How does the IRS know my income?

The Internal Revenue Service (IRS) has a variety of ways it can collect information about your income. The main way the IRS knows your income is through your tax returns. Every year, individuals and businesses must report their income on their tax returns and pay the associated taxes. Your employer must also provide information to the IRS about your income. Employers have a legal obligation to report their employees’ wages and other income. This information is reported on the W-2 form that is sent to the IRS. If your income comes from other sources, such as investments or self-employment, then these must also be reported to the IRS. The income must be reported in annual tax returns, which detail all income, expenses, and other information related to the income. The IRS also collects information from other sources such as banks, credit card companies, and other financial institutions. These organizations must report certain transactions to the IRS, such as interest paid on accounts, rental income, and other forms of income. This helps the IRS determine if individuals or businesses are accurately reporting their income. In addition, the IRS can also compare your tax returns to those of other taxpayers, and can audit individuals or businesses if discrepancies are found. The IRS can also compare your income to current economic trends to make sure all taxes due are paid. These methods help the IRS to ensure that taxpayers are correctly reporting their income and paying the taxes due.

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How does the IRS know my income?

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