Does The Government Check Every Tax Return?
People should not confuse the term “audit” with the word “check” when thinking about the government and how it handles a tax return.
The government Checks for a Signature
The government does check each and every tax return if for nothing else than the taxpayer’s signature, electronic or manual. A return is not considered filed unless it has been signed. The computers at the government will also check each return for mathematical errors although in today’s world of computer generated returns this type of error occurs less frequently.
The government Checks Items of Income
They will also cross check each return to make sure that the taxpayer has reported on their tax return information that has been reported to the government from other sources. If you are a salaried employee and receive a form W-2 you can be certain that the government is receiving the same information. It would be foolish to not report it on your return.
Any form with a 1099 as a prefix will also be shared with the government. These forms include distributions from retirement plans, unemployment compensation, state tax refunds, gambling winnings, interest and dividend payments as well as the proceeds of the sales of assets. If they find that income is being reported by an outside source and is not being reported by the taxpayer they will flag the return for further action.
Some types of income such as alimony are not reported to the government via a 1099 but are listed on another taxpayer’s return. If an ex-spouse is paying you alimony then they are indicating the amount paid and your social security number on their own form 1040.
The government Shares with States
In addition to them checking each return for income items of income, they also share this information with your home state. This government is nothing like it was a decade ago and automation has made it simpler and more efficient to check each taxpayers return.
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- Will The Government Notify Me If I Made A Mistake On My Tax Return?
- Why Should I File An Amended Government Tax Return?