at $146.49, according to Yahoo Finance, and despite all those wins, the tech giant shed more than 4% in value in the past month.

Nevertheless, Palantir ranks among the biggest winners in the stock market over the past several years. 

If you’d thrown in $10,000 into Palantir stock five years ago, you would have compounded that investment to $62,900 today based on a 529% gain, per Seeking Alpha.

That essentially means you’d be sitting on nearly a $52,900 in profit, not counting any taxes or trading fees.

If everything works out smoothly, it further expands Palantir’s burgeoning foothold in government and the stickiness of its platform in high-value enforcement.

For perspective, as per Palantir’s full-year 2025 results, government and commercial sales came in at $2.40 billion and $2.07 billion, respectively (54% government and 46% commercial). 

Palantir stock returns vs. the S&P 500

• Over 1 week, Palantir stock returned -5.36% versus the S&P 500’s 0.29%.
• Over 1 month, Palantir stock returned 6.78% versus the S&P 500’s -4.41%.
• Over 6 months, Palantir stock returned -19.70% versus the S&P 500’s -1.69%.
• Year to date, Palantir stock returned -17.59% versus the S&P 500’s -3.95%.
• Over 1 year, Palantir stock returned 73.57% versus the S&P 500’s 17.17%.
• Over 3 years, Palantir stock returned 1,633.61% versus the S&P 500’s 60.01%. Source: Seeking Alpha

How Palantir could change IRS audits

Using Palantir’s robust software, the IRS is looking to finally address a problem that has plagued it for decades.

“This fragmented landscape can lead to a number of undesirable outcomes including but not limited to duplication of effort and cost, poor understanding of gaps in the coverage, and suboptimal case selection,” the IRS said.

To put it simply:

• Palantir’s tool is called SNAP. It helps the IRS streamline how it narrows down potential fraud cases.
• It is still only a pilot. SNAP is not a full-scale overhaul at this point.
• The bigger goal is modernization. SNAP will be designed to sit atop the IRS’s fragmented databases, helping auditors spot red flags they missed early on. 

SNAP could prove especially useful when tax filings come with messy supporting documents — ones such as disaster zone claims and Form 709 gift tax returns.

Needless to say, this development gives Palantir an opening. 

If SNAP works, the tech giant could deepen an already fruitful relationship with an agency that has awarded it north of $200 million in contracts and payments since 2014. 

Also, that template could be applied overseas, opening up a whole new revenue stream.

The IRS is testing new technology that could change how it identifies audit targets.

Photo by Michael M. Santiago on Getty Images

Palantir’s top government programs

• Gotham: A core defense and intel platform that connects and spots patterns in data while supporting mission planning
• AIP: Its AI layer, tailor-made to allow agencies to run secure AI tools on sensitive internal information
• Apollo: The software delivery backbone pushing critical updates across classified, frontline environments
• Project Maven: The highly touted AI program that is linked to military image analysis, surveillance, and battlefield decision-making
• TITAN: A U.S. Army battlefield intelligence system that converts sensor and satellite data into real-time insights

Wall Street price targets for Palantir stock

• Citi: $235 (60.4% upside)
• Mizuho: $195 (33.1% upside)
• UBS: $180 (22.9% upside)
• Deutsche Bank: $200 (36.5% upside)
• Goldman Sachs: $182 (24.2% upside)
• Wall Street’s average price target is $185.25 (26.46% upside), with a high target of $260 (77.5% upside) and a low target of $70 (52.2% downside). Source: MarketBeat

Investor takeaway on Palantir stock 

Palantir’s current setup appears to be a stock that has its fair share of believers, but not one that’s giving investors an easy entry point.

According to Seeking Alpha, Palantir stock trades behind every major moving average.

It sits 2.75% under the 10-day, 0.95% below the 50-day, 10.23% under the 100-day, and 10.85% below the 200-day. 

More Palantir 

• Palantir CEO delivers curt 8-word message to investors
• Veteran analyst drops eye-popping price target on Palantir stock
• Morgan Stanley has a stark message for investors in Palantir stocks

That essentially means the stock is trying to find its footing in the short term, but the broader trend also needs a lot of work.

On top of that, valuation remains the bigger issue. 

According to Seeking Alpha, Palantir is trading at 195 times trailing non-GAAP earnings and 110.64 times forward earnings, both comfortably exceeding sector norms.

Moreover, its price-to-sales ratio of 77.45 is hard to ignore, more than 2,300% above sector medians. 

Even when pitted against its own five-year averages, several metrics still look remarkably stretched.

Hence, existing investors believe that the bull case will continue to impress and that growth will remain elite; they’d want to continue holding and adding on dips. 

However, patience is warranted for new investors before a clear trend emerges.

Related: Goldman Sachs sends surprise message to stock market investors