How Does the IRS Find about Unreported Income?

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asked Jan 20, 2019 in Law & Legal by stevewarner1957 (330 points)
How Does the IRS Find about Unreported Income?

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answered Jan 20, 2019 by madelinedg3 (420 points)
The IRS has a computerized system that checks for peoples income automatically since every time you deposit money into bank accounts or remove money from a bank account the income is reported to the IRS by the bank by law.

Every year the IRS will report your money and deposits as income to the IRS and if you haven't filed income taxes in a year or more then your name is red flagged and then the IRS starts investigating.

First the IRS will usually send you out a letter and then may also send someone out to audit you or request you come into an IRS office so you can be audited.

You won't always get into trouble or go to jail just because you failed to file at first but if you haven't filed for years and are clearly committing tax fraud then the IRS may send you to jail by prosecuting you and proving you guilty in court.

Usually though you will have a chance to make it right and pay back the owed taxes to the IRS.

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