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.
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.