How Does the IRS Know That I Didn't File My Tax Return?

The IRS uses a computerized, cross check system, to match W-2s, 1099s and other financial institution’s reports, to determine if taxpayers have submitted a return, which matches the information turned into them.

First you must understand, that Employers turn this information into the IRS, so that their expenses can be documented. An employer can claim the wages of employees, as a business expense.

True, the “IRS Computer” is very busy, however, sooner or later, it will figure out that there is no return, on file, for a particular W2 or 1099.

That’s when the letters start going out. The IRS calls them “Notices”

You will get a series of these letters over a period of time. The time frame varies, based upon, how much the IRS calculates that you owe.

It is best to respond ASAP, because the penalties and interest accrues daily. You could end up owing more in penalties and interest, than your original tax bill!