IRS tests free e-filing system that could compete with tax prep giants
washingtonpost.com
washingtonpost.com
Extraordinary that he could say that sentence with what I assume was a straight face.
I'm curious what he means by this solution harming vulnerable Americans. Are they the same vulnerable Americans that TurboTax tricked into paying for their product after enticing them in with promises of "completely free filing"?
It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling.
This is a revocation of the license to print money by the tax prep industry.
It will indeed cost dozens of millions, but billions? Come on.
We're not building the F-35 here.
People complain about government contractor costs for a reason
*Last I checked it was north of a billion in 2014 dollars
https://www.usds.gov/report-to-congress/2016/healthcare-dot-... (US Digital Service: Stabilizing and Improving HealthCare.gov)
https://archive.is/Boysy (Washington Post: White House launches ‘U.S. Digital Service,’ with HealthCare.gov fixer at the helm)
https://www.usds.gov/report-to-congress/2016/projects/
https://www.itdashboard.gov/reports
And a project close to my heart as an identity/auth wonk: https://login.gov
That all greatly increased the complexity of the project.
An IRS e-filing system would just be adding a public interface for taxpayers to a system they already have.
That's true -- one potential upside of the IRS plan is that an online tax submission site cannot constantly crash into the ocean.
Some large fraction of the population effectively pays no federal income tax at all. The rules for exempting them and discounting them to the point of $0 owed alone accounts for some significant portion of the tax code.
The problem is not progressive taxation, the complexity comes in when government attempts social engineering via the tax code by incentivize behavior they deem "good" and penalizing behavior they deem bad
i.e tax credits for EV's , children, different taxes for married vs unmarried persons, etc etc
A one time expense of a couple billion dollars is, like… I mean the public servants working on it should take it very seriously but it is a drop in the bucket, the US budget is measured in trillions. This is one of those “the difference between a millionaire and a billionaire is about a billion dollars” type things, except the billion is the little one.
Edit: I mean there are like 300 million of us, so even it it was shared equally, it is like… for the price of a particularly fancy latte we can all collectively fuck over these middleman tax processing companies, let’s do it!
Why on earth would, or should it cost that much? Unless they go full on "not invented here" and write it running on a IBM Mainframe running COBOL that they then pay an over priced consultant to somehow make web compatible
I don't know how much it cost a customer I had to build over a couple decades, but their eCommerce website had an operational run rate of at least 3 million a month just in cloud costs (not including all the other externalities).
All this to say that I can see how it might add up.
If you can not lie and twist the facts you will not become politician / spokesman / etc.
Most of Intuit's business is sheltered from the hit it will take when the IRS completes this system. They'll probably lose a couple billion in sales off the top (out of $13.6 billion the past four quarters).
You could probably take away 3/4 of their entire individual tax prep business and their overall business would still be larger than it was in 2020. I'll be interested to see if it pops the bubbly valuation the stock is carrying (~60 times earnings).
The process is still way too hard and confusing, but at least it feels like I'm feeding one less parasite this way.
And yeah my scenario includes investments. off the top of my head my return featured:
* income from 2 employers for the same person
* income in 2 states
* kids and the stuff that comes with that (child tax credits etc)
* capital losses (it's that time of the business cycle :< )
* interest (US treasury products)
* dividends
* mortgage stuff
So if tons of americans can just do a 1040-EZ, then I feel like my usage probably covers like 99% of the remaining folks (which I would characterize as "I could do a 1040-EZ but I have kids and stocks").
Everytime this comes up though I post this https://apps.irs.gov/app/freeFile/browse-all-offers/
There's many nice and cheap options out there. Please, if you value basic democracy, don't give money to Intuit or TurboTax - not a dollar, not a penny. But do click on their paid ads whenever you see them and just close out after the page load. That company needs to be dismantled brick by brick, byte by byte, and deposited in the dustbin of history.
Strangely enough that IRS search tool claims there are 0 options for me, even though FreeTax works just fine.
The other players in the industry price their competing products at $15-$20. They're upfront and there's no hidden costs.
Intuit is an extreme outlier and charges an outlandish premium to fund their dishonest lobbying efforts, lawsuit settlements for their countless crimes, invasive advertising and opulent demands of their shamelessly corrupt C-suite.
Fortunately I'm owed so shouldn't be paying any penalties for filing late. But it's still annoying.
I'm looking forward to an IRS free file system that won't require 5+ click-throughs to submit.
age <= 66 FileYourTaxes.com
20 <= age <= 64 TaxAct
age <= 58 TaxSlayerMight I suggest using AdNauseam instead? It's essentially just automating that in the background.
For years I kept a Windows VM around just to run whatever the cheapest tax return software was for that particular year.
I was flabbergasted that when I was living in Ireland, I could do my taxes by going online, clicking a couple boxes, and hitting submit.
This was the year I decided to compare freetaxusa with a paid professional. Maybe it's just that my taxes aren't complicated enough to warrant a pro, but I'm not making the same mistake again next year.
It almost seems like its doing some pdf scan with errors underneath when i dont trust it anymore. Maybe 1 day when they have proper api read access or something.
After I filled out all of the tax information my taxes were clearly off many thousands of dollars. I had to review my tax forms, do research, talk to an accountant, and then specifically request a tax form number in the help bar of TurboTax.
I would've owed $20,000 more in taxes because the software failed to account for the amount that was already withheld.
There was a state tax error, I think, in TurboTax's return. The FreeTaxUSA got that particular item more correct. (It was a bit of a debatable item, though.)
IMO TurboTax can't justify its price, vs. FreeTaxUSA.
Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane.
For tax incentives such as buying a qualifying electric vehicle, just provide the incentive directly to the car dealership at the time of purchase. Businesses which want to pass along such savings to their customers will need to do some paperwork and it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers.
Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI).
I agree that we should do away with market-distorting interventions in places that aren't strategically critical to the nation as a whole (like food production), but politicians are woefully inadequate to the task of resisting the urge to meddle.
Like it or not, the term UBI has been overloaded in common usage to refer to both forms. (Wikipedia notes that sometimes a "full basic income" vs. a "partial basic income" is used to disambiguate the two forms.)
"Basic" in this sense just means that there is a set "basis" from which income can only increase; it does not necessarily have anything to do with "basic" living expenses, although many proposals do tie that particular connection.
In that case, I prefer something like a Friedmanesque negative income tax, versus the absurd scenario of, say, a pauper and a millionaire both receiving the same basic income; or indeed over the existing absurdities of the means-tested welfare system, with all of its perverse incentives.
The majority of UK citizens file no paperwork with HMRC (equivalent to the IRS) and never have a reason to contact HMRC.
The majority of UK citizens only interaction with HMRC is when they get a summary letter in the post at most once a year telling them that everything is fine or they over/underpaid through the automated systems. In the latter casen they either are given the money owed or told that they will have to repay what is due through what is effectively an interest free loan over the course of the next 1-2 years (can be negotiated).
The reason why this is possible is because employers report salaries to HMRC and its a deduction in their monthly payslips.
You might say its not possible to do that in the US, but ask yourself how does the IRS actually know that you have misreported/underpaid? Its because they already know exactly how much you owe because the same information has already been reported to them by the banks and your employers.
There is literately no point in tax filing for the majority of US citizen that work as an employee employer except to enable the parasitic tax filing industry to exist.
"it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers."
Also to "Take a moment to look outside of your borders.", I'm a German citizen where my dad is a retired tax officer and Iia business degree which involved accounting and taxation. I'm familiar with some taxation outside the US. If I weren't, there'd already have been dozens of other posts here describing the better tax filing solution in every country.
I was intending to criticise the implied premise that the problem with filing is that tax code is too complex, when its very possible in other complex tax justidictions to automate all of this away for most citizens (esp when the standard deductible is sufficient for almost everyone). There is evidence that its already possible to automate most of this away in the US because the data collection and calculation is already happening for most simple cases.
I know this because I'm a dual citizen and I am constantly shocked at how terrible the IRS is and how relatively pleasant HMRC is.
I just took it as non-sequitur to promote some other policy bug bear.
The tax code is stupid, yes, but on the other hand one-fifth of high school graduates are functionally illiterate, and it would be hard for them to file their own taxes.
If it was simpler then these incentives would also be simpler, which would be great. It is a shame that so many regular W2 Americans will still have to run into some nonsense about an rollover IRA pro-rata rule or something that can cost you thousands of dollars if done wrong.
I guess what I'm trying to say is that it would be great, but not simplifying our existing tax code would be incredibly complex.
https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-F...
We may have high taxes, but at least they make it easy to pay them...
This is not simple: https://www.irs.gov/instructions/i1040s8
You could just say something like "multiply the number of dependents entered previously on form 1040 by $2000, enter value on line X" and you'd still have a child tax credit and the vast majority of people who claim it would see no difference other than taking significantly less time to figure out the amount of their child tax credit. By the time you get to the child tax credit line on form 1040 you've already written all your dependents and their social security numbers right at the beginning of form 1040.
Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups.
As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party.
When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.
I think, though, that this philosophy does not accomplish its ends -- people are mad at the IRS for making them do this work, not at the legislators for creating and maintaining a byzantine tax code. Ideally we would all choose politicians that favored removing complexity and reducing the amount of taxes, but the reality is that this is not usually a politically viable strategy.
That's a very weak case when they could just send me a letter telling me how much they took and why, which would accomplish the same thing but better and without saddling me with a bunch of unnecessary labor and/or expense.
Furthermore, the amount of money that people pay is not very strongly correlated with the time or effort (or frustration) involved in filing the taxes.
In fact, there's often (though not always) a correlation in the other direction: most of the "optional" complexity in the tax code comes from the various tax deductions that people are able to file for, making it more effort and frustration not to overpay - this is essentially the opposite of what GP is saying would be the "steelman" argument.
Nonetheless, seeking a legislative cure for this is something that people are just not interested in doing, making most of this moot.
The only remaining argument is that maybe legislatures HAVE been limiting the complexity and rates of taxation out of caution for the backlash, and if you get rid of it, then they'll go hog-wild and before you know it you find more and more of your earnings disappearing into taxes.
The theory makes sense, and the ends are laudable, but it doesn't work. Other ways of doing taxes do not even attempt to provide the benefit of this sort of built-in check on government excess, If you're willing to forgo that (or acknowledge that making people feel pain is not an effective policy tool in this case) then auto-filing solutions like the one in the article make a lot more sense.
Regardless of how one feels about arguments against taxation, that theory for how to achieve it does not make sense. It is belligerent sleight of hand from people who want to preserve the status quo of a sheltered income funnel for the tax preparation economy at the extremely inefficient labor expense of everyone else.
Here's the problem...
You're literally creating something entirely unrelated (paperwork) for people to get mad about instead of getting mad about the thing that your argument claims they should be mad about (taxes). This is what we call in layman's terms a smoke screen.
The only reason for not just sending an itemized receipt is to hide from people where their tax dollars go and to bury them in arduous paperwork so that they have less energy to focus on the actual issue of spending allocation.
If your argument is earnestly and honestly that taxes are bad and people should attempt to limit government imposing new taxes, it does not matter one whit how painful the paperwork process is, because the paperwork process is not what you claim you seek to limit.
If your argument is earnestly and honestly that taxes are bad and people should attempt to limit government imposing new taxes, JUST SEND AN ITEMIZED RECEIPT so that people can see the waste.
If you earnestly and honestly think that taxes burden people more than they help, by not just sending an itemized receipt all you've done is hide that burden behind an obfuscated wall of secrecy and toil, which goes completely against what your argument claims it wants.
A counterpoint might be: if you earnestly and honestly want to change people's behavior via whatever means necessary, then non-logical correlation/causation associations, appeals to emotion, and other smokescreens as you mention are effective tools and may get you there faster than logical sequences would.
That's just been my experience; YMMV.
If you want people to hate taxes end and ban automatic payroll deductions and make them pay it all at once. More than half the country will be unable to pay and the whole system will collapse under crushing tax debt.
Or it won't because of how little the average person actually pays that we could literally just have the top %15 of wage earners pay income tax as "the cost of winning capitalism" and we wouldn't even notice.
It would be very easy to change my taxes without my knowledge as a result, if the only feedback we had on taxes was what was deducted from our payroll. In the US, there are deductions taken from the paycheck directly, including anticipated federal income tax (called "withholding" here) but also many other miscellaneous taxes.
The withholding, in particular, represent an advance payment on your annual income tax, which you still have to calculate and file. If you withheld more than you owe, then you get a refund, if less than you owe taxes. But regardless you have to compute how much you owe and how much you paid on an annual basis so that you can see it all at once.
Once again, I do not think this method works, but the theory behind it is that this will make it hard to quietly raise taxes, and hard even to maintain current levels of taxation, because it will be a painful process that will make it clear what the current situation is.
I think opening the article this way is misleading, although they explain it better later on. This isn't about filing for free, it's about guided tax preparation. Those automated systems that ask a series of simple questions and magically submit your tax return.
That's why tax complexity is the underlying issue. To do your taxes you "just" have to follow along a 100+ page instruction booklet (plus instruction booklets for any additional forms). Even with the Free Fillable Forms (free government electronic filing for everyone with digital forms and some automated calculations) it's a pain in the butt. By rephrasing the questions, automating the calculations, and checking for errors, fairly complex taxes can be done in under an hour.
So we're playing this stupid game where the government spends the time and money to write complex taxes and all the forms and instructions to go with them, just for us to pay businesses to simplify it all so we can tell the government what our taxes really are. I hope this change takes a big chunk out of the $14 billion tax prep industry (that's more than the IRS's expenditures), because maybe when they're out of the game Congress will be a little more motivated.
You would think they would want to encourage high income citizens to use their tool so they can control the deductions/credits/process.
Free-file is useful when all you have is 1-2 above-board wage earning jobs, maybe with a 1099 contract job where the employer is nice nice enough to pre-fill the form out for you.
Once you start dealing with non-trivial amounts of dividends, interest, securities, partnerships, real-estate, you really do need a professional to keep things organized.
For some people. A person working a single job as a programmer earning $300k in straight W-2 income (no RSUs, etc.) does not have more complex taxes than a person earning $100k from a combination of their podcast + a few rental properties. There's no logic to means-testing this kind of service, where there would be for feature-testing (i.e. "Does all your income come from your job?").
CalFile only cares about handling "simple" items. Other notable exclusions [2] are capital gains, health savings accounts, Schedule C, Schedule E, and Roth IRA conversions and distributions.
[1] https://www.ftb.ca.gov/forms/2022/2022-540-ca-instructions.h...
[2] https://www.ftb.ca.gov/file/ways-to-file/online/calfile/calf...
One of the calfile devs shows up on HN every once in a while. I got the feeling that the real impediments were more bureaucratic than on the technical or accounting side of things.
Lobbying by the "big tax preparers". Higher income individuals are more likely to have more complex returns and/or be more willing to part with $149.99 to TurboTax to do their taxes. TurboTax (and others like them) don't want to miss out on that gravy train by letting the IRS let those folks file for free.
For what it is worth, the UK online filing is actually pretty good these days. Modern UI, and the process is tailored via a few "wizard" type questions initially so you are only shown the bits you need to fill. It can get a bit confusing at times though just due to the tax laws themselves and the terminology etc, but the system for filing itself is pretty good.
Thanks to onyone on here (and I bet you are on here!) who is working on the gov.uk stuff - it is generally pretty good.
1. Sign in via chip card or certificate based authentication for which the activation codes come in the post.
2. All forms are neatly laid out and guide you through the process of filing them, the quality of the frontend is really top notch, they even have a dark mode.
3. All insurances (health, life etc.) and wage statements have already been submitted and you just import them to your filing for that year, there's no guessing on what the correct deduction should be etc.
4. You add in your extra deductibles and submit, you'll have a response in the post within 2-4 weeks.
5. If anything is wrong I can call my dedicated guy at the local Finanzamt, I've had the same tax official for the last 10 years.
6. I still use tax advisors for some years because they just know more tricks then I do, and the legalese German is a bit of a pain to grok.
7. Best of all there's no requirement to do a yearly tax statement if you work a normal job.
Everything is pre-filled. If you have no additional deductions to add in, taxes take around 5 minutes total to file. They have a fairly robust banking system as well so any additional tax you have to pay takes around 60s to send through any bank's mobile app.
Pretty much all I need to do is upload a 1099 for my bank account interest & cap gains, everything else is autouploaded.
The main difference you have to realize is not that our system is actually super shitty, we just have 4x the number of people to complain about things.
I wonder what has changed!
People are less interested in important financial processes happening without their input.
Public sentiment may have shifted far enough by now that the "duty" from that deal could now be considered derelict.
https://www.theverge.com/2020/1/1/21045779/irs-turbotax-free...
Taxpayers can't contribute back to the pool that software engineers use. The people who build it will not be "compensated" with other tools that they can the use for free. So they don't build them
* - It's not something that I'm concerned about but I think some skepticism of the government is healthy if easily addressed.
Counterpoint: Blender is a wildly successful open-source 3D modeling tool. Yet the majority of Blender developers are not 3D artists, and the majority of Blender artists are not developers.
It's just a bit too much grunt work to make something that lots of people really want to use. Tax codes change very year, there are 50 states in the US with different tax codes, it's a lot of work to review contributions (are you a tax lawyer familiar with all 50 states ...)
Lots of successful open source projects are started by one person, who spends a few years making something very useful for themselves, and sharing it, then slowly growing the contributor pool. But this kind of project is a lot more work than just doing your own taxes! And nobody wants to use it as-is 2 years later, it needs more maintenance work every year to be baseline useful, a lot more than it takes to just do your own taxes.
At the end of the day, if you're a billionaire earned income is a teeny tiny part of your earnings and most of it is kept unrealized for tax purposes. As a result, the doctor or software engineer ends up bearing a 50+% tax burden while ultra high net worth individuals are lucky to pay even close to the LTCG rate on all their income.
The tax system is oppressive under the guise of being "progressive" but really it prevents social mobility.
Billionaires not paying tax on unearned gains is a complaint about the tax policy and its basis in $ not assets, not complexity.
Doctors and Software Engineers earning >$500K/yr and paying 50% of it in tax proves that social mobility is quite enabled.
The government has all of the data available to them, they should be able to send you a pre filled tax return that you can amend for whatever reason. In 98% of situations their numbers won't need changing and filing can be a 30 second process. I believe that's how it works in most other countries.
Of course there are powerful lobbies who want the tax process to be painful and that's why it doesn't work like that currently.
That's a problem but not the main problem. That's less than 20% of the tax paying population. The majority of the population is mostly 1-2 jobs & may be a house.
And then there's the disgusting shell game that IS the entire U.S. tax system, which is the root of the whole problem.
But... didn't Congress pass some corrupt legislation years ago that made it illegal for the government to set up a tax-filing Web site? What happened to this: https://www.propublica.org/article/congress-is-about-to-ban-...
https://www.congress.gov/bill/116th-congress/house-bill/3151
Norquist himself, and his organization Americans for Tax Reform, believe that making tax payers go through the process of preparing their tax return forces us to audit our comfortability with paying taxes[0],[1]. If, on the other hand, we just signed off on numbers that the IRS provided us every April, we'd be less aware of, and therefore less likely to protest, increases in taxes.
This isn't a subtle, arguably-the-cruelty-is-the-point sort of situation, this is a I'm-not-using-anesthetic-because-I'm-concerned-you-aren't-sufficiently-afraid-of-the-thresher-that-just-cut-your-foot-off-when-I-ran-you-over-with-it. I'm not a big fan of paying taxes, and I don't like it when my taxes go up. But I already feel that when I look at my paystub, or pay property taxes. The whole effort to make tax returns harder so people hate taxes hinges on the idea that most people are completely unaware of taxes until April 15th rolls around. It's cynical in the extreme, and that's really off-putting to me.
0. https://en.wikipedia.org/wiki/Americans_for_Tax_Reform#Oppos...
1. https://govinfo.library.unt.edu/taxreformpanel/meetings/meet...
Unless you’re cutting a check in person you’re arguably not feeling it as much as you should.
It’s like how replacing cash toll booths with electronic debit hides the true price you’re paying on the highway.
Having to at least see the numbers rather than blindly clicking “Yes” on a government run website is not quite there but it’s better than nothing.
If we ever reach a point where the IRS just tells you what they think you owe, they could include the same summary to placate the Norquist types (who undoubtedly will then start complaining about something else).
Literally all Norquist is doing is making it so for about 2 weeks a year, what little free time I have after the kids are down for the night is spent in tense almost-argument with my wife as we seek out all the places our employers have secreted the tax documents they already provided to the IRS. Its such a colossal, pointless waste of time for people who have a simple tax situation.
I have never, not once, looked at the numbers produced by performing my tax return (which, again, the IRS already performs so they can double check my numbers) and thought "Thank you Grover Norquist for keeping me aware of how much my government is costing me!". Because I am already made aware of that when I get my very first paycheck from a new job.
Speaking of toll booths vs electronic debit, when I lived in the Bay Area, I had to commute from east bay to west bay every day. For the first 4-5 months, I was paying cash, because in my scant spare time, I hadn't had time to get transponder and direct debit set up. I was paying $35/week. I didn't become less aware of that cost when I switched to the transponder, because the actual cost was time. Time is something I have very little of, so adding friction just wastes my most limited resource.
Using my most limited resource to make sure I'm aware of how the government might be using slightly too much of my like 10th most limited resource is a waste of my fucking time. Thus, I'm angry not at the government for potentially wasting my money, but at Grover Norquist for wasting my time because he thinks I'm too fucking stupid to realize what's happening.
Taxes don't reduce your purchasing power insofar as everyone else also has to pay them, so your relative amount of post-tax money is the same, and the tax system is progressive, meaning your relative position is actually a little better.
Remember, money isn't real.
You just proved my point without even realizing it.
When you were forced to pay cash, they were forced to show you the price. You even remember the amount now, presumably years later. If they could have you pay cash without seeing the price I’m sure they would. If the price had changed from week to week, you’d immediately realize it because the amounts you’d interact with would change.
But that’s only possible with a purely digital system. As all the numbers happen behind the scenes.
Ask yourself this, why don’t any of those automated toll booths show the amount you “auto paid” rather than just “Ok!” Or “Paid!”? It’s because they explicitly do not want people to know what they are paying so they can raise the rates with minimal flak.
Or maybe it's simpler to just say paid and they did that. I'd wager that they're well aware of push-back over fee increases but still do it anyway, because monopoly. And the roads need the money.
On that note, the real fun is going to be about how do we pay for the roads once the majority of traffic is not pay fuel tax...
If the intent was to get us paying without realizing, they'd add additional incentives (like discounts) to getting the transponder than the fact that its simply (and obviously) faster.
You're constructing this straw man where the price at the register is murky and ill-defined, and if only we could remove the smoke screen, people would see how much money they're losing to taxes. But the reality is that anti-tax folks are the ones making it difficult to understand the price at the register, as it pertains to income taxes. There's quite the conversation to be had about the murkiness of appropriations, certainly. But adding friction to the tax return process doesn't make me want to call my congressman about where my taxes are going, but instead to ask why a senator in Wyoming or Texas is so excited to bend over backwards to protect the business interests of a company based in Mountain View, California, at the expense of all of their constituents?!
Basically new tax rules are put into place with little regard on making them simple or including data collection as a part of the tax change.
https://www.policygenius.com/taxes/who-benefited-most-from-t...
I mean, yeah? 42% of Americans pay no federal income tax, how could tax reform benefit them unless it's handing out cash? Which we already do with EITC.
And the complexities and burden of the tax system go way, way back before Trump's tax reform. Think more like anything passed since the 1950's.
You went out of your way to make this about partisan finger-pointing and I merely countered that there's plenty of blame to share. Way to deflect and spin!
Partisan politics is why the subject is so rancorous. I have no party affiliation and am happy to acknowledge and criticize the one that I am most sympathetic too. This is why we can't have nice things -- because we can't talk about policy and and government reform without it becoming a pissing match.
You said "The last time we were given "tax reform"", which implies this is a recent issue. I countered with "look at some of the tax bills Democrats have sponsored", clearly showing it's NOT a partisan issue, both parties are doing it, and have been doing it for decades.
The original comment blamed Grover, so in fact you're replying to a chain of comments that were already partisan, so I reply with a comment about politics and you somehow blame me for making it partisan. Fun!
Are they going to be aware of all deductions in all cases? You are absolutely correct, there's no way that's correct.
> In 2017, 47.1 million taxpayers itemized deductions, relative to 15.3 million in 2018. This dramatic shift maps to a more than 19 percentage point drop in itemizers as a percentage of all taxpayers, from 30.90% to 11.47%.
The majority of this was people's mortgage deduction went from being more than the standard deduction (so itemization is worthwhile) to being less (so it's not worthwhile).
You can roughly estimate what your itemized deduction might be.
Why wouldn't such a system work here?
It's not like the act of doing your taxes is what makes your realize you're over the standard deduction. Most people will know if they've done standard or itemized in the past and act off that.
That is exactly how I figured out I should itemize my taxes this year.
That's pretty much the extent most Americans think about itemization as it stands, and whether it comes from a tax software or the government, the result is going to be the same.
Your comment seems like a prime case of perfect being the enemy of good.
Unless they are a homeowner, probably.
Part of the issue is that the US tax code is a lot more complex than most countries. (And the homeowner-targetted deductions are kind of insane and bad policy too).
Still, I don't disagree with the basic premise. They probably know enough to know if itemizing your homeowner-related things would be better for you, and do it that way. You can ask for adjustments, or you could always ignore what they calculate for you and do it all yourself from scratch if you wanted to, a thing I believe you _can_ do in European countries that generally calculate your income taxes for you?
Also, I wish our tax code werent' so insane.
Isn't that a relatively recent thing? IIRC, the standard deduction was massively increased a few years ago.
Yes, it is. What difference do you think that makes in the present day?
Something we can do differently that seems obvious today could have been a disastrous policy just a few years ago.
The optics of the IRS sending out bills for thousands of dollars more than people rightfully owe are bad, to say the least.
In practice, about half as many people itemize today than they did back in 2016.
Of course it depends on where you live - in San Francisco if you can afford a house at all you have enough interest to deduct it (especially at today's rates), but other areas have more sane housing prices and lower incomes.
I think you can still easily reach if you, say, tithe 5 or 10% of your (post-tax even!) income (to a church or other 501-c-3) and have a mortgage and pay property taxes in a major metropolitan area. (Also if you're single the standard deduction is half married filing jointly.) (I didn't realize the personal exemption is gone now too!!)
But a quick google says... according to the IRS in 2022, 139.2 out of 154.3 million tax returns took the standard deduction, which is indeed around 90%. (Looks like up from 87% in 2020 maybe). So, true, defintiely most people, but still 10% not.
It looks like maybe pre recent Trump standard deduction changes (which were phased in), as many as 30% of filers itemized. (Still a minority to be sure).
I wonder if charities have seen a big hit in donations, if the itemized deductions people are no longer taking were an incentive.
I guess there was a $300 provision for charitable deductions enacted in 2020 that they are trying to make permanent and larger. Web site wasn't working for me but Google's cache did: https://webcache.googleusercontent.com/search?q=cache:WdabFa...
https://www.nerdwallet.com/article/taxes/tax-deductible-dona...
"Here is what we think you owe/don't owe. If this isn't what you expect, then click this button to add or subtract deductions. Oh and BTW, we know you owned a home last year so we included that too!" Or, "Hey we noticed you took the standard deduction last year so we assumed based on what info we have that this year might be the same so here is the standard answer!"
> Your comment seems like a prime case of perfect being the enemy of good.
And the comments advocating for automatic tax filing seem to be ignoring Chesterton's fence. They seem to be viewing it solely through the lens of revenue collection. However, IIRC, for better or worse, one of the big levers the US government uses to influence individual behavior is incentives implemented via tax policy. It stands to reason that mechanism would stop working if individuals could avoid interacting with the tax rules.
Removing manual filing won't stop people from voting on tax policy.
FWIW, we are in the "on the cusp" boat. Another year or two and our mortgage interest vs principle equation will put us in the standard deduction range. And short of massive changes to either tax law or our income, we'll remain there.
Maybe these are “drastic” changes but they aren’t unusual across the population. Not planning on kids, so that means I’ll have fewer changes than most. But the person I plan to marry has significant changes to income based on commission so I’ll probably be doing taxes this way for a long time!
Which makes sense in a lot of spheres where's there's obligations on both sides. Unfortunately, if myself and the IRS come a disagreement about my filings, I can end up in jail or at the very least deal with an expensive criminal prosecution. If the IRS is wrong, then there's effectively no penalty for them.
The government wants it both ways. People understandably have some apprehension about this.
I think there's a huge gap between facing an audit in most circumstances and those two outcomes...
It has to be supported, and you should be able to change it. But there's really no reason today for why IRS doesn't send you "this is what we think you owe, based on this data that we have. Click to accept or add more data". That process would hugely simplify taxes for majority of Americans and wouldn't impact people who have more complex cases.
Imagine a landscaper doing doughnuts on your lawn and then telling you to pay him to fix it, and that's roughly how I view Intuit.
Which you can use free app to download, file and send the filed one.
weirdly enough official site also have instruction on how to use PlayOnLinux to run it under Linux
It's interesting that anything other than MacOS and windows is even considered at all, even just in the instructions.
Of course, you might still want to amend that, but as the first pass it can be quite accurate.
People wealthy enough to even think that their deductions might exceed the standard deduction are not only in the vast minority, they're also wealthy enough that paying for TurboTax isn't an issue because they have their accountant do the taxes.
IOW, you're optimizing for the exception, not the majority case.
For those who itemize, the government usually knows about most the things you're itemizing. I'm itemizing this year because of 3 things: taxes paid, mortgage interest, and charitable donations. The government already knows about 2 of those, so they could send me prefilled forms that are 95% complete (W-2, investment 1099, mortgage 1098, mortgage 1099 and other bank account 1099-ints, my form 5498 for my IRA, property taxes, etc). I'd much prefer only having to fill in my charitable donations. It would change a job that takes a couple hours into one that takes maybe 15 minutes.
https://www.pbs.org/newshour/show/dreading-taxes-countries-s...
A government has a monopoly on taxation by definition or else it can’t be a government so calling it a public monopoly doesn’t make a lot of sense.
Right now, the IRS is forced to establish some sort of data interchange format and adjudicate incoming tax filings equally, because they're required to work with TurboTax et al. (even if only required from a practical standpoint).
If they also provided the only filing solution, that pressure would be gone.
IMHO, the best possible outcome is definitely IRS-supplied free file + private options, if users would like. Keeps everyone honest and on their toes.
It’s literally data entry.
Tax prep/accounting (what to put where for cases where there is ambiguity) can always be different.
That doesn’t apply to W2 earners though (in 99% of cases)
Ergo, imagine there's a checkbox option that would apply to 25% of free filers to save them money. How would the IRS free file handle that from a UX perspective? What are their incentives?
Alternatively, suppose a feature used by 10% of filers is broken for the current tax year. How long does it take to get fixed?
Current private solutions are incentivized to optimize those ("We save you the most money!") and fix them ("Our software isn't broken").
And because only the data transfers over to the IRS, all the prep optimization can be done independent of the IRS.
Some of the incentive concerns would be alleviated by (as this did) building this from a different branch of government (e.g. US-DS).
But at the end of the day, it's still the government telling you how much to pay the government. Or as the joke went about the 1040-EZ: "How much money did you make? Good. Give it to us."
Dozens of companies sell online products to file, and thousands of individual providers are available too.
Apparently TurboTax has ~70% market share for tax preparation software, and TurboTax + H&R Block have ~95% market share. [0]
But even that's still a heck of a lot more competitive and responsive than if the IRS shipped the only tax prep solution.
[0] https://secondmeasure.com/datapoints/tax-prep-2021-turbotax-...
It's a competitive market on a stupid game. The market solutions (maybe mostly just intuit) fight to keep the game near impossible for the lay person to play. They generate "GDP" by making it more grievous than it need be.
At least part of this is a symptom of a broken political system (the current process of voting encourages 2 party system which are incentivized to not experiment)
The federal gov’t has enough power to make either of these groups miserable; and so each is using it to fight out who gets to do so.
Picking one to win isn’t going to stop the conflict, but it could turn it into a shooting war.
They all suck, and in a better society, that number for normal people would be close to 'zero', because the IRS could just send me a bill to attest to and sign.
The spherical cow of the accounting world
A lot of things are ‘legal’ as long as you don’t get audited.
But of course, the dynamics of our current system are such that the people least likely to be able to defend themselves legally are the ones which are frequently targeted for tax dodges. How many years do the extremely wealthy have to dodge taxes before the IRS finally comes down on them? Meanwhile, a friend of mine got dinged for a $500 deduction for unreimbursed work travel and not having receipts (a $2000 fine which she had to borrow money to pay).
I worked in a country that automatically fills out your tax return. Sure, it was nice that the form was pre-populated, but you know what I did? I doubled checked all the numbers to make sure they were right.
Were they? No, my employer had miscalculated retirement contributions resulting in a higher tax bill for me.
So I ended up doing all the math anyways, just like I do in the US.
Are we doing something wrong? It seriously does not seem hard to file taxes.
The majority of the population doesn't know anything about their taxes that the IRS doesn't. Why force everybody through a song and dance that only is of service to the exceptions (and a couple very large tax filing corporations who lobby hard against automatic taxes)?
My biggest time sink this year was sorting out how to file crypto gains/losses. After two hours of struggle, I found that I had to pay income tax on about 15 dollars of capital gains.
Investments: Yes, I have to file a 1099. Business: no.
Crypto: I think your holdings have to be significant for it to matter whether you file this or not, maybe I broke a law here.
I think most people don't report interest that is below the reporting threshold for the bank either. Doesn't change what the tax code says you are supposed to do.
If the answer is yes, but you put no so that you didnt need to file any additional details, thats definitely illegal.
What would be better is if the IRS just sent you the stuff they know and you affirm that it's true. This prevents people from accidentally committing tax fraud and eliminates the need for middle income Americans to pay a yearly fee in order to be law abiding.
Yearly fee? I had to pay for turbotax but I was under the impression that it was because my income is very high.
I don't know, it makes sense to me the way the IRS does it. If I get a massive windfall and the IRS didn't send me information about it, then I would be able to just not file it because I would know they don't know about it. Not so if I don't know what they know.
Even with the "free" standard offering, it's been lucrative enough for them to lobby heavily to prevent taxes from being easier, just to funnel the majority of the country through their slow filing flow and try to upsell to all of them.
Ideally the IRS would tell you what they think is accurate and you'd submit amendments for anything that's not accurate. That's no different than the current arrangement since you already need to report all income, it just eliminates the extra cost and effort for the majority of Americans that don't receive windfalls.
Yes if your tax situation is simple, the IRS already knows everything. In many other cases (even something pretty common like self-employment income) they do not know, and you have to tell them.
In my experience, the IRS won't get mad about that. They'll ask you to correct it, of course. What makes the IRS mad is if it looks like you're actively trying to illegally avoid taxes.
Also, in my experience, the IRS are generally decent to work with. My state revenue department, however, is the opposite of the IRS in every way. They're just mean and vindictive.
There's a lot in this thread about standard vs. itemized deduction, but since Trump's tax reforms, the standard deduction has always vastly outweighed itemization for me, and I believe, most Americans.
The part that causes me the most grief nowadays is the 1099-B; there's a few of required tax inputs related to investments that just aren't captured on that form. (Although in recent years, I've started taking better notes, and now I can just refer to past years' resolutions for repeat scenarios.)
But even just punching in the requisite numbers I think takes me longer than 30 minutes…
Then there just seems to be an annual surprise per year. ESPP sales complicated one year; they're a weird mix of income and gains. I had a stock split occur one year, resulting in a fractional share that was liquidated for some really odd capital gains. Moving has complicated state taxes numerous times due to states with poor definition of what constitutes a "resident". I've been plagued by a number of errors on various forms (including twice on the W-2!).
But the upthread remark — that the IRS knows the answers — should apply to my situation. Basically everything tax-related about me, the IRS already knows. They can just send a bill; if I don't trust it, I can look it over for correctness & perhaps trigger some sort of correction process. (Presumably today, they'd just audit me if I was too far off their number.) About the only thing I think that might cause a discrepancy is charitable donations.
Assuming the problem is actually ideological opposition from Republicans, and not campaign funding, because then it would be bipartisan:
https://www.opensecrets.org/orgs/intuit-inc/summary?id=D0000...
That page shows who employees of the companies have donated to.
(And the politicians aren't actually "bought" by it. It's more like they already agreed, and maybe they're being paid to stay politicians instead of getting a better paying less annoying private sector job.)
And corporations can't donate to "campaigns" but they can perfectly well donate to PACs aligned with campaigns.
> And the politicians aren't actually "bought" by it. It's more like they already agreed, and maybe they're being paid to stay politicians instead of getting a better paying less annoying private sector job.
But nobody said they were bought. It's not corruption if it's legal, right?
The problem is the systemic bias it introduces. Politicians need to raise money to stay in office, so they have to appease whoever has money. So politicians who appease special interests have an electoral advantage, win more elections and constitute a majority of the legislature.
How about a simple form which shows those numbers in large typeface and nothing else?
Unreported gambling winnings or a low revenue side gig aren't tracked by the IRS.
How this all changed with cryptocurrency, I don't know.
I think taxes are all about what's written down and what logically makes sense. If you pay someone $1000 to do a job, they have to pay taxes on that. If you invite your friends over and spend $1000 on food that they eat, they don't have to pay taxes on that. I don't know why.
The general issue with gambling wins is not that the IRS doesn't know (casinos report winnings) its that they don't have to report losses.
It's generally $600 for winnings, and $5000 for withholding.
https://www.irs.gov/pub/irs-news/at-01-17.pdf
https://www.irs.gov/pub/irs-tege/gaming_withholding_reportin...
Why can’t the IRS just tell me what they think I own by April 15th, and then i can add things to it.
My taxes are really simple. I still don’t understand why I have to spend at least 40 minutes every year giving the IRS the information that they already have.
Seems like getting to a point where ~75% of the population didn't need to file would be doable if there was enough motivation for it. If your only income is on a W-2, and your only mortgage / banking / trading is with U.S. companies like Chase or Morgan Stanley, no reason that couldn't all be done for you.
Most brokers send all the info to the IRS, but there are some that get wrong cost basis for ESPP (Fidelity looking at you) and so you’ll have to rectify that too. But those things should spit out a number that gets adjusted from the IRS number.
I had a friend in college who hated doing taxes so he spent 5 min putting whatever numbers into the forms.
A few months later the IRS sent a "your filed incorrectly, here is the corrected return" and he'd be like "cool".
That said, I'd be more than happy to see HR Block go bankrupt.
The hilarious thing is that if we remove the context from this statement it applies so broadly that you could mean just about of our systems.
Having absurd systems is pretty much our defining characteristic.
-- Winston Churchill (probably not[1])
1 - more likely a generic version of this was posited by Israeli diplomat Abba Eban in the 1960s and mis-attributed to Churchill sometime in the 1980s
We're just not aware of foreign dirty laundry, and as a tourist you'll not notice.
It's like when people say: Europe is so much better at xyz. When what they mean is: Finland is amazing, you know, tiny little 5m person Finland, with very little diversity and a strongly exclusionary (just try immigrating into it as a low-skill poor person) homogeneous culture, it's amazing. The same goes for much of affluent Europe: it's hyper exclusionary, elitist, and often extraordinarily racist against outsiders.
Meanwhile the US is the world's largest economy, has welcomed tens of millions of poor people from the third world over the past 40 years (and that door is still very much open), has the third largest population and is hyper diverse compared to nearly all peers in Europe. Even Canada is drastically less diverse than the US. It's far easier to manage a nation that consists of an overwhelmingly dominant single culture, there are far fewer competing interests or complexities.
A country as large and complex as the US, with that much diversity, and that many layers of government to manage it all (federal, state, local; the US state government system is gigantic in its own right), is going to be a very messy machine. There's no scenario where that isn't going to be the case, no matter where it exists.
The only reasonable comparison regardless, due to the scale, is the US to Europe broadly. The US does just fine on that comparison. Shall we talk about how nice Western Russia is? How about the last 20-30 years of Greek and Italian history? Or is the premise to only refer to the good outcomes of Europe?
What I'm saying here is: Until you've lived in a country, you probably don't know the absurdities of their own system.
Of course, it's good to celebrate specific absurdities being overturned, as is (slowly) being done in this instance.
IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated and what IRS really knows is a guessing game. IRS is posturing and bluffing that they know everything and put pressure on a tax-payer to voluntary disclose as much as possible about their income out of fear of criminal persecution. Also they will rarely tell you that you "overpaid" your taxes unless it is a simple math mistake.
If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.
“Our estimate of your income may be too high in certain situations, for example if you are a business owner, independent contractor, or receive income from RSU or ESPP sales where the tax basis reported to the IRS is missing or inaccurate. In those cases, you are encouraged to fill out your tax return using the tool of your choice” (Hopefully with links to some options).
Otherwise, there’s going to be a lot of tech workers who don’t understand RSU taxation paying thousands/10s of thousands of dollars extra in taxes for no reason. (And yes, I realize some may think this is a feature, not a bug.)
Practically though, our tX system and economy is much too complicated to be able to accurately say whether incentives through deductions and credits are a net positive. We can say how expensive they are, but how do we measure the value added by pushing consumers in one direction or another? And if we can't measure its value should the government have that authority?
But also, there's still the risk of getting audited either way. Just because they apparently don't know about some income _now_ doesn't mean they'll never figure it out later.
Gun control, ISP prices & availability, public transportation and in particular long range trains are the top of the list of those subjects.
At first it’s fun, then it’s anoying, then it’s sad.
Thougt & prayers ! It will get better, or at least you will know intrinsically that you exhausted all of the 1 solutions.
Sometimes the US truly is exceptional -- name another country that has more guns than people and, critically, enshrines private ownership of guns in its constitution.
Czechia, Guatemala, Mexico, Phillipines, Ukraine, Yemen.
1) The tax software industry 2) Libertarian/far right groups want to make it hard for you to pay your taxes.
Here's a Planet Money episode talking about this: https://www.npr.org/sections/money/2019/04/03/709656642/epis...
And even if you did have some side income to report, the HMRC website had most things in a pretty easy wizard-like form, similar to turbotax or the like, with the things they already knew about pre-filled.
But for the great majority of people whose income comes from working for a living, you don't need to do anything to be 100% legally compliant.
It’s been like this for more than 10 years
In the last 5 the government made everything electronic
Every invoice or receipt any business or individual issues, is digitally signed by the government
If you are a single wage earner, you don’t even need to file your return, your prepaid taxes exactly match your overall tax burden
You can always choose to file if you want to or need to in case your situation is more nuanced
But most people don’t really need to do anything
These "simple" cases still cover the vast majority of American taxpayers.
And most of the common items are known to the IRS... mortgage and mortgage interest, property taxes, state taxes, education credits, retirement savings.
Common items that could be known to the IRS (but aren't necessarily today)... charitable giving, medical expenses, self-employed healthcare premiums.
The IRS could, relatively easily, email/SMS/snail-mail you a pre-filled tax return with the info they do have. If nothing needs updated, you just (e-)sign and provide payment info.
That not everyone agrees that it is a waste, or that society would find a better use for it is of course going to be a matter of opinion. Which some folks are heavily incentivized to weigh in on (to the point it may be a large percentage or all of their net worth), and to others it’s $50/yr.
Sure, but that's a tiny fraction of the population. Nobody is saying the IRS should send you a fixed return. Only that they should send what they have, and if nothing needs changed, great, society is better off.
In any case, most Americans do not care about this. I'm getting tired of the "10% of taxpayers couldn't fully use this system, so let's not bother" type arguments.
Certainly stock grants end up as W-2 income, but unless you automatically sell all of them, your choice of accounting methods matters. Many people I know have at least 2, one for employment-related stock and the other for their own trading. You don't even need options to get an accounting problem.
Also, I think you have a very narrow view of who actually cares about special tax circumstances. Teachers have several special credits. So do students. So do people who save for retirement. Not to mention people who run a small business or a side hustle. This isn't a 10% situation, this is more like 30-50% in any given year, and almost nobody files a bog-standard return every year for their entire life.
It would be nice, however, if the IRS told you about all of the W-2s and 1099s they got before you had to file your taxes. The good news is that you can do this if you file for an extension on your taxes and check an obscure section of the IRS website - many accountants do it.
I'm in the UK and there's reporting systems for- employers, pension schemes, savings accounts, charities and student loans- all to avoid most people having to fill in a tax return. Something like deducting sales tax would never be passed as a law because it wouldn't be accessible to most people.
As an analogy, we can say that laundry will never be automated because the washing machine can't separate whites from colours, doesn't apply stain remover, doesn't remove the delicates when it transfers to the dryer, etc. All technically correct, but people stopped caring. People have a financial and emotional attachment to their tax loopholes though.
I’ve also underpaid and my experience was basically the same (except I had to send a check instead obviously). Edit: and the “penalty” was just modest interest on the underpayment.
- pay >=100% of your previous year's earnings
If you're underpaying by more than that, there's a high chance you're doing so on purpose. Or made a fairly egregious error (in which case, the penalty was probably assessed later upon audit).
And if you overpay, you get a refund, not nothing.
It's absolutely insane that it doesn't work that way. Precompute the taxes owed, and send that to the taxpayer. The taxpayer can then accept the IRS's computations or reject them and file their taxes like they always have.
- Lowers the burden on those who have very simple income (W-2).
- Offers enough boilerplate to start a custom return with.
- Never miss filing your return, no matter what happens to you between early February and April 15th. At worst you'll not receive as much back as you otherwise would.
Everyone thinks that they can come up with a much better tax system, and they always start with something super simple that meets their tax needs. But a simple system that meets one person's tax needs is usually not so simple, fair, or efficient for other people. And when you take all their needs into account when you redesign the system...you end up with something pretty close to what we have right now.
For example, try designing a tax system that is both fair and efficient with respect to agricultural income and tech income (this is a fairly common assignment in university tax programs). It won't be simple. And that doesn't even get into how to reconcile the tax treatment of business income with the tax treatment of individuals, or the many ways they earn and spend income, or the complexities of other types of businesses (like manufacturing, retailing, resource extraction, in-person services, etc.).
I love these armchair opportunities for college-level challenges without the admission fees, I'll bite. Step 1: disallow corporation as a legal taxable entity, private ownership only. Step 2: Subtract expenses from income. Step 3: Divide by 10. Step 4: If more than zero, send a check.
"Fair and efficient" in terms of opportunity is easy. In terms of outcome is a fool's game IMO
But what about investments and assets? A car that you bought for the company has a limited lifetime. So its value is slowly decreasing, should that be considered an expense?
What about R&D? We want to incentivize it, so that companies do more of it. Etc., etc.
As far as I can tell, all businesses would like to be able to deduct all cash outflows whenever they occur, regardless of whether it's capex or opex. Businesses depreciate across long time cycles because that's what they're forced to do.
As long as they can carry forward losses, don't all businesses want accelerated depreciation?
You can generalize this to the funding of the US government. The system obfuscates the stark reality: the US government spends resources faster than it collects them. It makes up the difference it two ways: deficit spending and off-the-books liabilities (SSA and Medicare being the biggest). Inflation is a solution to these problems.
... inflation in combination with hegemony.
My understanding is that if the US wasn't calling so many shots on the world stage, other countries would be less willing to tolerate us inflating away the US dollars they hold. But as "the global reserve" currency (for now), they have no choice but to grin and bear it, desperately try not to inflate their own money supplies to deal with the loss in value.
This is basically the truth behind MMT. Inflation actually can get you "free" money, but only because you're basically forcing it out of other economies by virtue of holding all the guns and oil.
This statement is mostly true and your point remains but there is a small percentage of Americans who have complex stuff like a Business, multiple non-W sources, investments, Itemized deductions etc. For those, IRS cannot just figure out everything themselves.
A good solution is for IRS to automate those 90% of cases and for the rest, let them file with CPAs and tools as they do now.
Source: I run a business (well 2 now with a much smaller one) and my taxes are never simple. I wouldn't be one of those Americans with straight calculated stuff. I like my deductions and options but also pay a lot to CPA to handle this shit.
Imagine building a tax collection product that attains a 99% satisfaction rating from the people that pay those taxes and then having it get killed by legalized highwaymen. Even today the top google results return dubious totally-not-funded-by-intuit sources such as "the tax foundation".
How does the government know my non-compensated travel and moving cost, wfh expenses, cash charity donations,etc...?
If people like you get the option to file directly with the IRS, fine by me so long as you don't make the rest of us pay more by losing the ability to play the game and save money.
Was that ever deductible? You don't get the home office deductions unless you're self employed.
> cash charity donations
That basically isn't deductible for anyone anymore since nobody itemizes.
Why can my bank and credit card vendors tell me "up to the second" the status of my account. I use a credit card and get an alert on my Apple Watch. The IRS could have an app that shows it in real time (say up to the day) how much tax you've paid and if they think you'll owe more or get a refund based upon what they know at that point and time and what they know from last year.
Second, why do I need to give my employer my SSN and several forms of ID? Couldn't I share some sort of token that the IRS could give them with my name and maybe a picture and all the instructions embedded on how to withhold, how much to withhold, etc. Maybe it could be a unique identifier per job. I get a picture id but they shouldn't need my SSN. It can't quite be just an opaque QR code but it could be something pretty similar.
Why is it that we can have highly advanced AI, phones, and monitoring systems but so much of what we do is as if we're living before the internet?
Obviously politics (not just a left/right divide, but even at local and budget levels) plays a role. But let's be real, street lights (and cross walk) should be algorithmic and sensor driven, stores should have trivially developed web interfaces (AI can help this just from SAM), SSN being used for identification but also not (and being terrible at it), and so much more. This is literally every industry and ESPECIALLY anything that the government does. I don't want to hear voting online, but please talk to me about DMV online (not literally to me). These things aren't flashy, and maybe that's the problem, but I hate living in both the 22nd century and the 17th at the same time (exaggeration).
This is almost certainly an immigration thing, not a tax thing. From I-9 is required to be completed by all employers. See: https://www.uscis.gov/sites/default/files/document/forms/i-9...
That particular idea might be a little bit more subversive but why does an employer need to care? Immigrant or natural born citizen, they should have some sort of tax paying relationship with the US federal government.
The southern boarder is being used mostly just for politics right now, but if we wanted to curb illegal immigration I think a big part of it would be some sort of "you're here now" stamp, some sort of criminal penalties for hiring undocumented non-residents, maybe mandatory tax withholding for everybody and then some sort of "you're allowed to work here" token from the feds.
The IRS certainly doesn't care whether you're working legally or illegally, as long as they get their share. The employer is mandated to care by immigration law, since it's against the law to hire someone who is not authorized to work in the US.
> we wanted to curb illegal immigration ... some sort of criminal penalties for hiring undocumented non-residents
This would certainly make a big impact.
> then some sort of "you're allowed to work here" token from the feds
It's called an Employement Authorization Document or EAD, issued by USCIS.
Thanks for pointing this out - looking at the responses, folks blaming congress might have a point but I'm also surprised that this thread isn't directing more of the frustration to intuit and others involved in the deliberately confusingly named "free file alliance" - an industry coalition that's nominally providing a free filing option that's hidden / limited / difficult enough to use that very few people actually do despite it being free.
The answer to your question is that initially yes, it was banned as part of a mutual MOU, but it is not anymore. The rest is in here: https://www.propublica.org/article/irs-reforms-free-file-pro...
Here's more on the subject: - This one has internal slides from intuit https://www.propublica.org/article/inside-turbotax-20-year-f... - This is a report prepared by a left think tank (pointing this out as a disclaimer) that has a lot of details from earnings calls and such: https://big.assets.huffingtonpost.com/athena/files/2023/05/1... - This one details on the influence of the "revolving door" of lobbyists taking governemnt positions on the IRS' policymaking https://www.opensecrets.org/news/2023/05/turbotax-owner-intu...
The problem is the rules are complicated. Except this is only a problem because people dont want to pay more in taxes. Virtually all the complexity comes from opportunities not to pay taxes. Its difficult because you need to figure out how much you DO owe and be sure you qualify. In order to simplify taxes you’re going to raise taxes in an uneven and non deliberate way.
Obviously, calculate whether it really works out in your favor with the credit card payment fees, but in many cases it will.
Example: Chase Ink Unlimited[0] has a 75K points ($750 at minimum, more if you have a Preferred or Reserve to transfer to; was a 90K/$900 offer up until tax time this year) bonus and 1.5% cash back. It's free (untaxed!) money to pay your taxes.
https://creditcards.chase.com/business-credit-cards/ink/unli...
For example, if you have to pay $15K in taxes, you can sign up for a Chase Ink Business Preferred card, pay the $15K+1.85% = $15277, get the 100K bonus + 1X points on the $15277, which puts you at 115277 points, which is worth 1.25x in travel, which puts you at $1440 worth of air tickets or $1152 worth of cashback.
Subtract the $277 extra you paid, subtract the $95 annual fee for one year (before which you'll cancel the card of course), and that leaves you with a net return of $1068 in air tickets or $780 in cash.
There are quite a few other cards that you can come out ahead in as well, depending on how much tax you owe.
And yes, I did this.
What’s wrong with that? You can pay estimated quarterly taxes with a credit card too. Many churners do.
No, many W2 people also have investments and capital gains, and it's very easy to owe big taxes without under-withholding.
Also, if your W2 income is, say, $500K, it's not out of the ordinary to owe another $10K or $15K even if you don't intentionally under-withhold. It's not within penalty territory but more than enough to get a sign-up bonus or two and get a couple thousand of it back in cashback, air tickets or hotel stays and things you'll use anyway.
If you owe $20K in taxes, you can totally sign up for 3 or 4 cards and reap all the bonuses in one fell swoop. 2 payments per processor, PayUsaTax is 1.85%, Pay1040 is 1.87%, as long as your sign-up bonuses can beat those numbers (they easily do on many cards, see my other comment below), you can get 4 sign-up bonuses easily.
I already am doing everything I can possibly do within legal bounds to reduce my tax bill. 401K, IRA, credits, you name it, I have it. The credit card thing is just at least getting my cherry back after the government took my cake.
But there are downsides too, we also have free healthcare and the last school shooting was more than 80 years ago.
I'm curious how you know they aren't cheating you somehow? Also, how could their numbers be off (high/low)? In the US, there are all sorts of 'deductions' you can take and potential areas where you may owe more, which is why you can't just rely on the IRS to do it for you... they wouldn't know the data.
> But there are downsides too, we also have free healthcare and the last school shooting was more than 80 years ago.
sigh...
How do we know that now, in the US? I don't know the details of tax calculations; I get money deducted from my paychecks, I pay a website so I can copy information from many confusing forms onto one confusing form, and then I get some money. It's inscrutable to most people.
And frankly, the for-profit system is currently cheating us, so...
Tax laws are insanely complex. Even if you hire an accountant, chances are they are going to miss some deductions or not optimize things perfectly for you. Especially given their whole business model revolves around getting as many clients as they can and being overly busy just a few times a year.
If you really want to be sure, you have to learn this stuff yourself. There are a lot more people willing to take money from you than there are to help you keep it.
I can find obvious optimization flaws in every other branch of the government, but man, tax collection seems close to perfection here. Of course we could argue about this been a good or bad thing, but the engine is running perfectly tuned.
I've always had this feeling that you could ask the IRS what they believe any given SSN/EIN owes and they'd be able to tell you (not that they would, but that it's already calculated somewhere). I don't know if this actually true though. I know almost all W-2 information is sent electronically. They know about most 1099 transactions too. But is all this information pre-compiled against someone's SSN, or do they only run that calculation as part of random audits?
I know this firsthand because a broker transmitted proceeds without transmitting a cost basis, resulting in a scary letter from the IRS a few months after I filed.
The problem, as I understand it, is that the IRS' technology is very dated, so processing is quite slow, hence the months-long wait between filing and a CP2000 letter.
If you knew the IRS missed something , you could safely not report it.
Not quite. The IRS knows the income that is reported, and the taxes you have paid.
It doesn't know which credits and deductions you qualify for. It can guess based on your previous returns, but it isn't accurate and needs to be updated annually.
Once you provide your credits and deductions, the IRS can calculate what your tax liability should be vs what you actually paid.
Everyone from poor people to billionaires needs a guy who can game the system. The popular sentiment on HN and similar sites is strange to me, yes the IRS knows how much I owe them, no I don't want to pay that, I want to pay less or get more refund (same thing, taking into account witholdings). Do you all have so much money you think everyone else also thinks the convenience of filing tax is not worth the extra money?
The right guy has saved me 10K+, this is especially true when you contract.
The thing is, the government doesn't know everything I do, and I won't be able to even think of those things when filing. I need a guy asking me "did you work from home or take toll way to work?" And the works his magic.
You think you're doing poor people a service but they'll file it on irs's website and get a lot less because they don't know to ask the right questions to get all the nice deductions.
I swear everything on HN political these days is "big gov and corp bad,never trust". It's never that simple.
Oh and get this, maybe all these people behind this movement don't know this but every poor person I have known files taxes for free. Not only are there volunteer ngo's, individuals also do that at libraries and such.
"The government already knows how much I make and how much I owe, why don't they send me the bill?" So you can tell them you owe less! There is just no way around the fact that there are tax deductions and exemptions and all that.
People who are just in normal employment dont need to submit their taxes because it Pay As You Earn (PAYE) and so its all obvious. But if you are self employed or get paid dividends or made a capital gain or sundry other exceptions then you have to submit a tax return.
HMRC provide a web app for you to submit your tax return should you need to. Its a pretty good app. Its long and complicated because thats how taxes are, but its pretty good.
There's also an API where 3rd parties can develop their own software for submitting your taxes. I guess you have to get some sort of approval to use it, but its there.
There are a few doubly-exceptional cases that are not covered by the default HMRC web app. E.g. if youre in a partnership (a sortof type of ad-hoc company) and need to do a special sort of return. A bunch of other edge cases too. For those you go and search out a third party software supplier from an approved list. Or fill in a paper form.
TDLR: something sane is possible
And as an American who lived in the UK for a few years I did have to file a self assessment, which had me pretty scared.
My UK tax return was ~5 pages long and took me ~2 hours to complete. My US tax return for the same year was ~200 pages long and took an accountant weeks to complete. I don't do anything interesting (I have a wage-earning job and some stock investments, I own no property in any country).
The I.R.S. specifically notes that there is no limit on overall deductions, and hasn't been for years. https://www.irs.gov/newsroom/irs-provides-tax-inflation-adju....
However, there are now limits on individual deductions that didn't previously exist, like the SALT cap of $10,000. It also appears you were affected by the cap on the (loan) value of homes which for which you could take the mortgage interest deduction, which was lowered to $750k from $1m by the TCJA (meaning, if your home is worth more than $750k for loan purposes you can only deduct the mortgage interest attributable to the first $750k of the loan), or by the elimination of a number of 2% items (items that pre-TCJA could be deducted only if they exceeded 2% of your AGI).
This is...incompletely stated...the only $10,000 limit when itemizing is on SALT taxes (state and local income and property taxes). There is no $10,000 limit on deductions in general.
And indeed, the IRS itself states "For 2023, as in 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act." (https://www.irs.gov/newsroom/irs-provides-tax-inflation-adju....)
The increase in the standard deduction means that it became more beneficial for many taxpayers that used to itemize. But many things that could be itemized in the past can no longer be itemized, which is probably what affected you (however, due to the way the TCJA was written, that prohibition only applies until 2025 unless extended by Congress, which will depend on who wins the 2024 election).
This low uptake absolutely has to be one of the impediments to a rollout of a free IRS-run tax service. The argument is simple: why should we invest resources in expanding our free services when taxpayers don't use what we already make available? Is there data to support the notion that usage would meaningfully increase if we supported 100% of filing cases? (I would expect the opposite to be true; as tax situations get more complex, filers have more incentive and means to hire specialized help.)
Propublica did a report on this (linked several times in this discussion) that showed how difficult it was to get to the actually-free version of TurboTax.
It's not a service. It's an obligation. You want my money? Why do I have to find a "service" to get you to take it?
If you've never used one of those services, you should. Some of them have gotten better only very recently, some still look like fly-by-night scam operations that are trying to filch your personal information. The old adage "you get what you pay for" has never been more true.
> Is there data to support the notion that usage would meaningfully increase if we supported 100% of filing cases?
Yes. The billions of dollars spent lobbying the congress to prevent this very thing from happening.
Complex tax situations, likely will be using third-party advisors from here out regardless of what the IRS provides for wage earners.
> Though 70 percent of taxpayers qualify for those products, fewer than 3 percent of taxpayers use them, according to a Government Accountability Office report.
There's something other than "free" and generally blaming lobbyists that's preventing people from using these products. Without understanding that, it may not make sense to roll them out more broadly (although I do think that should be the goal).
Instead what I'm left with is a dizzying array of information to keep track of and a vulturous private tax preperation industry trying to lock me into their products. I get it, people with serious money moving around want the flexability to make sure every last penny stays out of Uncle Sam's hands.
That's not what I'm concerned with. I'd gladly opt in to a simplified system where maybe I don't save every dollar but I don't have the hassle of dealing with a complex system and I can easily stay compliant and up-to-date.
Btw should I mention this is mandatory only for self-employed. If you're an employee, it's required by law that your employer must provided you a free service of filling the taxes and everything for you.
Everything is then setup centraly by tax authority which enables the process of submiting tax reports being automatic for most or either, if you have a more complex tax situation, taking you a couple hours tops to self-fill and submit.
It's rather surprising how progressive USA can be in some fields but so far behind in others...
Conceptually, and in principle, this freaks a lot of Americans out. But the burden of not doing it is exceeding the alternative, I think. While it may be progressive to automate tax filing, having the government know everything about your financial transactions without proper cause is not considered very progressive (I guess it depends on what you are trying to progress towards).
There are incentives (tax deductions) that are granted to citizens who ask for invoices with their fiscal details
It is indeed progressive because it unburdens citizens from a massive yearly headache when submiting taxes. It's progressive because it avoids physical printing of receipts, thus reducing waste and paper consumption. It is progressive because less tax evasion means more taxes to apply in free healthcare and social security.
Having people not dying because they can't afford insurance, or being restful that the state will cover up part of their expenses if they can't work (for eg: if they have a flu and can't work for a week) seems pretty progressive to me and a good tradeoff for leting the government know about a few purchases you make.
Also, if you want go paperless, your bank also knows about all your financial transactions and I don't see people caring too much about it as they care with government...
They present the facts better than most (CNN, Fox, MSNBC) but fall prey to the "both sides" bullshit time and time again trying to appear unbiased instead of living in reality.
I recall hearing them do a news story ~~15 years ago, where "balanced" coverage was "Democratic spokesman says 2 + 2 = 3, Republican spokesman says 2 + 2 = 5". No hint from the NPR reporter that something else might be the correct answer to "2 + 2 = ?". Let alone dropping a hint as to what that right answer was.
I didn't bother listening to NPR News (nor donating to them) after that.
Many years ago, over a decade now, Virginia had an incredibly easy and free tax filing system. H&R block got one of their people elected for one term and they quietly killed it off and now we have one of the highest filing fees in the country.
Here's my breakdown of what took the most time/stress (I didn't use a stopwatch, so it's heavily impacted by how it felt):
2% creating a spreadsheet that did the simple arithmetic to add up sums for investment boxes and that did the final tax calculation
90% spent trying to understand/fix one stupid mistake with an HSA account that was very confusing in the tax code. I am nearly certain that TurboTax wouldn't have helped.
5% reviewing all our other accounts, saving copies of the statements, and inserting relevant values into a spreadsheet
3% copying and reviewing my copying of other numbers, including the long stupid EIN numbers from W-2s that I miscopied and caused the IRS to automatically reject my return
... and here are my conclusions:
* The thing I personally would most love but don't believe is easily possible is a way to avoid all the mistakes copying and to simplify some of the data collection and staring at 1099s from different accounts that arrange the boxes slightly differently, but I can see why this hasn't really been automated in an open source way. While some sort of image processing or by trying to scope out APIs with the financial institutions might help, it's hard to envision an open source project that would do this.
* I actually value tax time as a time to review accounts and finances. So even if the data collection stress was reduced, I would still want to have a good feel for the numbers.
* The most serious problems I seem to run into never feel like software problems. I have had problems like the HSA issue in the past with turbotax and the "helpful" UI can only do so much to answer tough questions.
* Last year I filled out the Qualified Dividends worksheet by hand, the spreadsheet is a million times better though. It's basically the same thing as those online calculators, but I wanted to be able to see what calculations it was doing and review it and also not put my tax info online.
* Overall, what I'm most inspired to do would be to share the spreadsheet or a similarly scoped program and document/continue to refine my process for entering and collecting data. Working towards an end-to-end solution feels to me like a loser, at least to start off. Modular seems like the way to go. Solve one problem at a time. There is already an https://opentaxsolver.sourceforge.net/. Haven't tried it out yet, but I feel like it isn't what I'm looking for.
They’re so close to their own solution, “just” needs some UI. (Famous last words, but still…)
I’d be content with “here’s what the CRA has on file.” with a big list of everything already in auto-fill. Then two buttons [accept] which just send it to the CRA with NETFILE, or [file myself] which directs you to a private service instead.
7/7 years I’ve been required to file taxes I would’ve clicked [accept].
[0] https://www.canada.ca/en/revenue-agency/services/e-services/...
As the years go by and all these plans are killed one after the other I realize how right this guy was.
[1]: https://www.opensecrets.org/orgs/h-r-block/lobbying?id=D0000...
[2]: https://www.opensecrets.org/orgs/intuit-inc/totals?id=D00002...
[3]: https://www.irs.gov/statistics/collections-activities-penalt...
The US taxes are not trivial each state will change frequently and federal also throughout the year.
Given I've experienced how much is actually involved i don't think i would trust a government body to be the only option for me who is not an accountant.
With ChatGPT models, we can perhaps have our own tax agent who can assist us -seems likely in the near future in any case. Also as other pointed out, the tax system is at fault, it should just be automatically done and billed by the IRS.
Call on the IRS to provide libre tax-filing software - https://news.ycombinator.com/item?id=35705469 - April 2023 (129 comments)
60M Americans have taxes so simple the IRS could do them automatically - https://news.ycombinator.com/item?id=35476709 - April 2023 (277 comments)
Lobbyists begin chipping away at Biden’s $80B IRS overhaul - https://news.ycombinator.com/item?id=35381701 - March 2023 (214 comments)
Intuit pouring money into lobbying amid push for free government-run tax filing - https://news.ycombinator.com/item?id=34840039 - Feb 2023 (178 comments)
IRS builds task force to explore running its own free e-file system - https://news.ycombinator.com/item?id=34764952 - Feb 2023 (199 comments)
IRS Free File: Do Your Taxes for Free - https://news.ycombinator.com/item?id=34462122 - Jan 2023 (247 comments)
IRS will look into setting up a free e-filing system - https://news.ycombinator.com/item?id=32753099 - Sept 2022 (408 comments)
The IRS could be on the verge of changing the way Americans file their taxes - https://news.ycombinator.com/item?id=32550841 - Aug 2022 (17 comments)
IRS will study free tax filing options - https://news.ycombinator.com/item?id=32502321 - Aug 2022 (25 comments)
TurboTax’s fight against free tax filing - https://news.ycombinator.com/item?id=31072202 - April 2022 (394 comments)
Filing taxes could be free & simple. H&R Block & Intuit lobby against it (2017) - https://news.ycombinator.com/item?id=30856968 - March 2022 (114 comments)
FTC sues Intuit for its deceptive TurboTax “free” filing campaign - https://news.ycombinator.com/item?id=30846071 - March 2022 (587 comments)
Ask HN: How does TurboTax get away with dark patterns? - https://news.ycombinator.com/item?id=30409523 - Feb 2022 (122 comments)
Why do Americans have to pay much to file their tax returns when the IRS knows? - https://news.ycombinator.com/item?id=30267361 - Feb 2022 (22 comments)
Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Lobby Against It (2017) - https://news.ycombinator.com/item?id=30185484 - Feb 2022 (18 comments)
California tried to save the nation from tax filing, then Intuit stepped in - https://news.ycombinator.com/item?id=28944200 - Oct 2021 (283 comments)
The IRS has a big opportunity to fix the way Americans file taxes - https://news.ycombinator.com/item?id=28177289 - Aug 2021 (12 comments)
UsTaxes – open-source tax filing web application - https://news.ycombinator.com/item?id=27998452 - July 2021 (53 comments)
Good Riddance, TurboTax. Americans Need a Real ‘Free File’ Program - https://news.ycombinator.com/item?id=27902380 - July 2021 (248 comments)
Intuit will no longer be a part of IRS Free File program - https://news.ycombinator.com/item?id=27865625 - July 2021 (140 comments)
Killing TurboTax - https://news.ycombinator.com/item?id=26330584 - March 2021 (662 comments)
Show HN: ustaxes.org – open-source tax filing webapp - https://news.ycombinator.com/item?id=26138446 - Feb 2021 (219 comments)
TurboTax Tricked You into Paying to File Your Taxes (2019) - https://news.ycombinator.com/item?id=26102695 - Feb 2021 (306 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free (2019) - https://news.ycombinator.com/item?id=26060414 - Feb 2021 (199 comments)
FTC Is Investigating Intuit over TurboTax Practices - https://news.ycombinator.com/item?id=24409093 - Sept 2020 (194 comments)
IRS stops firms like TurboTax from hiding free tax-filing products in searches - https://news.ycombinator.com/item?id=21948935 - Jan 2020 (25 comments)
IRS Reforms Free File Program, Drops Agreement Not to Compete with TurboTax - https://news.ycombinator.com/item?id=21923220 - Dec 2019 (448 comments)
IRS Tried to Hide Emails That Show Tax Industry Influence over Free File Program - https://news.ycombinator.com/item?id=21393758 - Oct 2019 (188 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free - https://news.ycombinator.com/item?id=21281411 - Oct 2019 (447 comments)
TurboTax to charge more lower-income customers - https://news.ycombinator.com/item?id=20461169 - July 2019 (81 comments)
Congress Scraps Provision to Restrict IRS from Competing with TurboTax - https://news.ycombinator.com/item?id=20119916 - June 2019 (18 comments)
TurboTax Uses a “Military Discount” to Trick Troops into Paying to File Taxes - https://news.ycombinator.com/item?id=19994118 - May 2019 (42 comments)
Listen to TurboTax Lie to Get Out of Refunding Overcharged Customers - https://news.ycombinator.com/item?id=19870242 - May 2019 (44 comments)
TurboTax and H&R Block Saw Free Tax Filing as a Threat - https://news.ycombinator.com/item?id=19810981 - May 2019 (143 comments)
TurboTax Hides Its Free File Page from Search Engines - https://news.ycombinator.com/item?id=19758126 - April 2019 (262 comments)
TurboTax Uses Dark Patterns to Trick You into Paying to File Your Taxes - https://news.ycombinator.com/item?id=19718284 - April 2019 (274 comments)
Congress Is About to Ban the US Government from Offering Free Online Tax Filing - https://news.ycombinator.com/item?id=19613725 - April 2019 (696 comments)
Filing Your Taxes Is an Expensive Time Sink. That’s Not an Accident - https://news.ycombinator.com/item?id=19572917 - April 2019 (155 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=19392673 - March 2019 (253 comments)
H&R Block and Intuit Lobby Against Free and Simple Tax Filing (2017) - https://news.ycombinator.com/item?id=18956883 - Jan 2019 (190 comments)
Would You Let the I.R.S. Prepare Your Taxes? (2015) - https://news.ycombinator.com/item?id=17751383 - Aug 2018 (424 comments)
IRS electronic filing system breaks down hours before midnight deadline - https://news.ycombinator.com/item?id=16860086 - April 2018 (97 comments)
Why I'm boycotting TurboTax this year - https://news.ycombinator.com/item?id=16844458 - April 2018 (23 comments)
H&R Block and Intuit Lobbying Against Simpler Tax Filing (2017) - https://news.ycombinator.com/item?id=16841449 - April 2018 (232 comments)
Stanford Professor Loses Political Battle To Simplify Tax Filing Process - https://news.ycombinator.com/item?id=13990391 - March 2017 (386 comments)
H&R Block and Intuit Are Lobbying Against Making Tax Filling Free and Easy - https://news.ycombinator.com/item?id=13922482 - March 2017 (234 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=13853150 - March 2017 (439 comments)
US Senator Warren Introduces Bill to Simplify Tax Filing - https://news.ycombinator.com/item?id=11492025 - April 2016 (155 comments)
TurboTax Takes Aim at Smaller Rival in Fight for Filers - https://news.ycombinator.com/item?id=11150694 - Feb 2016 (87 comments)
Would You Let the I.R.S. Prepare Your Taxes? - https://news.ycombinator.com/item?id=9381437 - April 2015 (150 comments)
Would You Let the I.R.S. Prepare Your Taxes? - https://news.ycombinator.com/item?id=9380232 - April 2015 (124 comments)
TurboTax Maker Intuit Funnels Millions to Lobby Against Easier Tax Returns - https://news.ycombinator.com/item?id=7595440 - April 2014 (182 comments)
Filing taxes: It shouldn't be so hard - https://news.ycombinator.com/item?id=5488084 - April 2013 (56 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing - https://news.ycombinator.com/item?id=5443203 - March 2013 (330 comments)
Intuit lobbies against California's free tax filing service - https://news.ycombinator.com/item?id=1569169 - Aug 2010 (29 comments)
This should be the only entry point IMO.
In my country:
1. our IRS owns the software 2. the forms are pre-filled with all the data they already have about me 3. they send me an email if they spot an error (both ways)
I could not imagine it differently.
Prior to that, though, the tax code is so encumbered with all of the various exemptions and deductions and carve outs that it was easier and less stressful to have someone else do it. I somewhat recently bought a house, so the mortgage interest deduction comes close on its own to not take the old standard deduction.
There are plenty of these things that the government isn't going to know about- health expenses, state and local taxes (state would be easy enough to keep up with, but local taxes change all the time), even things like a deduction if you keep a home office.
The operating theory is that the federal government isn't incentivized to hunt down all of these things for you (or cannot legally know about ahead of time without violating your privacy), and will over-charge you by pre-filling out the paperwork.
This is where commercial companies believe (or claim) that they are doing good- they ostensibly have a motivation to provide better results than their competitors, and so will do the best job to ensure you are paying the legally required amount of taxes without overpaying.
I wonder if a politician could get away with calling these "bullshit jobs" in response.
> The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
Just got back from Austin. Cashiers telling me "card only". Because it's more hygienic. For my health.
Yeah.
Having stipulated that, I do not understand why the government is creating a free product to compete with Turbotax, et al. instead of making tax returns unnecessary in the first place. I assume it is because it would have been much harder for Biden to sneak that change into the bill. But, sadly, nothing short of reform is an actual solution. And, I'm much less comfortable with the government spending tax dollars competing directly with a private company than I am with them legislating or regulating that company's reason for existing away. That feels like it's much closer to their remit.
https://www.bls.gov/oes/current/oes132082.htm
The industry should be destroyed and the earth salted, but doing so will hurt some decent people.
>The IRS estimates that setting up and operating a direct file system would cost the government between $64 million and $249 million annually, depending on the number of users and the complexity of returns it could handle.
For all practical purposes, it's free. Intuit alone has some $12.7 billion in revenue, so we could spend fifty times the estimated cost and still be in the black.
Worth noting that the GOP-led House is trying to silently kill this with haste (along with funding for IRS enforcement) by burying defunding language in H.R. 2811 (a.k.a. the House's proposal to raise the debt ceiling) § 251 under a backhanded title named "Family and Small Business Taxpayer Protection"[1]:
> The unobligated balances of amounts appropriated or otherwise made available for activities of the Internal Revenue Service by paragraphs (1)(A)(ii), (1)(A)(iii), (1)(B), (2), (3), (4), and (5) of section 10301 of Public Law 117–169 (commonly known as the “Inflation Reduction Act of 2022”) as of the date of the enactment of this Act are rescinded.
The $15 million budget mentioned in the article was appropriated[2] by § 10301 p. (1)(B) of the Inflation Reduction Act of 2022 and will expire at the end of this fiscal year:
> TASK FORCE TO DESIGN AN IRS-RUN FREE "DIRECT EFILE" TAX RETURN SYSTEM.—For necessary expenses of the Internal Revenue Service to deliver to Congress, within nine months following the date of the enactment of this Act, a report on (I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct efile system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct efile tax return system, $15,000,000, to remain available until September 30, 2023: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.
What the GOP really wants to quietly snuff is the IRS's enforcement budget...something about IRS examinations and collections having very real capacity to deliver positive revenue increases for the Treasury[3], and higher-income taxpayers facing the largest increase in audit rates[4].
Alas, games will be played[5].
[1] https://www.congress.gov/bill/118th-congress/house-bill/2811...
[2] https://www.congress.gov/117/plaws/publ169/PLAW-117publ169.p...
[3] https://www.cbo.gov/publication/56467
FIRST, obviously, there are probably fewer dark patterns in anything than the intuit / us tax situation. there are so many problems with our tax system and the way it eats away at working people while barely touching the wealthiest folks.
i’ve had some unfortunate interactions with the CA Franchise Tax Board in recent years that have made me question whether the IRS will choose to be transparent and treat us fairly if this passes.
I’m certainly no tax expert, so the notion that I may have made a small mistake in past tax years that needed to be corrected is not unreasonable. that i was not provided with any detailed information, or really any communication at all, and the money was siezed from my paycheck without notice. The first time this happened was the second paycheck in the month of december. This sucked, but I was probably wrong, maybe I failed to update my contact address somewhere, and I always want to pay what I owe.
Fast forward to 2021/2022, somewhere in there, IIRC, the CA FTB, during a budget crisis, found that I was short a couple thousand over multiple years from several years back. I had never heard anything about this before, and they came at me for 2-3 years all at the same time. No information on what was incorrect.
CA has an, “Office of the Taxpayer Advocate”, because of course at some point we legislated that there should be someone paid by the state whose job is to help taxpayers who feel they have been wronged. Obviously there’s a weird conflict of interest here, but it’s better than nothing.
My interaction with the taxpayer advocate many years ago involved them trying to tax me for work I performed in an office in San Antonio, Texas, over a year before moving to California.
certainly part of this is about the fact that CA is a bit grabby at the entire lifetime income of anyone who relocates here, which is absolutely the fucking truth, but I also found these situations to give me pause on whether I want to trust the government to tell me whether or not I have correctly paid my taxes.
Even though I am single, live alone, no dependents, and claim 0, somehow I am always off.
If we want to simplify this, get out from under Intuit’s thumb, and have like 95% of the country or whatever not even have to worry about taxes, we have to fundamentally rethink how they are calculated.
Why isn’t my employer liable for not calculating the appropriate deduction? Why is this something I have to worry about? On balance, at this point in my career, a thousand bucks a year isn’t a big deal, the problem is asking me for it all at once, when there’s no great way for me to know to expect it.
I have, for the first time in my life, a small amount of savings, but I still don’t consider it a nest egg. That is my insurance for when I somehow manage to owe taxes even though I have done every single thing that I should do, correctly.
another knock on TurboTax is that they often end up calculating that you owe more tax than you do, and I think it backs up my concern that in those cases, the IRS does not say, “Hello, kind person, you gave us an extra $3,000, we would like to return it to you.”
It’s basically just fucking all bad.
Until some lobbyists bribe congress to ban that.
> Kentucky Single Member Limited Liability Company Income Tax Return: As a sole proprietorship LLC, your business income and expenses are reported on your personal tax return (Form 1040), Schedule C. However, Kentucky requires you to file a separate state tax return for your LLC income. You will need to complete and file the Kentucky Single Member Limited Liability Company Income Tax Return (Form 720S) along with your personal tax return.
It's wrong, I needed to use form 725 since 720S is for an s-corp but it might have pointed me in the right direction. Instead I paid a couple hundred dollars to H&R Block and they messed up a handful of my forms and told me to "use whiteout" to remove the incorrect phone number and address they put on the form (725) and I also had to mail it in (they sent in my state/federal taxes). They said there wasn't a way to e-file 725, not sure if they were right.
This year I'm just going to get an accountant (I was in a rush for my 2022 taxes).
I suspect, that given the currently complexity of the tax system itself (rather than the filing, which seems to be pretty straight forward), the private based system saves the tax payers money each year over any system the government could create.
Oh, and USDS is involved, so shouldn't be a contractor shitshow.
That's our current system. You can pay nothing to file, but it means that the government then has to spend a ton of resources on managing pieces of paper. I'd prefer for staff time to be spent going after fraud than trying to read bad handwriting.
In this case with the IRS program, the WaPo article even notes about the Biden administration wanting to "better serve low- and middle-income Americans entitled to a bevy of credits." As in, they want to make sure folks get all the deductions (and other benefits) they're allowed.
Edit: Let me also add that many people use paper forms because it's free (or other reasons). There has always been a publicly-funded version of a way to pay your taxes. But because it's paper, it's been very expensive for the government to administer. This also incentivizes the IRS to keep this system updated each year.
Probably without even giving Intuit a chance to bid on it. Not that I like Intuit, they suck IMO. But I do think a vendor selection process such as this should be an open one. Instead we will have more back room-brokered graft.
You can learn more about the U.S. Digital Service here: https://www.usds.gov/mission
On the downside... no way would I use a tax preparation system provided by the IRS. It's bound to be a UX nightmare, like all government software, there's an obvious conflict of interest (the IRS has no reason to help find deductions and/or assist me in minimizing my tax bill), and I'd rather not give them any more visibility than I have to into my personal finances.
Update for downvoters: Woah! Sorry for casting aspersions at the Tax Man.
Seems to work for every other developed country
As someone who has used government-provided tax preparation systems my entire life, I'm curious what your threat model here is exactly.
Additionally, our revenue dept has an unforgiving reputation if you fail to complete your tax information properly.
But that's fine. That would mean that TurboTax would have to provide value by way of minimizing what you owe to the IRS instead of being the easiest way to navigate a complicated process with legal consequences if you make a mistake.
This is not true in regards to the US Tax code. There's a reason the tax preparation industry is so large in this country.
they send a bill of the expected amount, and you do your taxes on your end (if you so choose) to make sure its correct. If wrong, you submit your taxes, and move on with life.
for the vast majority of people, you have a w2 or some other accounts that submit stuff to the IRS, and these same people mostly take standard deductions, its a simple computation.
The US likely wont do this, because they potentially miss out on income that honest peopel will report, when it hasn't been reported to them (for example cash tips / gambling winnings under W2G and things like that.
The giant tax prep industry can still be there for everyone else.
I'm curious, what happens in your scenario if you reply 'no'?
They already kinda have all the visibility they want. Remember the whole joke about the IRS - "we know exactly how much you owe, but we're not going to tell you that amount because you have to figure it out yourself, and if your number doesn't match ours, you could go to jail for tax fraud".
If you use anything but cash for everything, the IRS knows. Credit cards? Employment info such as salary? Rent, mortgages, loans? They know everything already.
I'd rather trust them than a private company that has to lobby against tax reform to keep their stock price high.
But now I'm in my 40s and filing taxes is a nightmare.
You have to fill out values and match them based on the IRS’ existing knowledge?
It’s never made sense to have them separate. :/
This sort of attitude isn't productive, the IRS is not out to get you and they already know how much you make (unless your income is all cash you made from selling things out of the back of your truck).
The IRS doesn't receive a cut of the taxes they collect, so I don't see the conflict. They've been known to contact people who overpayed so they could send a check.
If the IRS system is found to be negligently ignoring valid deductions, that'll cause a hullabaloo picked up on by politicians. Things should change.
If Turbo Tax is found to ignore valid deductions, they'll lose a small portion of users who follow the news and know about equally-priced alternatives. Chances are, they'll keep on trucking just fine.
>and I'd rather not give them any more visibility than I have to into my personal finances.
What kind of information do you think an online form would collect that wouldn't already be on the tax forms you submit today?