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Comment by BitwiseFool | Hacker News Reader

>"There's no reason the government couldn't just tell me how much money they took each year and give me a chance to contest it if I thought it was wrong."

Behind the scenes, the IRS already has a well informed idea of how much you owe, based on the information submitted to them by your employer and a few select third parties - such as your bank or broker. The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status.

For the majority of people who file using 1040-EZ, you're basically just confirming what the IRS already knows from its own data collection along with some possible adjustments. It would be possible for the IRS to collect even more information, but that does seem rather intrusive and unwelcome to most American's sensibilities.

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There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists.

I think a change in language would go a long way. The average American spends 13 hours and $200 per year to fill and file their taxes. This expense is itself a tax, albeit an indirect one. "This tax season, we want to save you money, and pre-filled tax forms will do just that." "The tax industry and their lobbyists fight tooth and nail to keep our tax code complex, and every year this costs you money. We want to fix that."

I've done my taxes by hand - pencil and paper (not even a calculator), and it was faster than filling in all the forms for the online tax software. I still use the software, because the last time I did things my hand I didn't transfer line 17a of form 2345b to line 28c of form 9876d and when that was caught it was a big hassle to correct (even though the IRS had the right numbers I still had to fill out an amended return and then send new forms to the state - the state of course had the right numbers too if they could be bothered to double check)

There is another good talking point: "You already pay the IRS to do your taxes each year. That is how we know if the forms you submit us are correct. You shouldn't have to pay twice!"

Yeah really taxes could be much easier if you only had to submit what they don't already have. E.g. various deductions, non-W2 income, etc. They could then prep the final return and make it available for you to review and approve.

All my problems with taxes over the years have amounted to similar mistakes - forgetting to transfer one amount from one form to another, or transposing numbers, etc.

IMO there are basically two types of tax filers in the US:

1. People who really should file with pencil and paper (or excel, at most)

2. People who need an accountant

Very few people fall in between these categories. The tax code is so complicated and annoying that even things like employer RSUs, mortgages, side hustles, and doing more than 20 stock trades in a year can be risky and weird.

> but they always get quietly sidelined by tax industry lobbyists.

Turbo tax has spent 44 million dollars on lobbying.

The American Medical Association(Physicians) have spent 500 million dollars on lobbying. (All of medical spent about 2 billion)

Its good that people are angry that lobbyists control the nation, but for some reason we give the biggest lobbyists a pass. I don't see the outrage against the top 20 lobbyists, I do (rightly) see it against turbotax.

The medical industry is something like 20% of the economy. That’s not the case for the tax prep industry. Their lobbying is outsized, and able to be more narrowly focused on the couple things they really care about.

The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly. I agree that we often don't consider all sorts of other lobbying, but "our medical industry is broken because of corporations" is a pretty uncontroversial statement in the US.

> The medical industry is squarely in the crosshairs of "most broken and fucked up industry in the country" pretty much constantly.

The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.

I’d love to see a thorough breakdown of what that opposing stance is. How is medicine, a service that is non-negotiable (e.g. you can die without it) in a position to work without problems in a completely free market? I’m any free market, you vote with your wallet, but that’s impossible if you don’t have time to switch providers or if forces outside of the free market dictate price?

I’d love for us to just say “let the market sort it out”, but that generally requires presumptions that aren’t universally true for all goods or services.

Where are these people? While the bulk of democrats and republicans disagree on what the route evils of the medical industry actually are, they largely agree that it is broken. The republicans, for example, complain to high heaven that the ACA has eliminated the free market within the medical industry and replaced it with regulation and rot.

I think GP was being sarcastic. Nobody really thinks that.

GP you should definitely throw in a /s or something because it's not real clear whether you're serious or not

> The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.

Who are these unicorns which are not paid by this system?

Are they friends with Yeti, Bigfoot, and the mythical hot single living in my area?

The broader medical industry is something like 1/5 of the American economy. It had over 2.5 trillion dollars in revenue this year. Intuits annual revenue was 5.6 billion, so it directs 10x as much revenue, relatively speaking, at lobbying.

I don't get it. Are lobbyists in control of congress? Aren't politicians the ones who pass bills? Or not pass bills in this case.

> Are lobbyists in control of congress?

Effectively, Yes.

> Who passes bills?

Technically the elected officials, but the bills themselves are usually written by lobbyists.

Pressure from campaign donors, either directly or through lobbyists, or through "party" channels influence votes.

Yet another reason I wish the US were a real democracy. For all the good that checks and balances do, let's not forget that the founders were trying to entrench the power of their class.

Yes because having a Twitter mob rule the US would be such a great improvement../s

I know there were issues that precipitated the direct election of Senators but I think we would be better if we went back to State Senate control of the Senate, that would force people to focus more on their state and local politics where they have more power rather than ignoring them and shouting how the US Senate is doing nothing.

I think usually is a stretch but some bills certainly are written by lobbyists (or think tanks/do tanks)

Even if they aren't written by Lobbyists I'd be surprised if most bills weren't influenced at least a little by at least one lobbyist group.

Hmm, probably depends on what you define as a lobbyist. If you're writing a bill about education reform and including more tech in the classroom (just a hypothetical example) and ask the teacher's union, Brookings, and a major education company about what would be important to include or not include, would that be influenced by a lobbyist group?

"Congress should wear jackets like NASCAR drivers so we can know who bought them."

https://www.armstrongeconomics.com/international-news/north_...

The real issue is that the tax industry is a large employer. There are about 80k full time tax preparers in the US, and several times that are hired seasonally. H&R block alone hires about 80k for Jan->April. The lobbyists only have to go into senator's offices and say "We created 14,000 jobs in your district, and this bill puts those in jeopardy". Our tax payment system is, in part, a taxpayer funded private jobs creation program.

The US tax code is longer than the C++ standard if you count only the laws that are active today. If you add on the rulings in IRS tribunals, clarifying papers, and other publications, the US tax code is something like 100,000 pages. It is easy to see a profession being established around learning to read that sort of thing.

The solution to the tax prep industry isn't to have the IRS do your taxes for you, it's to reduce the size of the tax code.

It's both.

With how US govt uses tax (instead of other adhoc channels) to interact with citizens, let's be honest, reducing the size of the tax code is the least likely event to happen. It would require a complete change of paradigm in how the govt works to make it happen.

Nobody is incentivized to reduce the number of laws on the books, but I would vote for any politician whose position was "I will only repeal laws."

The US government is obsessed with giving narrowly-targeted groups of people money through the most obtuse mechanism possible, and it is ridiculous. If you were just sent a check when you bought an EV (for example), a lot of the tax stuff would be much simpler.

Reminds me this joke:

“Taught my kids about democracy tonight by letting them vote on which movie to rent and what pizza to takeaway.

I then picked the movie and pizza cos I’m the one with the money.”

>Are lobbyists in control of congress?

Yes, lobbyists and intelligence agencies.

Congressional members commonly have no idea what is in the legislation they propose. Nancy Pelosi is on the record saying as much:

https://posey.house.gov/news/documentsingle.aspx?DocumentID=...

> There have been several proposed bills that would create a pre-filled tax form system, but they always get quietly sidelined by tax industry lobbyists.

Not just industry lobbyists. Another big part is Grover Norquist's "Americans for Tax Reform" and similar groups. They have a lot of influence with about half of Congress.

Here's a PowerPoint presentation [1] Norquist presented to the President's Advisory Panel on Federal Tax Reform in 2005 explaining their opposition to free filing.

It's short so I'll paste the text from each slide here, with the slide titles marked with dashes, so people don't have to find a copy of PowerPoint (or LibreOffice or Keynote, which also can open it fine).

---- Implementing a “Return-Free” Tax Filing Scheme

Presentation to the President’s Advisory Panel on Federal Tax Reform

Grover Norquist

President

Americans for Tax Reform

May 17, 2005

---- The Current System

Tax filing is citizen-based – taxpayers tell the government what they earned and owe

---- Under Return-Free

Tax filing would be government-based – the burden would be on the taxpayer to challenge the government’s findings -- essentially an audit of every single American taxpayer

---- The Fox Would Guard the Henhouse

The same agency that collects taxes would be the tax preparer – the motivation to maximize revenue would dominate both ends of the process

---- Return-Free is a Tax Increase

The true goal is to increase revenue. The government knows few taxpayers will challenge its findings

---- Taxes Should be Visible

Doing taxes keeps citizens aware of the tax burden imposed upon them by the government. A Return-Free scheme would allow the government to raise revenues invisibly

---- The California Example

The State would not guarantee the accuracy of the returns it prepared – the taxpayer was removed from the process, but left with the responsibility

The pilot program achieved 50% less uptake than planned

Comments by CA officials tell us that the true aim was increased revenue

[1] http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/...

So much BS in these lines. For whatever record IRS already has on me, there is nothing my version of the filing can change. It's not like I can arbitrarily remove an 0 from my AGI and "challenge" IRS to accept my version. Then why demand me to repeat the duplicate information? "keeps citizens aware of the tax burden" - Sure if some people want to be aware, but I'm sure many people don't care about and can't reason about every tax change. Seriously, how many of you ever read a news about a new tax and "talked to your congress representative"? All these are just giant waste of time to majority of the population in the country.

> there is nothing my version of the filing can change.

The IRS can say "this is not a valid business expense." You can say "it clearly is a valid business expense and should be deducted!"

The IRS can say "this is contractor income." You can say "it clearly is an down payment for subcontractors, you can see the money leaving here!"

These are two obvious problems you could have, and it doesn't even require dishonesty on the IRS' part. Maybe one of your subcontractors is trying to cheat the system and is jamming you up?

For most people, you won't have these issues. For those that do, what difference does it make to fix it vs making it all on their own?

> what difference does it make to fix it vs making it all on their own?

That sounds like a big difference to me. The former would require government knowledge of every single transaction you make/receive, while the latter does not.

It isn't. Most people only pay tax on their income, which is already sent to the IRS. Just pre-file it and ask the payee to approve it. If you have more complicated taxes, you can just decline the pre-filed and file your own, like you already do.

Well, you've flagged the point. These people, about 10% of the population, that own small businesses are in the minority. They're likely to be an explicit disadvantage in this system. This is a segment that you probably want to use tax policy to protect, not harm.

Further.. it feels like the goalposts have moved on this since it last came up. I don't need the IRS to do my taxes for me, I just need to be able to login to the IRS, pick a form, fill it, and submit it.

E-filing should be free and available to everyone. If you have that, I'm not sure what the value of having it prefilled for me is. In particular, if you just have a single W2 to work from, there could be a 1040-SUPER-EZ where you just enter a serial number from your W2, have it fill from that, and then submit.

You can make this easy without putting everyone under the thumb of the IRS.

Why would they be at a disadvantage? As a small business don't you keep your business accounts separate to your personal accounts, and have an accountant to at least audit them each year before submission?

> They're likely to be an explicit disadvantage in this system

How are they at a disadvantage? Before, they had to do all their filing themselves, after, they have to also do all the filing themselves.

I think you are both right. There can be a process for business and personal. The two are different, why lump them together?

> Seriously, how many of you ever read a news about a new tax and "talked to your congress representative"?

You and I don't do that, but rich people and companies do, if a tax increase is going to impact you and I by $100 it's barely worth the email that will be ignored. If a company is going to be hit by $100m, then it's well worth spending $1m to carve out an exception.

> All these are just giant waste of time to majority of the population in the country.

It works too. Tax return day is ingrained in the American Psyche through cultural output (TV), there is a constant undertone in the US that taxes are bad and the government is stealing your money.

Get rid of tax day and make 70% of the country not have to worry about it other than a line on their payslip and as well as making things far more efficient for both the taxpayer and the government (thus reducing government spending), it changes that cultural balance. Few will care about taxes, and that means the pressure to introduce a 0.1 cent drop in tax (which is structured to benefit someone on $150k by say $2 a week, but benefits people like the Koch Brothers by $200k a week) goes away.

Very interesting - basically none of that is the case in most countries that have a pre-filled system...

This is a point that I return to often—on so many issues, Americans feel compelled to argue using speculation informed by their particular ideologies, when there is no need to speculate. We can just observe the effects of various policies around the world, assuming of course that we are somewhat curious and willing to be proven wrong by reality.

This is such a load of horsecrap. If you need to file deductions then you do that, the government just pre-fills everything they already know. If you want to hire an accountant to be creative with your exceptions you can still do that.

The nice thing about Norquist is you can choose an optimal policy set by simply doing the exact opposite of everything he says.

In the UK the vast majority of national tax take is either baked into the price of goods (things like VAT, alcohol, petrol taxes) or taken off by your employer.

Each month I get a payslip saying I've earned £xxxx and £yyyy has been taken in various taxes and other deductions (from pension to [optional] healthcare, some of which comes off pre tax, some post tax), and the balance is transferred into my nominated bank account each month.

At the end of the year I get a summary from my employer called a P60, which shows how much tax I've paid.

If I have complex needs I then have 9 months to go to a gov.uk website, fill in that data, and either get a rebate or a bill. If it's a bill then they adjust my tax code (which defines the deductions) the next year it takes about 10 minutes (or I can just pay straight away), if it's a rebate they pay it direct to my account (or they can adjust next years deductions)

For self employed people then, but you likely have an accountant who handles everything, and pay yourself via dividends, making large enough tax savings to easily pay accountant fees (which for a small business is pretty low)

I don't consider tax a burden, I consider it the cost of living in a western society. I don't have to pay them - I could move to Svalbard or a country that would take me and pay taxes in that country. Even Americans can do this (and get rid of their US citizenship - saying "no I don't want the benefits of American society")

Why legislate any of it? Just charge all 300+ million of US with tax evasion and allow everyone to enter a plea of no contest. The fine for this treachery can be to pay the exact amount of taxes I owe. No need for any laws to be changed anywhere. We can enter our plea via zoom call.

> The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status.

Two things:

1. A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS.

2. Okay yes, it's reasonable for me to put in my living status changes or tax deductions I want to claim, but they don't ask just for that, they ask for all the other shit too, all the stuff they already know the answer to. Why?

1. If the IRS handles it without reporting they assume that your sell LIFO for the worst possible capital gains treatment.

Vanguard gives me an option on how to treat capital gains for tax purposes.

The brokerages permit election of the method and can easily be made to report that along with the other details

In the theoretical new system, you could have an option to file additional elections or changes. The IRS would have a default that you could then vary if you chose.

And as long as it's just the default, who gives a shit?

Besides, as others have pointed out, there are ways to specify at the time of the sale. That's what Schwab does when I sell stock there.

> A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS.

Your financial institution doesn't necessarily know your capital gains. It reports stock sales to the IRS, but often doesn't report the cost basis because it doesn't know. Consider:

You buy 50 shares of ABC on Jan 1 2020. Then you buy 50 more shares on Jan 1 2022. Now you sell 50 shares of ABC on Jul 1 2022. Which bunch of shares did you sell? Was it a short term gain or a long term gain? Was it a loss? It depends. Neither your broker or IRS knows the answer, but you do.

EDIT: The above information is evidently out of date by about 10 years. TIL

> Which bunch of shares did you sell? Was it a short term gain or a long term gain? Was it a loss? It depends. Neither your broker or IRS knows the answer, but you do.

Your broker does know because you need to tell them which ones to sell when you sold.

The IRS also knows because that's included in the cost basis reported to them by the broker. (This changed some number of years ago, brokers used to only report the income from the sale but not the cost.)

https://www.spencerlawfirm.com/2011/01/new-cost-basis-report...

Interesting. I learned something today. Thanks.

...and therefore there is even less reason for the IRS to not pre-fill forms or just have an exception-based filing system vs everyone has to file regardless of exceptions / amendments / challenges etc.

What about including the free market of tax helper systems and services? You'll be wiping out an entire industry - doesn't seem very conservative to me.

We should bring back the entire industry of leech breeders and sellers for bloodletting, too.

I should add to this, even though the broker reports the cost basis, be proactive in verifying that it is correct.

For reasons I can't comprehend, ETrade reports the costs basis wrong every single year on all my RSU and ESPP sold shares. They do issue a supplemental report which has all the correct info, but the 1099-B has it wrong. It is maddening. I need to send both the 1099 and the supplemental doc to my CPA so things are accounted correctly, otherwise I'd pay a lot more taxes due to ETrade errors.

All other brokers I deal with do it correctly.

In recent years by law the brokerage company tracks the lots you buy and when you sell you can select which to sell. The gains are reported accordingly on the forms the brokerage company sends at the end of the year.

Things get more complicated when you are trading the same security across different brokers because they can’t detect wash sales. The IRS has the information to detect was sales.

I've only been trading stocks since 2005ish, but all the brokers I've dealt with have had ways to tell them which shares I was selling. And if I didn't pick them, they'd pick for me. Nowadays, they're required to track cost basis for regular shares. Even if you have shares where they won't report a cost basis, you're supposed to tell them which shares you're selling before the transaction settles.

Employment compensation related shares get weird, but they will at least track the purchase date or the date it entered their system anyway.

Still true for cryptocurrency, and still true that you have latitude over whether to do it as FIFO vs LIFO vs specific lots.

Edit: To pre-empt some replies: yes, centralized exchanges will report sales but they won't always know your cost basis, and a lot of the trades will happen on-chain, which definitely isn't automatically reported.

To be clear, I support the IRS doing as much as the filing as possible, and I agree these issues aren't dealbreakers, but please don't make the situation look different than it really is.

> you personally need to report additional information for things like capital gains tax on asset sales

This part annoys me; when I would have RSU's vest, my broker would send me a 1095B(?) which plainly lists stock price at time of acquire and time of sale, and the gains, which for RSU's sold at time of vesting is 0

but for some reason I don't understand, they don't report the cost basis to the IRS, just the sale and price at time of acquire, so if you don't file your taxes to fill in that cost basis information, the IRS will cite you as having earned the entire sell cost of the stock!

This fucks up a lot of people new to tech/taxes, and I still haven't been able to find documentation on why they don't file the cost basis for you if they're reporting the sale anyway.

The broker didn't report the cost basis to the IRS because they don't have to. They only have to do this for "covered securities" [1], which include stocks you buy with cash, but don't include stocks you acquire as employee compensation.

[1] https://www.irs.gov/instructions/i1099b#idm139900428766768

Also, it sounds like brokers are somewhat to blame, because they made comments to the IRS opposing additional reporting for stock compensation:

> ... commenters asked that there be no change to the Form 1099-B to reflect compensation status or, alternatively, that using the indicator be permitted, but not required. These commenters indicated that compensation information is not accessible to most brokers, and extensive reprogramming for both the underlying database and the reporting process would be required. The commenters also expressed concerns that, in many situations, a broker would have to accept customer-provided information in order to track the compensation-related status.

> The lack of a mechanism to communicate whether the basis of stock has been adjusted for the exercise of a compensatory option coupled with a system involving discretionary broker adjustments for compensatory options would, however, be unworkable.

> A broker may not increase initial basis for income recognized upon the exercise of a compensatory option or the vesting or exercise of other equity-based compensation arrangements, granted or acquired on or after January 1, 2014.

https://www.federalregister.gov/documents/2013/04/18/2013-09...

The IRS system that generates CP-2000 letters has screwed up majorly every year that I have filed in the last 3 years. The IRS received 1099s in each year that my wife and I did not remember having issued for us, all for less than $5.

What is crazy about the system is that every one of those years, I have been asked to pay the same amount of money (roughly $2000 extra), but the mistakes change each time. Each time, I have sent a very kind letter to the IRS telling them, "no, I did this correctly," and the IRS agreed. It failed to account for cost basis on RSUs from an employer. It failed to account for long-dated options expiring worthless. It failed to account for long term capital gains being long term.

It's hard to avoid drawing the cynical conclusion here, that the IRS each time attempts to extract a payment that is slightly less than the cost of having a lawyer or accountant deal with them. I don't want this kind of system sending out a tax bill to me that I have to contest, because:

1. It will almost certainly not do the accounting that minimizes each person's burden. The US tax code is long and full of terrors.

2. Most people will just accept the result, regardless of the fact that it will cost them thousands in extra taxation.

3. People that don't accept the result will likely be flagged for future audits, and will likely face a lot more scrutiny. In the previous system where everyone has to file, there are a lot more targets.

This is an utterly self-serving rationale, but I don't want this system.

What we need is an open, automated, auditable system where the rules are transparent. The IRS is not there to cheat you out of money, they have no incentive to do so (they don't get bonuses for that.)

On the other hand, with our present adversarial system there are a variety of private businesses that do get money when the IRS makes mistakes.

I used to think that the IRS was not trying to cheat you out of money, and the individual employees are usually great if you return their calls and treat them with the minimum level of respect that they deserve. However, the systems at the IRS are designed to maximize revenue.

The adversarial process that exists today (between you and the IRS's automated systems and processes, mediated by the humans at the IRS) allows you to generally get the benefit of being on the side that minimizes your tax burden. Usually, the more complicated your tax filing is, the more gray there is, and the more advantage you can take of it.

Even if the IRS doesn't know, for most people the difference between the right answer and the answer the IRS has despite missing some data isn't enough for either to worry about. My bank reports my stock trades, my company reports income. My state already collects mortgage information so it wouldn't be hard to send that on. Sure I could build a widget in my garage and not report taxes, but either I'm doing so little of this that it not worth the IRS's time, or I really need to become a real business and get an accountant to report this while dealing with the other complexities of finance.

This has always been my viewpoint. It doesn't have to be perfect, nothing is. Everyone already "cheats" on their taxes by not reporting things like gifts which never reach the limits anyways. Or servers who take cash tips and don't report. We don't care about these things because they are so low value and honestly might be better for the economy if ignored.

And as far as I see it, everything the Fed needs to file my taxes is information that the Fed already has. I'm pretty sure this is an extremely common circumstance.

I also don't understand why states don't push for return free filing. They can demonstrate it working without the need for the Fed to take action, which in turn would put pressure on the Fed.

Aren't capital gains already reported from your bank? If not, it should be trivial to have them since they send the exact same information to me. The same goes for loans.

Honestly I wouldn't be surprised if the IRS could already have a 90+% success rate for 80+% of people. It seems like the real issues would be in the very rich who can take advantage of many loopholes or the average person when big life events happen (things like death, marriage, and birth, though most of this could be automatically reported as well but easier to fall through the gaps).

Maybe I misunderstand, but it doesn't seem like the IRS needs any additional information than I have presumed it already has. This information is at least all known by the fed, so it doesn't seem like a data leakage. And I'm someone that highly cares about privacy.

I suspect that the real pushback for return free filing is from 1) tax filers like Turbo Tax who would lose a lot of business and 2) the ultra wealthy as RTF would put pressure to simplify the tax code and reduce the number of loopholes.

Your bank will report interest via the 1099-INT, and they will do this if you make more than $10 per year. You will also get a form if you redeemed any government bonds. I'm not deeply familiar with AML/KYC, but transactions over $10,000 are reported to the government, but not necessarily to the IRS and definitely not as a taxable event.

Let's say you sold your car and deposited the money in your account. The IRS won't have details about the sale and neither will your bank. They will know the amount, but it is incumbent on you to report information if this sale represented a capital gain. In all likelihood it wasn't, but the government doesn't have a way of knowing this. If you get audited, someone will probably ask where the money came from and it would be up to you to furnish receipts in order to prove it.

Honestly, I don't see a problem with this. Like every other country, they send you a bill. You either correct the mistake they have or pay a fine. Still easier and cheaper than paying TurboTax.

> Aren't capital gains already reported from your bank?

Capital gains from real estate sales are not automatically reported.

Public securities (stocks, ETFs, crypto, etc) are a small fraction of overall capital gains by $.

> Capital gains from real estate

What percent of Americans buy and sell a property within a year? I bet it is pretty low.

> stocks

All the major players report this information.

> ETFs, crypto

The vast majority of people use exchanges like Coinbase and Binance. These already report.

So I'm not sure what your point really is. That there are edge cases? No shit. No one is even arguing against that. The argument for return free filing is that the vast majority of people will benefit from the system. Even if there are mistakes it is easier to look over something and correct it than do everything from scratch. The people that won't majorly benefit from this likely already have more than enough wealth to pay someone to do their taxes already and honestly I'm not concerned about them.

Don't let perfection get in the way of massive improvement.

You pay capital gains on any property sale where you earn income unless you reinvest the money in another property or use the one-time exemption. I don't know why you think the sale being within a year or not makes any difference. The major players know when you sell the stock and for how much, but they don't know the cost basis. The sale could be LIFO or FIFO and you might have transferred the stock into the brokerage without them ever knowing the purchase price. These are not edge cases.

Sorry, I looked at a bad source. But looks like so did you. Here's Investopedia:

> You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. (once every 2 years)

> You can add your cost basis and costs of any improvements that you made to the home to the $250,000 if single or $500,000 if married filing jointly.

So I'll change my question:

What percentage of home owners are profiting >$250k (single)/ >$500k (married)? What percent of them do that more frequently than a 2 year period?

I'm willing to bet that these numbers are still very low. That's the entire point. I'm sure there's nuance I've missed as I'm not an expert. But my entire point isn't about specifics, it is that your argument against this system is about edge cases. If you can prove that these aren't edge cases, I'll actually side with you. If not, I still see return free filing as an extremely beneficiary policy to the vast majority of Americans, and especially to those with the least income. I already know that 90% of households take the standard deduction, so you're going to have to make some substantial claims.

https://www.investopedia.com/ask/answers/06/capitalgainhomes...

It's straightforward to calculate real estate capital gains from reported information. Remember, real estate transactions (including sales prices) are public records.

> The Tax Reform Act of 1986 required anyone responsible for closing a real estate transaction, which may include the escrow agent, title company, or attorney, to report a real estate sale or exchange to the IRS on Form 1099-S. In addition, they were required to furnish a statement to the seller of the gross proceeds of the sale. In 1998, with the passage of the Tax Payer Relief Act of 1997, an exception to this reporting requirement was allowed.

> If the sale price of your residence is $250,000 or less ($500,000 or less for married sellers) and you have lived in the property, as your principal residence, for the last two out of the last five years, your closing agent will not be required to file Form 1099-S with the IRS. The gross proceeds of the sale need not be reported to the IRS if these conditions are met.

> Be sure that your closing agent has your written confirmation that your sale is exempt from the IRS reporting rule. Most closing agents have a form, called a “Certification for No Information Reporting on the Sale or Exchange of a Principal Residence” which you will you be asked to sign at closing. The form will ask for your seller information, social security number, address, and certification that you have met the exemption requirements.

https://sandygadow.com/will-my-escrow-agent-have-to-report-m...

Here's how it should work! The IRS has a page, you can go look at it and say "eh ok" or you can click further and do whatever you think is important to update.

And the tax companies can offer to do that "click further" for you, and you then would see how much they saved you (if any at all). Heck, make it so the IRS always charges a "I dun wanna read anything" fee of $50 that you can get out of by clicking "uh no" like the presidential one. That would satisfy most people, heh.

Complex scenarios can still be handled by hand if the taxpayer wants.

I will corroborate, as I've posted elsewhere in this thread. I've had to interact with IRS employees, and they basically have all the information in their computer system. For simple returns, they could tell you the entire contents of it!

Yes. But if you make a mistake and don't report something the IRS already knows about rhen you lose, and there's a penalty on top of that.

It shouldn't have to be a game. There shouldn't be fear and antagonism. The current system favors the IRS. It favors other third-parties. And it's devoid of any favor for the taxpayers.

>The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status.

But that's exactly what the parent comment was saying: you'd get a notice from the IRS that says they think you owe $X based on their records. You have until the filing deadline to file any additional income/exemptions/deductions/challenges/etc.

As you say, for the vast majority of people this would make taxes a million times easier. For people with more complex situations, they can then engage in the more complex process of additional filings.

1040-EZ hasn't existed since 2017. It's just the 1040 which has multiple schedules.

The new 1040 is nearly identical to 1040EZ just split over two sheets.

There are much bigger problems currently. For example, if you receive RSUs and don't sell some manually at vesting, you might end up in debt by being forced to take loans to pay your taxes.

> like capital gains tax on asset sales

They know what you purchased your asset for + when and what + when you sold it for, don't they?

> changes in your living arrangements or life status.

These seem trivial to find out from other government agencies.

You just said the same thing with more words.

One could argue that a basic principle of liberalism ought to be that if the government wants to tax you they should be responsible for calculating how much you owe according to the law. Or in other words, for every dollar the government doesn't demonstrate that you legally owe, you should not owe that dollar. Kinda like presumption of innocence, but for taxes.

we really missed the boat not getting that in the constitution

I mean it kinda was in the United States one.

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