Can Someone's Tax Returns Tell You His/Her Net Worth?

[TromboneAl]

Can Someone's Tax Returns Tell You His/Her Net Worth?

I hope we can keep this non-political, but I often hear news reports that imply that looking at someone's tax returns would reveal his/her net worth.

Looking at our tax returns would definitely not give a hint of our net worth. We'd look pretty destitute actually.

So, is it possible?

 

[JDARNELL]

Theoretically is you used debt ratios in mortgages etc you could maybe get a rough profile. But I think there are too many variables to really be accurate. I don’t buy it.

 

[COcheesehead]

I am not sure how with any accuracy.

 

[sengsational]

I'd say that in some cases, you would be able to infer someone has lots of assets. If they're showing lots of dividends and interest. You could probably tell exactly how many shares of stock they held if they held the same number of shares all year. And the interest, you could presume a rate, so back into the balance. But if the same amount of assets were held in instruments that didn't throw off dividends and interest, then there would be no way to imply the wealth was there. On my return, you'd see money coming out of a tIRA and Roth. You could surmise there was more, that I didn't pull out, but you'd just be guessing.

 

[Gumby]

Based on my own tax returns, I think it would be doubtful.

 

[Freedom56]

I can't see how that's possible with any degree of certainty.

 

[Bamaman]

The IRS records show the amounts you have in IRAq and 401k's. They also.know any interest being paid to you and can kind of tell how much savings you have.

They don't necessarily know the worth of real estate.

The IRS may know you are substantial, but not know your exact net worth.

 

[COcheesehead]

The IRS records show the amounts you have in IRAq and 401k's. They also.know any interest being paid to you and can kind of tell how much savings you have.

They don't necessarily know the worth of real estate.

The IRS may know you are substantial, but not know your exact net worth.

But would not know business interests, K1 investments or taxable accounts. Leaving a lot to the imagination.

 

[ERD50]

Agree with others, no, you can't really get NW from a tax return. You could guess on some as mentioned - $X in interest means it came from $X/(some assumed interest rate). So $100 in interest might mean $100/1% = $5,000 in a money market account, but 12% from some high risk loan would be only $833.33.

Other forms of taxable income, especially from a complex tax return could be anyone's guess. I could own $100M in stock, and sell $1,000 of it at near cost basis, and have $3.46 in gains. No where on my tax return does it mention the $100M. You would only know I sold $1,000, which could have been everything I own.

RMDs with no penalty for not taking enough would tell you how much was held in Trad-IRA's, assuming you knew the person's age. Property taxes would tell you something about their home value, and you could make some assumption on any mortgage deduction, but you would not know the mortgage rate or how many years into the mortgage, so that would be hard to say.

Why do you ask specifically about NW? If someone wanted to sneak a peak at another's tax return, they could learn other things, like their income from various sources, carryover losses, medical expenses, etc. Why NW?

-ERD50

 

[audreyh1]

Can Someone's Tax Returns Tell You His/Her Net Worth?

I hope we can keep this non-political, but I often hear news reports that imply that looking at someone's tax returns would reveal his/her net worth.

Looking at our tax returns would definitely not give a hint of our net worth. We'd look pretty destitute actually.

So, is it possible?

No.

Tax returns only report income from investments. You can’t tell what is underlying them. Someone might own a large amount of real property but not taking deductions for property taxes, plus a large amount of equities paying no dividends and no indication of their value is on the return.

 

[audreyh1]

The IRS records show the amounts you have in IRAq and 401k's. They also.know any interest being paid to you and can kind of tell how much savings you have.

They don't necessarily know the worth of real estate.

The IRS may know you are substantial, but not know your exact net worth.

The IRA statements though aren’t reported on your tax return, if someone other than the IRS only had your return.

 

[statsman]

On a somewhat related subject, can *any* CPA get access to your tax records without your permission? I was curious if someone who is a CPA that you end up having issues with (but didn't file your taxes) could acquire your tax information.

 

[Dtail]

Converted TIRA to Roth for taxable income of $20k, so for me not at all.

 

[samclem]

On a somewhat related subject, can *any* CPA get access to your tax records without your permission?

Absolutely not. At least not just because they are a CPA. If they are a CPA who is also an IRS employee with access to taxpayer returns then possibly "yes."

 

[GrayHare]

One can get an indication from dividends. In an earlier thread most people here reported their annual dividends total about 2.0% to 2.5% of their taxable portfolio. So find the dividend amount on a tax return and multiply by 40 or 50. Next, multiply that by some number (2?) to take a stab at net worth that includes non-dividend producing assets plus money in tax deferred. Obviously, individual cases will vary.

 

[COcheesehead]

One can get an indication from dividends. In an earlier thread most people here reported their annual dividends total about 2.0% to 2.5% of their taxable portfolio. So find the dividend amount on a tax return and multiply by 40 or 50. Next, multiply that by some number (2?) to take a stab at net worth that includes non-dividend producing assets plus money in tax deferred. Obviously, individual cases will vary.

Not even close. What if significant income is from muni’s, K1’s, cap gains?

 

[statsman]

Absolutely not. At least not just because they are a CPA. If they are a CPA who is also an IRS employee with access to taxpayer returns then possibly "yes."

I was thinking in terms of a CPA who is not an IRS employee. A family member who I had to deal with during the administration of my parent's estate and trust several years ago is a CPA (or at least was - I haven't kept up nor care to), and I just hope that this individual never has access to our tax returns. I am not sure why I should worry, but this individual is extremely manipulative.

 

[ocean view]

I was thinking in terms of a CPA who is not an IRS employee. A family member who I had to deal with during the administration of my parent's estate and trust several years ago is a CPA (or at least was - I haven't kept up nor care to), and I just hope that this individual never has access to our tax returns. I am not sure why I should worry, but this individual is extremely manipulative.

Only if you gave them power of attorney with the IRS, form 2848 or 8821. On form 2848 the taxpayer designates the tax type and tax years to which the POA applies.

If you are not sure if you did this or not, you can file the same form to revoke all existing POAs.

 

[GrayHare]

Not even close. What if significant income is from muni’s, K1’s, cap gains?

Yes, obviously, individual cases will vary.

 

[coveredbridge]

Corporate Tax Returns include a taxable income to book income reconciliation, which would give some insight into net income for the year. It also contains a balance sheet which IIRC is tax basis. You might be able to use those two items to get at some sense of net worth, but if there is anything more than a nominal amount of depreciable and/or marketable assets on the balance sheet, it would be a rough guess at best.

 

[HillCountry]

Amazon not paying any tax on 10+ billion profit. Personal tax may not be as complicated, but if you own business, you can legally shift profits and not paying tax. So tax is very poor indicator of wealth.

 

[COcheesehead]

Amazon not paying any tax on 10+ billion profit. Personal tax may not be as complicated, but if you own business, you can legally shift profits and not paying tax. So tax is very poor indicator of wealth.

Please enlighten me on this process. As a business owner, I would love this tax break.

 

[SecondCor521]

Absolutely not. At least not just because they are a CPA. If they are a CPA who is also an IRS employee with access to taxpayer returns then possibly "yes."

Even IRS employees are not allowed access to any individual taxpayer's return unless necessary for their job.

My understanding is that there are strict audit controls and consequences in place if someone "takes a peek" at someone's return for any untoward reason.

My understanding also is that the tax returns for important people of the kind OP is asking about are under even stricter controls.

@ERD50, some people wonder if other people perhaps were not honest about their net worth. In some cases, lying about one's net worth might be illegal.

As a general comment, an extremely complicated tax return (say, with hundreds of K1s) would make it even more difficult to determine net worth beyond a very rough order-of-magnitude(s) guess I would think.

 

[audreyh1]

I was thinking in terms of a CPA who is not an IRS employee. A family member who I had to deal with during the administration of my parent's estate and trust several years ago is a CPA (or at least was - I haven't kept up nor care to), and I just hope that this individual never has access to our tax returns. I am not sure why I should worry, but this individual is extremely manipulative.

If they accessed your tax records, they could only do it by impersonating you, and that would be fraud and identity theft.

 

[rk911]

ours might provide clues.