They don’t, though. The IRS doesn’t know where your kids go to daycare, or how much you’re paying for it, until you claim it as a deduction on your taxes.
They audit you, and you provide proof of what deductions you qualify for. If you say you paid $10,000 for child care, and you have paperwork from the daycare to prove it, then you’re good. If you said you paid $10,000 for child care and it turns out you don’t have any children, you’re kinda fucked. Same goes for things like charitable donations. The IRS has no idea that you donated to a cancer charity unless you claim it as a deduction. If they audit you, you’d better have proof of the donation.
If you claim 17 children as deductions, you’ll probably get audited. If you claim a new Ferrari as a business expense deduction, you’ll probably get audited. The IRS is not some evil omnipresent overlord looking to lock you into a life of servitude, and the people trying to convince you of that are: 1) very wealthy people trying to avoid paying taxes, and 2) the actual people trying to lock you into a life of servitude.
They don’t, though. The IRS doesn’t know where your kids go to daycare, or how much you’re paying for it, until you claim it as a deduction on your taxes.
Then how do they “catch” people? The data is there or they couldn’t.
They audit you, and you provide proof of what deductions you qualify for. If you say you paid $10,000 for child care, and you have paperwork from the daycare to prove it, then you’re good. If you said you paid $10,000 for child care and it turns out you don’t have any children, you’re kinda fucked. Same goes for things like charitable donations. The IRS has no idea that you donated to a cancer charity unless you claim it as a deduction. If they audit you, you’d better have proof of the donation.
And how do they know to audit? Because they have the information already and they can make you a modern indentured servant if you can’t get out of it.
If you claim 17 children as deductions, you’ll probably get audited. If you claim a new Ferrari as a business expense deduction, you’ll probably get audited. The IRS is not some evil omnipresent overlord looking to lock you into a life of servitude, and the people trying to convince you of that are: 1) very wealthy people trying to avoid paying taxes, and 2) the actual people trying to lock you into a life of servitude.