How does the IRS know my income?

The Internal Revenue Service (IRS) collects information from employers and other sources to report all income to the IRS. Generally, employers are required to withhold taxes from wages paid to its employees and send it to the IRS. These deposits are reported to the IRS with Forms W-2 or 1099. Most income such as wages, salaries, tips, bonuses, and other payments for services are reported to the IRS by the employer. Self-employment income is reported to the IRS using Form 1099-MISC and other forms. Banks, other financial institutions, and other businesses must report income to the IRS for dividends, interest, sales proceeds and other transaction income by filing form 1099-INT, 1099-DIV, and other forms to the IRS. Income from rental property must also be reported. If you rent property, you must report all rental income on form 1040. Royalties, prizes, awards, and other income must be reported on form 1040. In addition to wages, salaries, and other income, the IRS also collects information from state and federal agencies about income received. In most cases, this information is received from the Social Security Administration, Veterans Affairs, Railroad Retirement Board, and other agencies. The IRS also reviews state and federal income tax return information to verify the income reported by employers and other sources. The IRS also has access to real estate, credit, and other financial information to verify that all income has been reported.

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How does the IRS know my income?

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