Is IRS depending too much on computers

[Pacun]

I have a distant cousin who lives in another state. I have my brother who gets a bunch of 1099s-misc.

I prepare my bother's returns and a couple of years he left one 1099 out and the IRS send him a $1,000 bill, which he paid at once.

My distant cousin, has been working for 10 years using his correct social security number and getting a 1099 for about 50K a year. He has never filed and he has never received a letter from the IRS.

It seems that the IRS is hunting the honest people who by mistake leaves one 1099 out. Since I do understand how computers work, I understand their problem. I believe that computers are relying on matching. What do you need for matching? You need two items, if one of them is missing, there is no matching event. Very smart, correct?

[Lion EA]

Actually, the computer is trying to match. When it cannot, it generates a letter to the taxpayer that they have unreported income.

Don't know why your cousin has not received a letter, perhaps his employer never filed the Forms 1099 with the IRS. Or, it's really a W-2 with withholding and a lower priority to the IRS, because it might be a refund instead of revenue for our government.

[Pacun]

It is trying to match departing from a return filed, not the other way around.

Have you seen tax payers with 1099 who have not filed for years and not received any letter?

[Lion EA]

No, the 1099 usually triggers a letter if it wasn't reported on a return. The computer fails to match what was filed with the IRS with an amount on a return of the corresponding SSN -- for income. For deductions, mortgage interest for instance, the computer tries to find the amount/SSN in its computer to confirm what a taxpayer deducted. I have talked to taxpayers who receive W-2s and don't receive letters for years of non-filing, then suddenly a letter.

Maybe employer never filed 1099s with IRS, so computer is not looking for your cousin. It will be a big problem when it surfaces!

[kcjenkins]

It is true that in the past, the person who never filed was often never noticed, but that was before the IRS put on the pressure for 1099s. And it is also true that if it was a W-2 with enough withholding, they will not bother to follow up on why it was not filed for the refund. But in today's system, if there actually was a 1099 reported to the IRS for 50K of income, there would for sure be a demand for a return and/or a payment.

I've got one in here that came yesterday. He just got letters for 2006, 2007, and 2008 for not filing on 1099s. I'm guessing though, that it was the 2008 that got them to take action, because the amounts on the 1099s ranged from 6.250 to 7200 per year, and there was only one each year, for a very small tax bite, since only SE tax was owed. BUT, in 2008, somehow the IRS showed the same $7,200 FIVE TIMES, five identical 1099s from the one payer. So now we have to get a letter from that employer verifying that in actual fact, he only made a total of $7,200 for the year, and the other four duplicates, wherever the error was made, need to be eliminated.