I think that this is a solid argument for why the government should be reducing filing burdens. If they already have the vast bulk of what is needed, and they're able to rely on that to audit people in case of discrepancies, they also should allow people to file more easily (or not file at all) using that information. Many other countries, including the UK where I currently live have a system wherein the most common kinds of employment don't require filing at all. The US could become one of them if it really wanted to.
Afaik, this is both true and not.
The IRS gets very specific data points, that institutions are required by law to give them.
That's largely a complete picture of your income, at least from sources that are required to report.
What they have no idea about is your expenses or classification thereof.
If we decided to move to a progressive (more money = higher rates) and no exemption/deduction system, then the IRS would have everything needed.
But in fact we have a spaghetti of deductions, because it's far easier to sneak a special interest deduction into the tax code.
When I started filing taxes way back in the olden days, I had to mail a copy of my W2 to the IRS. I could alter it, not include it, whatever. So audits would verify all that.
Now w2s are sent electronically along with 1099s and everything else.
So it’s not perfect, but it’s much easier on the IRS now, than it used to be.
For most people, there are no expenses. You could lie about kids but you need socials. You could lie about tax or mortgage deductions but those data are sent to the IRS by institutions. You could lie about charities, but again that’s sent electronically.
There are some edge things, but they are really edge because most filers don’t have any deductions that are easy to lie about without detection.
I do not think this is the case. Taxpayers have to have records to substantiate in an audit, but I don’t believe that information is filed with the IRS by the charity. (I’ve never been asked for, nor provided, my SSN when making donations over the decades.)
In the 1980s and before, the IRS literally had no way of knowing if you're telling the truth without auditing you. Everything was done on paper, cash was king. So the audits were indiscriminate and invasive, and needed a large army of employees to orchestrate.
Now, the IRS knows almost everything about your finances. They get electronic data from your employers, your bank, your brokerage. Most of commerce is settled electronically. Paypal and Venmo send them your info if you receive more than $500 in a year. There is nothing to be gained by randomly auditing the average family if the numbers on their report match what the IRS knows. The IRS can zero in on specific activities, such as people claiming unusual business deductions. But they no longer need to routinely audit most of us, and they don't need funding to that effect.