This is true in the US as well, but the tax authority (IRS) gives you nothing but blank forms to fill out yourself.
It is more like a test, where you get nothing if you answer correctly and penalty if you make a mistake.
Note: IRS does provide a way to download what they know as a pdf (what banks reported, for example), so one can get some help with the "test"
That’s what happened to me when TurboTax applied too many credits.
That’s when I learned that the IRS had everything they needed to just send me a bill.
That said there are ways they could build around it but it’s the IRS so that’ll never happen.
The IRS does not have the resources to manually verify all of everyone's income, so instead they use a process of flags which trigger audits of varying depth. Flags include things such as certain reported amounts/types of values. Shallow audits review some submitted records, and the deepest ones are detailed, extensively scrutinizing all aspects of all records by a forensic accountant in an attempt to identify some criminal behavior.
But I have no idea how much of this is true as I think about it. It's just some things I've intuited/reasoned out over time.
Seriously though, I would love (hate) to read what sort of ethical backflips they had to do to make IRS reform a bad thing. I'm presuming they tried to make logical arguments.
The following year it was going to be rolled out to everyone. The state had invested millions in it. The legislative session before it was to go live Intuit successfully lobbied both the governor and legislature to kill it.
Why would they need to make logical arguments? Money (lobbying) is far better at influencing politicians.
However, the politicians that are getting lobbied sometimes try to make logical arguments, and they typically say that making the process harder encourages popular support for lower taxes.
The US needs serious reform on what it allows corporate entities to do. Your common citizen couldn't get away with a fraction of the arguable theft to the general population most these companies get away with. It's not technically "theft" though since the theives define the rules and what constitutes theft to not include their actions.
Alas, I don't know how we accomplish such reform. It increasingly seems to be yet another lost battle and perhaps lost war. Aside from consumers essentially checking out as many segments of systems and allowing them to crumble under their own weight and then rebuild them after under stricter policy, I'm not sure what can be done. Legisilation doesn't seem to reflect the needs of the many and continues to cater to the wants of a few.
I suspect Intuit and the like argue that any sort of electronic system of improvement is some direct competition to the private market and is unethical. They probably also argue that the free market version of something like TurboTax offers a more cost effective solution to the general tax payer than what it would cost the government to simply fix parts of a broken process to simplify things. In the short term these arguments could be viable but I'm pretty sure within a few years time, a tax system that didn't involve so many people spending hours of their time navigating through these commercial packages while also paying them plus many still needing an accountant to speak to could possibly be cheaper than a simplified tax system.
Obviously simplifying the tax system can have socioeconomic effects. Many deductions exist to try and fix those issues or help push policy onto citizens and some of the complexity is unavoidable as even those dedications are loopholes around existing legislation. It seems to me though we can still allow for these sort of dedications to let people who need tax relief get it and not what we currently have where the people getting tax relief are the ones with mountains of capital to hire professionals to find and exploit tax loopholes while so many who need the tax relief likely overpay comparatively as a relative portion of their total assets.
Of course, if you actually incurred more expenses (and kept track), you can claim that, but I have my doubts about most people doing it.
Did it today. It takes 5 minutes. You need the normal HMRC account though.
Is it just a double-edged sword that we have to thank for making us (one of) the economic powerhouse(s) of the world? At the same time, it feels like it to blame on why we can't have anything nice when compared to European countries. Am I out of line/uneducated on this matter? I very well could be.
I hate just chalking the root of problems up to some massive unbeatable evil force (like lobbying).
My guess would be the will to collect taxes is stronger than the lobbying to make it more difficult. In Europe there is far less opposition to taxation as well.
I do think the FPTP system in the US and UK concentrates power. And that makes them better able to exploit foreign countries (Arms deals, coups etc). But that seems less about lobbying it's more that the concentration of power makes lobbying more profitable.
Among other reasons, America has a uniquely loose political fundraising / election spending system. If all else fails, a company like H&R Block can directly take out election ads -- with business funds -- to campaign against candidates who would support simplified filing measures. This would be somewhere between illegal and heavily curtailed in other countries.
The net effect is to give greater policy weight to issues that give concentrated benefits to (or avoid concentrated costs on) small, well-funded groups at the expense of diffuse costs (or foregone benefits) to the general public.
In the 2020 election, pretty much every ballot measure to increase taxes failed, including in blue states like Illinois and Colorado.
Other countries have lobbying too. What they don’t have is a huge population that hates taxes with a passion.
Our origin story is literally a tax revolt.
“No taxation without representation” — they weren't looking to get a couple of new members elected to Parliament. Definitely focused on the no taxation part.
- Tax prep companies like Intuit have a vested interest in keeping tax prep difficult.
- Grover Norquist (Americans for Tax Reform) believes that making filing taxes easier will make people more okay with paying taxes, and as a result, many conservative policymakers won't bite. (It's slightly more complicated than this, but I believe this assessment to be accurate.)
Here's a Planet Money podcast: https://www.npr.org/sections/money/2017/03/22/521132960/epis...
And a ProPublica series on Intuit: https://www.propublica.org/series/the-turbotax-trap
It's tinfoil hat, but my only conclusion is the actual reasons for the policy are so incredibly unpopular that they invent these realities to obscure them.
I love paying my taxes and support higher taxes with more government services. But I agree with Norquist that it’s a useful exercise for people to go through once a year and write down how much they make and what part of that the government is taking. I don’t like the idea of socializing people to accept higher taxes by deducting them automatically and making it so they never have to think about how much they’re paying.
Take investments. The current way I get 1099-INT and 1099-DIV forms from a variety of sources. I've got to go to each source and find and download the form.
They are all laid out differently, so there is some confusion when I'm trying to find the right number to use for my filing.
I get so caught up in the mechanics of finding the 1099s, and ensuring that I've got them all, and finding the right data and copying it to or adding it to the right line on the right form that I don't really notice the numbers themselves.
If the IRS sent me something that said "Here are all the 1099s we have received from your banks and brokers. We received forms from <list of banks and brokers>", and had a nice table of the 1099-INTs and 1099-DIVs and any other similar forms, each telling me where it was from, the amount of interest or dividends or whatever, how much of that was taxable, and if it was ordinary income, short term capital gains, or long term capital gains, with totals at the bottom, I'd be much more likely to actually notice the numbers.
Even if I still had to copy the numbers to my IRS filings, it would be a vast improvement, both to making less work for me and to Norquist's supposed goal of making me more aware of how much I make and how much of that goes to taxes.
That’s what they are claiming, but there are many ways (probably a lot better), of drawing attention to taxes, aside from forcing you to go through a bad process.
Additionally, if they were truthful about what they are saying, they should be trying to draw attention to government budgets and make them transparent, i.e. how much the government spends and collects.
Government spending is out of control, and clearly people being forced to file their taxes through a crappy system hasn’t fixed that. Why would anyone ever think that keeping things as they are will do it?
Drawing attention to budgets should not only be about the way the money is spent, but also about the way the money is collected.
In any case, the point still stands. There are many ways to make people be aware of their taxes, and probably one of the worst is making it hard for people to file their tax return.
It’s been tried in America. The idea that we’ll have Scandinavian-style benefits without raising taxes on “middle class people” (defined to include people making as much money as five median households) is the centerpiece of the platform of the progressive wing of the Democratic Party, which has tremendous media visibility. Everyone acts like someone else will pay the $30 trillion price tag for Medicare for All, etc.
And most people focus primarily on the balance or refund due and their marginal tax bracket, not on the total tax liability or the effective total tax rate. Lots of confused or inaccurate conclusions get drawn.
Were it that simple, I would agree. This approach is problematic in the US because:
- the tax code is too complex for the average citizen to approach on their own,
- powerful interests such as Intuit have a vested interest in keeping things difficult for their own gain, and
- reporting your income incorrectly (when the IRS already knows what to expect!) can expose one potential criminal penalties.
> I don’t like the idea of socializing people to accept higher taxes by deducting them automatically and making it so they never have to think about how much they’re paying.
I think this is an implementation detail; there are solutions to removing unnecessary pain from tax filing that combat regulatory capture while keeping people involved with the process of taxation. Advocacy for lower taxes and tax reform are not mutually exclusive.
Why is it constructed in that way? There's a reason, it doesn't come from nowhere. What is the reason?
Pretty basic stuff here
Yet investment in the IRS is highly likely to result in recapturing the huge amount of legal taxes they miss, if they were only able to. Clearly the status quo is insufficient to actually collect the taxes currently on the books.
Of course tax law in the US is also politically designed to make policy that results in favored industries and organizations and to make this as obfuscated as possible, resulting in crazy complexity, which of course also benefits the tax prep industry.
Holy crap, so if a h4x0r breaks into that website they can see the income and assets of every citizen of your country? That's nuts.
The IRS sucks, but believe it or not they're smart about keeping data secure. The massive mainframe into which all that employer-related data gets loaded is not web-connected.
In fact, not even IRS employees can access the data in there via the web. The only connectivity is through (fairly) dumb terminals with a chip-card slot. The chip-card signs each query before it's sent to the mainframe. Yank out the card and the terminal will cease to respond to your commands. The chip-card is also their employee badge.
This is why it's not as bad as you think.
"As part of Finland’s celebrated transparency, any member of the public can call up the local tax office to enquire about a total stranger’s annual income and tax contributions." - https://yle.fi/uutiset/osasto/news/in_finland_all_it_takes_i...
Also tax and income data for everyone earning over 100 000€ a year will be posted publicly online (with an option to opt-out).
The IRS knows everything about your taxes. The filing process is about allowing the citizen to make deductions and providing flexibility by default.
I actually prefer it this way. Note that I’m not saying that the actual filing process is good - that has ways to improve. But, I’d rather take action on my part than government assuming on my behalf. I want to file taxes.
I feel like I might be the only person that likes filing taxes. It’s sort of a Zen mode for me. I love it.
Why you would prefer to have to re-enter data that your government already has and that they will match against your own data I don't really understand...
Complacency, complexity, corruption, and conservatism.
First, there's a strong status quo bias. The system works as-is, and the tax code is also set up in a way that's relatively simple for the median worker, so there's not a huge benefit to a change. Additionally, the IRS may not have enough data because data collection itself is decentralized. For example, married Americans typically file joint taxes, but the IRS has no way of telling who a taxpayer's spouse is until filing time.
Second, a lot of the complexity of US tax law happens on the deduction side, rather than the income side. The US has last-dollar deductions from taxes, so deductions are worth proportionally more for higher-income filers, but the IRS won't necessarily know about charitable deductions or mortgage interest or home office expenses.
Third is the aforementioned corruption -- tax-preparation firms consistently lobby against any sort of automatic return. Their arguments are relatively thin: they claim that automatic returns would have people not claiming tax credits they're eligible for and that developing automatic returns would be a waste of government money. In the meantime, they've collectively agreed to a "free file" program for moderate-income Americans -- only the program is barely advertised and full of "pushes" to paid tax offerings.
Lastly is the ideology of fiscal conservatism in the United States. Anti-tax politicians (usually Republicans) argue that automatic filing would make it easier for future governments to raise taxes, since people would not have to calculate themselves how much they're paying in federal tax. This is often coupled with farfetched offers to greatly simplify the tax code by (e.g.) replacing it with a flat income tax that collects much less revenue.
I kind of understand this, but kind of don't. I live in one of the countries where tax forms are pre-filled and you only make corrections for whatever wasn't already known to the tax authority. I don't really need to actively file everything (only deductions etc. that weren't pre-filled), or in the simplest cases anything, but I still definitely know the number under the line.
I'd understand it better if automatic filing meant that the total is somehow less clear to you, but it doesn't.