How does the IRS know my income?

In South Carolina, the Internal Revenue Service (IRS) obtains information on individuals’ and businesses’ incomes through many different sources. This helps the IRS track taxes owed and taxpayer compliance. One way the IRS knows income is from the W-2 form employers submit to the IRS at the end of each year. This form contains all the wages an employee earned throughout the year and the taxes withheld. Any other income not reported on a W-2 form, like interest or dividend income, should be reported on the 1099 form. Another way the IRS knows income is from self-employed taxpayers who must report their income through a Schedule C or Schedule F form. These forms detail an individual’s net income, including any business expenses they incurred throughout the year. The IRS also tracks income via tax return filings. Taxpayers must report all sources of income and deductions when filing their taxes in order to accurately calculate their tax liability. Finally, the IRS matches information from third-party sources, such as banks and brokerage firms, to cross-check income reported on tax returns. This helps the IRS detect any discrepancies and ensure taxpayers are reporting all their income and paying the correct amount of taxes. The IRS requires any information discrepancies to be addressed to avoid interest or penalty charges. In short, the IRS knows your income through W-2s, 1099s, self-employment income reports, tax return filings, and third-party sources. It’s important for taxpayers to accurately report their income in order to avoid any repercussions from the IRS.

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How does the IRS know my income?

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