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Does the IRS know how much you make?

ecgtaxpros.com - Yes, The IRS Can Find Out How Much Money You Have

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September 23, 2020

It seems at times as though the IRS is an all-knowing, all-powerful entity that no one can escape. You can’t run, and you can’t hide. They know how much money you make, how much you have in your bank and investment accounts, and even how much you won while playing roulette at the casino last week. But the real question is: do they truly know all of this? Or do we just assume they do? How can they obtain all this personal information? The answer is pretty simple. In reality, the IRS does have plenty of financially insightful access to everything from your bank accounts to every tax form submitted with your name and social security number on it. But is there a limit to “Big Brother’s” financial access?

How Does the IRS Know That I Have Undisclosed Income?

The IRS uses a sophisticated computer system in order to match up your income as reported on your tax return with everything that your employers have reported under your name and social security number. For example, if you submit a return that only has the money that you’ve made from one client or job, neglecting to enter any of your other income, the IRS’ computers will catch the mistake. Then, you’ll receive a letter from them informing you of their findings and their impact on your current tax situation. Since income can be reported on a number of different forms and from many varying sources, this is the best way for the IRS to determine whether or not you’re reporting all of your income. You are better off holding off on submitting your return until you have all of those forms (while still sending it in before the due date) in order to accurately account for all of the money that you’ve made throughout the previous year.

Can The IRS View Your Bank Accounts?

The short answer here is yes; the IRS can view your bank accounts. They can also place a levy on them if you owe back taxes or they suspect that you are cheating on your taxes by not reporting all your income. With that said, this is something that they won’t look into without approaching you first. You’ll receive a notice from the IRS requesting that you provide your bank statements to either a revenue agent (in the case of an audit) or a revenue officer (for those suspected of owing back taxes.) If you don’t comply and willingly send them the information, they will reach out to your bank to obtain those records. Since many of your bank account information is already in the IRS’ hands, either from interest earned and reported on an account or from making payments to the IRS, they already know where you do your banking and which types of accounts that you hold. It’s true – you really can’t hide anything from the IRS.

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Do They Look at Your Social Media?

Although reports sometimes contain conflicting information on this aspect, it’s more than likely true that the IRS looks at your social media posts. While they may only do so for people and businesses that they suspect have cheated on their taxes and have plenty of unreported or hidden income, it’s clear that an agent in charge of investigating a particular case may spend time on Instagram, Facebook, or Twitter to see if people are posting expensive items and going on pricey trips that are far outside of their tax brackets according to their reported income. This is definitely a red flag that they look for when investigating those who are suspected of cheating on their taxes. However, the amounts of this undisclosed income are more than likely large. They aren’t going to do this type of investigation for someone who hasn’t reported $600 or so. For those cases, they’ll simply send a letter or audit you.

What About Gambling Winnings?

Yes, gambling winnings over a certain dollar amount based on the games played do need to be reported to the IRS. If you fail to disclose these winnings, you’ll certainly receive an audit request. Casinos, horse racing locations, and other legal gambling locations need to report any money won over a certain amount on a form W2G. You’ll receive a copy of this form after winning the money, and the IRS will receive a copy of it as well. If you fail to report this as income on your tax return, the IRS’ computer system will flag it, and you’ll be notified about the lapse. As you can see, the IRS is informed of various types of income and won’t hesitate to inform you if you fail to fully disclose all earning.

Can They Audit You If They Suspect You Cheated on Your Taxes?

Again, the short answer here is also yes, the IRS certainly can – and will – audit any person or business that they suspect of cheating on their taxes. However, they usually don’t just send someone to your door. Instead, you’ll receive a notification informing you of an impending audit. Since there are several different types of these audits, your notice will contain plenty of details about what the IRS agents need from you and how to submit all documentation to them. An audit is the ideal time to come clean about any unreported or underreported income.

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Have You Cheated On Your Taxes?

If you’ve cheated on your taxes and are afraid that the IRS is going to send you an audit request, you will definitely need professional tax assistance. Seeking the guidance of a tax professional who is familiar with IRS dealings will ensure you receive sound advice and the process goes much smoother. You should have a trusted expert by your side whether you are admitting to the IRS how much income you haven’t reported or are selected for an audit. Someone who has previous experience in dealing with the IRS can help the process along and ensure your best interests are taken into consideration. If you have tax-related questions or owe money to the IRS, the tax advisors at the Enterprise Consultants Group can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a free and confidential consultation to see how we can help you.