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.
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.
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.
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".
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?
- 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.
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.
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.
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.
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.
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.
That said, I'd be more than happy to see HR Block go bankrupt.