What the IRS Knows About You Before You File

What the IRS Knows About You Before You File

By Taxus Financial LLC

Many taxpayers assume the IRS learns about their income only after they submit a tax return. In reality, the IRS already has a detailed financial snapshot of most individuals long before filing season begins. Understanding what the IRS knows about you before you file can help you avoid mistakes, reduce audit risk, and file with confidence.

At Taxus Financial LLC, we believe informed taxpayers make better decisions. Here’s what the IRS already knows and why accuracy matters more than ever.

Income the IRS Already Has on Record

The IRS receives copies of most income documents directly from third parties. This means they already know about:

  • W-2 wages from employers

  • 1099-NEC and 1099-MISC income from freelance or contract work

  • 1099-INT and 1099-DIV from banks and investment accounts

  • 1099-B from brokerage firms reporting stock sales

  • 1099-K from payment platforms such as PayPal, Venmo, Stripe, and Cash App

  • Social Security benefits reported by the Social Security Administration

If your tax return omits or underreports income shown on these forms, the IRS automated systems will flag the mismatch. This often leads to CP2000 notices, additional tax assessments, penalties, and interest.

Your Filing History and Prior Returns

The IRS maintains a complete record of your previous tax filings. This includes:

  • Reported income trends year over year

  • Past deductions and credits claimed

  • Filing status changes

  • Prior audit results or correspondence

  • Outstanding balances or payment plans

Large or unexplained deviations from prior returns, such as a sudden drop in income or unusually high deductions, can increase scrutiny. Consistency and documentation are critical.

Bank and Financial Account Information

While the IRS does not see every transaction in your bank account, it does receive data related to:

  • Interest earned on accounts

  • Large cash transactions reported by banks

  • Foreign bank accounts (FBAR and FATCA reporting)

  • Investment account activity

Increased reporting requirements mean financial transparency is growing. Failing to disclose reportable accounts or income can result in serious penalties.

Business and Self-Employment Data

If you are self-employed or own a business, the IRS likely knows:

  • Who issued you 1099s

  • Whether you have employees or issue payroll

  • If payroll taxes are filed on time

  • Whether sales tax or other filings are inconsistent

For business owners, discrepancies between reported income and third-party data are a common audit trigger.

Identity and Personal Information

The IRS also has access to basic identifying information, including:

  • Social Security numbers

  • Dependent claims across multiple returns

  • Address history

  • Filing status consistency

Duplicate dependent claims or mismatched personal data can delay refunds or cause returns to be rejected.

Why This Matters When You File

The IRS uses automated matching systems powered by data analytics. When your return doesn’t align with what the IRS already has, the system notices. Many IRS notices are generated without human review.

Filing accurately, reporting all income, and properly documenting deductions reduces the risk of audits, delays, and penalties.

How Taxus Financial LLC Can Help

Navigating modern tax filing requires more than software. At Taxus Financial LLC, we help individuals and businesses:

  • Review IRS-reported income before filing

  • Correct discrepancies proactively

  • Optimize deductions while staying compliant

  • Respond to IRS notices and audits

  • Develop long-term tax strategies

Knowing what the IRS already knows puts you in control. Filing with professional guidance helps ensure your return tells the right story the first time.

Need help preparing or reviewing your tax return?
Contact Taxus Financial LLC to schedule a consultation and file with confidence.

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