3 ms·

Does the IRS actually know what everyone owes? I know it's true for W-2 employees, but what about everyone else? I've always had this feeling that you could as

Does the IRS actually know what everyone owes? I know it's true for W-2 employees, but what about everyone else? I've always had this feeling that you could ask the IRS what they believe any given SSN/EIN owes and they'd be able to tell you (not that they would, but that it's already calculated somewhere). I don't know if this actually true though. I know almost all W-2 information is sent electronically. They know about most 1099 transactions too. But is all this information pre-compiled against someone's SSN, or do they only run that calculation as part of random audits?

clintonb 3y ago
They know when you don't pay enough, so they have to know what you owe. All of the forms we receive (e.g., W-2, 1099) are transmitted to the IRS. They can use them to determine if a tax payer underpaid. I know this firsthand because a broker transmitted proceeds without transmitting a cost basis, resulting in a scary letter from the IRS a few months after I filed. The problem, as I understand it, is that the IRS' technology is very dated, so processing is quite slow, hence the months-long wait between filing and a CP2000 letter.
- gowld 3y ago
  They want to spook you into being honest, by not telling you what they know. If you knew the IRS missed something , you could safely not report it.
  - themagician 3y ago
    It honestly seems like the revenue lost to this would be trivial against the cost savings of not having to play the weird game that we play.
balls187 3y ago
> Does the IRS actually know what everyone owes? I know it's true for W-2 employees, but what about everyone else? Not quite. The IRS knows the income that is reported, and the taxes you have paid. It doesn't know which credits and deductions you qualify for. It can guess based on your previous returns, but it isn't accurate and needs to be updated annually. Once you provide your credits and deductions, the IRS can calculate what your tax liability should be vs what you actually paid.

clintonb 3y ago

They know when you don't pay enough, so they have to know what you owe. All of the forms we receive (e.g., W-2, 1099) are transmitted to the IRS. They can use them to determine if a tax payer underpaid. I know this firsthand because a broker transmitted proceeds without transmitting a cost basis, resulting in a scary letter from the IRS a few months after I filed. The problem, as I understand it, is that the IRS' technology is very dated, so processing is quite slow, hence the months-long wait between filing and a CP2000 letter.

gowld 3y ago
They want to spook you into being honest, by not telling you what they know. If you knew the IRS missed something , you could safely not report it.
- themagician 3y ago
  It honestly seems like the revenue lost to this would be trivial against the cost savings of not having to play the weird game that we play.

balls187 3y ago

> Does the IRS actually know what everyone owes? I know it's true for W-2 employees, but what about everyone else? Not quite. The IRS knows the income that is reported, and the taxes you have paid. It doesn't know which credits and deductions you qualify for. It can guess based on your previous returns, but it isn't accurate and needs to be updated annually. Once you provide your credits and deductions, the IRS can calculate what your tax liability should be vs what you actually paid.