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Income Reporting to the IRS: Is My Employer Required to Tell the IRS About My Income?

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Posted on June 30, 2023 |

If you earn a living anywhere in the United States (or even abroad as a U.S. citizen), you are required to report your income to the Internal Revenue Service (IRS). You must also accurately calculate your federal income tax liability and pay what you owe.

But what if you don’t?

If you don’t report your income to the IRS, will your employer report it for you? What are the risks of not reporting your income on an annual tax return? If your employer is reporting your income and you are not, do you need to be worried—and what do you need to do to protect yourself against the IRS? Tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

What Employees in Boston Need to Know About Reporting Income to the IRS

If you receive a regular paycheck, you aren’t the only one that is required to report your income to the IRS. Your employer is required to report your income as well. This applies to income in all forms, including not only compensation you receive from your employer but also tips that you receive from clients or customers.

Employers can face steep penalties if they don’t report their employees’ income and employment tax withholdings. Employers can also reduce their federal income tax liability by claiming their payroll expenses as deductions. Given these incentives, your employer most likely reports your income to the IRS.

So, what happens if your employer reports your income and you don’t? In this situation, you can face steep penalties as well.

Crucially, the IRS imposes penalties not only for failure to pay but also failure to file. This means that even if you don’t owe any additional income tax (beyond what you’ve paid through your employer’s withholdings), you still need to file an annual return.

If you owe additional income tax, the consequences of not reporting your income can be far greater. Minimally, you will remain liable for the taxes you owe, and you will also begin to accrue interest and penalties. However, if the IRS determines that you have intentionally attempted to evade tax, you can face criminal tax fraud charges that carry up to a $100,000 fine and five years of federal imprisonment.

What Should You Do if You Haven’t Reported Your Income to the IRS?

In light of these risks, what should you do if you haven’t reported your income to the IRS? Assuming that your employer has reported your income, the IRS will know if you haven’t been meeting your federal income reporting obligations. This means that you need to act promptly, but you also need to be very careful. Different situations call for different approaches, and, to ensure that you are making informed decisions, you should discuss your situation with an experienced tax attorney promptly.

Request a Confidential Consultation with Tax Attorney Kevin E. Thorn in Boston

Are you behind on your federal income reporting obligations? To discuss your situation with tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, call 617-692-2989 or contact us confidentially online now.

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