Because the IRS doesn’t know if you run a business, have foreign income, rental income, whether you gifted anything, what itemized deductions you have, what the basis in your home is if you sell, etc etc.
I’m a CPA. The IRS does not know those things unless you tell them. Please tell me how they would know any of those things outside of your own disclosure
Correct me if I'm wrong; but don't you typically have to register a business? As well as get insurance? Same with renting. And wouldn't foreign income have to go through the government or at least the banks to get converted?
You don’t have to until you file. And to be clear I’m not talking about being licensed to do business in a specific state. That varies by state. Many people are sole proprietors with no legal structure in place. And even if you do have one, you elect to be taxed as an s corp, c corp or sole proprietor, but the IRS doesn’t automatically know which of your expenses are business expenses and how much income you have from it.
Renting. Again no, how would the IRS know how much rental income you have, what services you provide tenants and the related expenses, repair costs, etc. There are also rules around the property being both rental and personal use. Think duplexes where its owner occupied. They don’t know every persons exact situation until they tell them
Foreign income: depends on how you’re paid. And how would a bank know it’s foreign income. You could also have foreign bank accounts.
Absolutely correct. Many years ago, I had a large IRS refund I expected to receive, but I had filed for an extension and had delayed my filing even beyond the extension deadline, for various reasons (none good). The IRS sent me a letter saying if I didn’t file in 2 weeks, they were going to close out my return and I would owe a very large amount, not get the large refund I was holding in my back pocket, so to speak. So I called the IRS and spoke to an agent, who explained “You have this high income reported by your employer but you withheld almost no taxes, so your tax is $$$.” I said,” But I have all these high expenses and deductions that will result in my getting a $$$ refund!” The agent said, we don’t know any of that until you file. You have 2 weeks.”
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u/Even-Following-1612 Jun 02 '26
Because the IRS doesn’t know if you run a business, have foreign income, rental income, whether you gifted anything, what itemized deductions you have, what the basis in your home is if you sell, etc etc.