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If you do not report income that was reported on a W-2 form or a 1099 form, the IRS will calculate what you should have reported, and you may owe penalties.  If you do not report income that you received in cash, you still are supposed to report it, and you may owe penalties if the IRS finds out.  If the income is for tips, the IRS calculates how much they think you should have received, and they might question your return if you report too little.

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