If you ever wonder, "why is the tax code so complicated?" this is the answer.
Every time there is a proposal to eliminate a specific deduction, credit, or loophole, special interest groups crawl out of the woodwork to fight it tooth and nail.
Every time there is a proposal to eliminate a specific deduction, credit, or loophole, special interest groups crawl out of the woodwork to fight it tooth and nail.
The process of filing taxes is separate from how complicated the tax code itself is.
And to be honest, you don't need to pay hundreds of dollars to anyone in order to file taxes in the US. In fact, you can file your taxes using a form that fits on a single sheet of paper.
You may want to opt for one of the other methods of filing, if you qualify for special deductions that might significantly reduce your tax burden, but most people already qualify for the option that takes "a few minutes".
The difference between that and filling out a 1040EZ is negligible. It takes as long to write out a 1040EZ as it would to properly verify the information on one that's already filled out for you.
For people who want to utilize the more complex deductions available - there's no way that the IRS could do that for you. Contrary to popular belief, they don't have sufficient information to do that until you give it to them, and quite frankly you wouldn't want them to have access automatically to all of that.
this will never happen
The problem is, the IRS has no incentive to help minimize your tax. If you really have nothing to deduct, that might not be so bad, but I would have more faith in any of the existing free short-form filing services that already exist.
You don't. Your employer does [+], because they are responsible for (for the majority of traditionally employed folks) managing your tax returns for you. The prices are, indeed, in the hundreds of dollars per year.
If you do something exotic in Japan, like (to pick an example entirely randomly) sell bingo card creation software over the Internet, you will get intimately familiar with the 青色申告, which is almost exactly as much fun as a US tax return.
My personal tax compliance cost for last year on the Japan side was ~$2.5k; it's cheap at the price because doing a full return given my situation would likely have eaten a solid week.
[+] There are some economies of scale here, but a startup in Japan should budget several hundred dollars for payroll administration, per month, plus another lump-sum due in December for the spike of work caused by the end-of-year adjustment (which is not a tax return per se, but is the closest thing most Japanese people have to a tax return).
There are some irreducibly complex questions in tax, such as the surprisingly difficult "What is income, really?" and the related follow-ups "What type of income is that income given that we've decided we want to treat them differently?" and "When exactly did that income happen, given that we've decided we want to run taxation in an other-than-continuous fashion?" These questions are complicated and nuanced because the economy is complicated and nuanced.
What can be done to simplify US taxes isn't a 1 sentence idea ... Unfortunately, having to be cheap on sophistication and explanation is a limitation of the internet discussion format and people's habituated attention spans for it.
Anyway, for a deep dive, I recommend this book by TR Reid who did a longitudinal analysis of tax systems across the OECD, traveling to the countries and interviewing hundreds of people. He gives things a fair play:
https://www.nytimes.com/2017/06/23/books/review/a-fine-mess-...
Here's his commonwealth club talk for people who only want to give it an hour:
https://www.commonwealthclub.org/events/2017-04-13/journalis...
Again, pleasure to see you and thanks for your time.
FWIW, in 2011 the top 0.01% earned 5% of national income, the top 0.1% earned 10%, and the top 1% earned 20%. Source: http://ritholtz.com/2011/10/forget-the-top-1-look-at-the-top...
In 2016 the top 25% earned 51% of national income. Source: https://www.statista.com/statistics/203247/shares-of-househo...
Gifting when dead you aren't taxed until 5m or 10m for married. The GOP tax plan doubles that to 10/20m and then removes it after 6 years.
The estate tax was already a huge benefit when compared to the gift tax. What would be nice is if they could up the amount on the gift tax rate if they aren't going to collect any tax on gifting after death (inheritance). This could free up money that will only be in an estate and not used for years maybe even decades.
When you compare the gift tax when alive to the gift tax after death (the estate tax) it is already a massive benefit.
Basically then any money you receive or earn is taxable except loans and gifts up to the gift tax limit, all other money movement is taxed.
Of course winnings are still taxed at normal rates because that is income not gifted per se, I guess I was conflating the two. Example: If you win a car you owe taxes on the whole thing.
So essentially it is the same limit as the estate tax, so I wonder if that also doubles and also goes away in the tax bill.
The Clintons, Kennedys, Romnys, Bushs, etc...
http://time.com/money/4344981/hillary-clinton-estate-plan-ta...
https://www.forbes.com/sites/carlodonnell/2014/07/08/how-the...
http://www.wealthmanagement.com/wealth-planning/unlocking-mi...
Heck, even Noam Chomspky has used estate planning to avoid paying the estate tax.
https://www.hoover.org/research/noam-chomsky-closet-capitali...