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Comment by bushbaba | Hacker News Reader

Idk. I think the IRS gets the better end of the stick here. They have you tell them how much you owe. If you report more than they knew about great they made money. If you tell them less than they knew about, then they'll audit you assuming the difference is large enough (and there being a high likelihood of winning)

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this is not how taxes work with the IRS. If you make a calculation error in their favour they will correct it and issue you a refund. If you make a compilation error in their favour and get reviewed or audited, you will get a refund. They also audit based more on discrepencies vs. "likelihood of a big payout".

If they precalculated your taxes and sent you a bill (or refund) it would (a) be easier, (b) be more accurate and (c) encourage simplification of the entire system. I consider that both more effective and more fair.

You’re missing the point. The point is that the IRS isn’t aware of a good amount of income (trivial example is tips) unless you tell them about it.

Also income from illegal activity is taxed like any other. If you get caught for doing illegal things and not reporting it on your tax bill, you're in trouble for that too. Harder to prove you're stiffing the IRS when you pay the bill they send you.

If you are audited by the IRS and they find that you overpaid, they will issue a refund. It's not a one-way street.

Does the IRS start an audit if they suspect you massively overpaid? They certainly do if you massively underpay.

Not an audit, but they corrected a mistake I made in my favor once. It was a trivial amount, like $30 or something, but they sent me a little packet explaining what they did, why, and a check.

Sure. But why in the world would they audit you if you overpaid?

Whatever indicators they use to select audit recipients may correlate with under-payers, but it's not a guarantee. I'm sure there's some fraction of those they audit that turn out to have paid too much.

They have some data on this (https://www.irs.gov/pub/irs-pdf/p55b.pdf, pages 33-35). Out of 509,917 examinations, 18,988 resulted in a refund. There was $7.0 billion of tax refunded in 2020. For comparison, there was $17.2 billion of additional tax generated with additional recommended and unagreed amounts.

Huh, that's a pretty large amount of refunds (granted, still $10B in additional revenue). Interesting data, thank you for sharing.

you can also claim refunds for years back; like an audit this is a 2-way street as well.

It isn’t equal however. If you underpay, the IRS has seven years to get the money. If you overpay, you have three. (Simplified of course)

I've never been audited, but several times I've had the IRS just tell me I did my return wrong and give me a bigger refund.

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