Essentially, they are not “lying” on the form, they are reporting their income under that number (W4 / 1099) - and filing a return based on it. The IRS can match up the two so “everybody” is happy!
Not sayin’ it’s right - AFAIC we should do away with the income tax (and SS and all the others taken from our income) entirely! Then we wouldn’t need government agencies that can play such games.
Oh yes! A happy day that would be.