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Comment by lr1970 | Hacker News Reader

lr1970

> Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”.

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.

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> 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

If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.

Exactly. Doing custom taxes could be opt-in. "Here's what we're going to charge you. If you think you owe less due to details we don't have, feel free to file the old way"

Correction: "If you think you owe less or more due to details we don't have, feel free to file the old way"

I’d be happy with a system like this, as long as they made it very clear WHEN you should do it the old way. For example:

“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.)

I don't understand why the RSU basis adjustment isn't reported automatically. All of the information is available without my involvement...

I worry about be one of those. what is it about RSU compensation that is commonly misunderstood?

It’s often the case that you sell a block of RSU stock, and the broker reports the entire sale as a capital gain (e.g. if you sell $50K, then it shows up as a $50K capital gain on your broker’s 1099). But in reality, the gain should only be the difference between the price it was when it showed up in your account and when you sold it (which can actually be a loss), because the basis is already included in your W-2 as earned income.

E-Trade and Fidelity report gains correctly. Which broker doesn't?

My recollection is they report it on a “supplemental information” form, not directly on the 1099. If you just do a naive import in TurboTax or similar, you’ll overpay your taxes by thousands.

The IRS requires your broker to report a different cost basis to you than you are entitled to use. It is government-mandated disinformation, not a misunderstanding.

Simplifying the tax code would go a long way. We don't need to go all the way towards some flat consumption tax, simply eliminating tax deductions, credits, and write-offs would make calculating a person's tax burden much easier.

Don’t deductions, credits, etc allow the government to incentivize citizens to behave in certain ways? Are you implying that it shouldn’t be in the business of incentivizing behavior?

Well yes, I would absolutely say the federal government shouldn't be in the business of manipulating markets and consumer behavior. That was never part of our government design in the first place, unless you consider dealing with interstate commerce disputes to fall under that umbrella.

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?

And that's probably the main reason it isnt done. The IRS assumes nearly no one would report extra taxable income if they came out and said all of the things they already knew (and by implication, dont know).

Well I think that depends on what is being provided, most suggestions I've seen only talk about cover the simple case of some W-2s and other income sources already reported to the government and taking the standard deduction. If that's the case then the government doesn't _have_ to provide everything it knows, it would be on you to know if you have income that wasn't already reported to the government and file yourself, and it would be the same as now in that you don't know if they'll find out about your other income.

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.

Right. I was assuming most people would choose the lower of whatever the IRS said or their calculations showed. And that's fine, presumably that would be taken into account on the government side in order to get enough money.

Here we go. American exceptionalism again. No surprise here. It isn’t done because your government is stupid and corrupt. Look at the myriad other examples of this happening in other countries.

Thanks. Glad to have this pat and reductive answer to all of our problems.

Right? Now that you know the answer, apply it to every problem where « but for us It’s different »

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.

> Gun control

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.

> enshrines private ownership of guns in its constitution.

Czechia, Guatemala, Mexico, Phillipines, Ukraine, Yemen.

You are right, it’s truly unique. Nothing else that worked elsewhere will work. Thought and prayers!

"It isn't done" isn't responsive to this article about how it is being done.

It's not done for two reasons:

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...

Isn't this what some of the nordic countries do? They send you have receipt/bill and you have a window to correct it.

It's what the UK does too - I never had to file anything for taxes if I only had reported salaried income. Even stuff like interest or investments is mostly automatically handled, you often need to be doing something a little unusual in that area to require anything.

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.

This is how it works in New Zealand; you get a tax statement. You can file if you think that IRD got it wrong, and you have to file if you have income from (for example) dividends, overseas incomes, or similar sources.

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.

This is how it works in Chile

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

I moved to the UK last year from the US. Over here, you only file your own taxes if your income is over 100k GBP -- which is probably a reasonably simple proxy for "your tax situation might be more complicated." No doubt it has edge cases, but it's a nice sorting mechanism for the majority of cases.

IRS knows about my taxes because my employer informed them. If you are a business owner, well talk to your boss about getting the taxes done. Self employed, business owners, and petite with some investments will still need to do some work.

> IRS knows all the income data only in simple cases like salaried employees with W-2 forms.

These "simple" cases still cover the vast majority of American taxpayers.

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