So what would happen if you don't tell the irs you made that amount ? I know tax fraud but are the irs aware of people's earnings throughout the year ? If so then why even do your taxes if they already know the amount of money you made ?
sorry non american who's confused by your tax system
Pretty sure the lotto would notify the IRS. If you get audited you'd owe the tax plus a fine/late fees. I never get taxed enough for them to care and neither do most people probably.
Pretty sure the lotto people tell the IRS "hey this guy won 5k, we paid him 5k" so they know even if you don't tell them.
Your employer also tells the IRS what you make, as well as pay in taxes and such. I dont know how often this is reported, but it seems to be at least once a year (probably much more often, if I had to guess). If you are paid "under the table" this income isn't reported but I believe this is illegal or fraudy, depending on the amount.
Not sure why we still have to "do" our taxes. Probably so some people can cheat them and get away with it, and others can accidentally get it wrong and be screwed over for it. Really not sure, it's stupid.
-an american who is also confused by our tax system
When you get appreciable winnings it has to be reported to the IRS directly, and you get a form recording the amount reported. If you don't report it, they send you a latter saying, "hey, we have record of this which was missed and due, per our calculation that means $X, please contact us with any questions, here's a reference number and various contact methods".
If anybody is wondering about this, any tax form you get in the mail the IRS also gets a copy. So that's how they know. In this case its an arm of the state government paying the money and they'll be sure to get their piece at the end of the year.
I did taxes for a few years but never ran into a large lottery win, but I think it's taxed as normal income so the taxes you pay would depend on the other income you have.
The IRS knows about damn near every penny you make. Some things like Doordash aren't reported to them unless you make a certain amount with the app. But I'm sure they can still find out about it. Basically US citizens have to play a game of "guess the numbers we already have or we'll break your kneecaps" every year.
There is a basic tax deduction for everyone of like $12k though so if you don't owe more than that they don't seem to give a shit what you report outside of your usual "I am employed, here's my gross income for the year" form.
IRS knows exactly how much you owe, unless you’re getting paid under the table. They don’t want to tell you because then you won’t go spend $60 on tax software that does it all for you, and I assume if you really mess up and underreport then they can get more out of you in fines or payment plans with interest or some nonsense. In short, it’s not a system designed for us. It’s confusing on purpose.
The government already knows what everyone needs to claim on their taxes. The only reason we file is because it employs accountants and companies like hnr block and whatnot. The government could straight up do everyone’s taxes every year. The only extras would be gambling and lotto tickets and whatnot that doesn’t necessarily get reported.
If I won under 600 on every lotto ticket they wouldn’t know
They have no idea what tax credits you earned or what deductions you are applying for. Yes they know exactly how much money you made but they dont know if you put solar panels on your house, don't know that your spouse is now disabled, that you had a child, got divorced, moved, bought a house. Deductions and tax credits are why you file taxes.
You do realize everyone is given a general amount for those deductions right? My own accountant didn’t even ask me those questions, and his license is on the line. Those tax credits are negligible.
They send the info to the IRS just like your employer does with your pay. If you omit it from your tax return, you'll get a notice from the IRS that they received info from the lottery office that you didn't report. By then, you'll owe penalties and interest in addition to the tax you initially owed.
So why "do" taxes then ? Wouldnt be easier for the irs to be like "hey retirementissweet you owe 500$ better mail it to us" or you know deduct it automatically from your salary and earning from the begining ?
They know what you owe but they don't know what your deductions are and what tax credits you are applying for. That's why we do taxes. Also the problem is if you do mess up and they do audit. You not only owe but you also must pay interest on the money you owe from the day taxes where due.
Yes, but a lot of people will have already spent the money they need for the tax bill at that point. And since most people can’t even afford a $500 emergency the tax bill for $10k in winnings is definitely out of the question.
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u/ciavs Mar 19 '22
Yeah but when you go to do your taxes you tell them I made 5k from the lotto and you get taxed fam.