As a federally licensed mortgage officer, I can tell you a few of the things the IRS is actually trying to crack down on and why. We have to take “red flag” continuing education classes every year, and (while I’ve never done so) are LEGALLY obligated to report suspicious income or tax activity directly to the IRS. In fact, if I saw one and didn’t report it, I could lose my license. And I’ll tell you first to be very clear: they don’t care about your guitar you sold for over $600 unless you are a business, or are selling things for profit, and without filing taxes as a business.
My wife told me a few years back, about a woman who goes daily to local Goodwill stores and other thrift stores, and she buys all kinds of stuff. She brings it home, sells it online (mostly EBay) for profit, and claims no income from this “business.” Yet the woman who has no retirement income and no SS income, and no income of any other type, has a 2 year old mid sized vehicle, owns a home, and has over $10K in the bank. (Yes, I know, because she actually called me for a mortgage refi).
According to my wife, this woman comes in every day and ships multiple packages. At one point, the Goodwill store was right next to the post office. My wife said this lady would go in the store, take pictures, post stuff for sale on eBay, sell it, then go to the store and buy it and walk it right next door and ship it. At one point, she told my wife that she was making over $1000/moth profit just selling female Levi’s jeans to buyers in Japan. There were so hard to get over there, that what she could buy here for $3-5 a pair, would bring $50 to $70 plus international shipping fees, even used! Certain types of womens purses and shoes, same thing. She would sell on eBay for 10 times what she paid.
At one point, this lady even said that she wasn’t paying any income tax on any of this income… and mentioned that “she never sold anything over $600 because then the IRS would know.” LOL. So far, she’s flown under the radar for over 10 years… but I have clients who are IRS agents, and as soon as someone finds out that this lady owns a home, car, has money in the bank, etc and never claims income or files tax returns, you can trust me that they’ll be sniffing around soon.
Must of us are wage earners who pay their fair share (and more) of their taxes, but there are a TON of people out there who don’t. The IRS is not “out to get you.” They are looking for more and more ways to find those who are skirting around the rules and not paying any taxes, or nothing paying them on a legitimate income source which they should be paying on.