| > How do they know your self-employment or business income? If it's 1099 income, they know it for the reason that the 1099 gets filed with the IRS, as well as a copy going to you. > How do they know how many kids you have? That doesn't change very often, and there is interaction with the federal government which easily could be, if it isn't already, shared with IRS for the most common reason for changes in the positive direction. > How do they know your marital status? Again, that doesn't change frequently, so mostly they have a good basis for it by assuming whatever it was he previous year.(For this and the preceding, and a lot of similar status issues, it would be easy enough to move the data collection to a pre-filed form—for regular workers you could collect it, or changes to it, as part of the W-4—instead of the equivalent of the current retrospective tax return, expanding the accuracy of precomputed taxes and reducing the need for supplemental retrospective filing. But, yeah, you'll probably always need an option for at least supplemental filing for information that differs from information the IRS has from other sources or is outside of it. |
1099s have the wrong cost basis information for ESPP and vested RSU shares, so the IRS does not know what the correct tax is when those are involved.