In my experience, if I underpay my tax, they will come at me and demand penalty and interest. If I overpay my tax, they will do nothing. This is by design, I think.
This is a common misconception. The mission of the IRS is to collect taxes and enforce the tax code. They don't make the rules and cannot make you pay more than you legally owe. An audit can just as well prove that you paid too much tax as you paid too little. It just so happens that there are far more people looking to skirt their full tax liability then people who mistakenly overpay. I did the latter once and got a check in the mail a few months later for the overage.
Sometimes, the IRS identifies the overpayment and sends the taxpayer a CP268 notice. The taxpayer can choose to receive a check or a credit against other taxes.
Did they give you 5% interest on the amount you overpaid?
Because that's what they take from you if you underpay (by accident or not).
Living in the US is like: "oh you were born and live in the US? We're forcing you to give us a huge chunk of your earnings for your entire working life, make it close to impossible to determine the exact amounts and then fine you 5% interest if you happen to underpay, but we'll never give you interest if you overpay.".
Edit: Well, as mentioned the tax system is super complex here and I obviously don't know the rules for every case. It seems in SOME cases you do get interest when the IRS owes you money but personally I've never seen this, where as I've always had to pay x% interest if I ever owed anything.
They didn't stop the IRS from telling us what they know and what they expect, and if it's accurate and you don't dispute their information, you pay the bill and attest you have no other income.
I wouldn't care if I over pay. After paying someone hundreds in fees to do my taxes I don't usually get much of any money back. I'd rather let the government keep $400 than give it to a tax company that probably won't actually help me in an audit.
We can still appreciate progress. And this is progress.
Although if the IRS is gonna audit when I under pay, they technically already know how much I owe. Why not just tell me? Reckon it's since people also over pay, and there's no refunds for doing that.
Most people have already paid their taxes and just have to file some paperwork confirming it. Many people have overpaid and if they don't fill out that paperwork, the government gets extra money. The IRS isn't going to care much then.
If you owe a small amount of money (probably the most likely case) they are going to care, but it's just not worth their while to deal too much with it. By small amount of money, I mean like $100. At that point, they'll want you to pay it, but it might cost them more to get you to pay it than the $100. Having a staffer spend 3 hours dealing with you would probably wipe out that $100. So, they'll take measures to make you pay, but they aren't going to waste too much effort.
If you're underpaying your taxes by a good deal, they'll make your life hell if you decide to brush them off.
The IRS operates similarly to how you'd expect - some things are worth their time, others aren't. Yeah, there are always humorous stories about someone getting a bill for less than a dollar, but overall the IRS wants to spend its time chasing the money. That means going after the egregious violators who are rich because those are easy to spot and have the most benefit to them. Going after someone earning $50k who forgot to report $30 worth of interest income on one of their bank accounts just isn't worth it.
I'm curious what mistake happened that you overpaid so much and the government caught it? I always assumed that the IRS relies on the tax return unless it explicitly audits you, but I think my assumption is now out of date.
A trick for when you're trying a strategy you aren't sure of:
you can overpay the IRS by the amount you would pay if the exceptions you are pretty sure apply actually didn't.
They will return the extra to you, and you lose the interest that money could have earned but gain the knowledge for next year of whether you can or can't do what you wanted to try. Depending on your specifics might be cheaper than a tax adviser.
Disclaimer: YMMV, I'm not a tax advisor, I pulled this out of my * * *, etc.
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