IRS moves forward with a new free-file tax return system
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> In contrast, the NAACP has spent $140,000 lobbying on “free-file” since 2006 and Public Citizen has spent $110,000 in the same time frame.
With two orders of magnitude of lobbying dollars difference on either side, I'm surprised this is going anywhere.
> “An IRS direct-to-e-file system is redundant and will not be free – not free to build, not free to operate, and not free for taxpayers,” Plummer (a spokesman for Intuit) said, adding that it “will unnecessarily cost taxpayers billions of dollars.”
Oh, like the system your company built and lobbies for? How do you say stuff like this out loud without your pants bursting into flames on the spot?
I can definitely foresee a future, based on governmental record in publicly-facing IT systems, where every single word of that statement is technically 100% true.
First part is all but tautological - Of course it won't s not free to build or operate; and thus it wouldn't be "free for taxpayers" in the most technical sense (this doesn't mean it wouldn't be excellent value or save money overall or even cost more money but save it where it counts).
It's the last sentence (unnecessarily cost taxpayers billions) that could go either way. This could in principle end up an efficient and effective, easy to use and helpful well performing system that's a brilliant investment of public money.
I hate to say it though, but it's also extremely possible it would cost a lot of money with nobody using it because it sucks.
Besides, it feels like in the USA, IT systems are only a part of issue with tax system. Actual tax code and submission options are the bigger part.
For instance, I just received some mail that I owe tax based on my Uber and Lyft earnings. One problem, I never worked for either. So now I'm expected a big slog through paperwork to remedy this problem that happened a couple years ago. Oh, and it may continue on to the next two years. I have no way of knowing what they think they know about me.
Also interesting is my account balance is currently $0, and I know that's not true even if they 100% believe the last mailing denying my 1099's from Uber and Doordash (not Lyft as I said above).
Incidentally, Neither Uber, nor Lyft can help through customer service. I was thinking of taking them to small claims court since I'm not bound by any forced arbitration.
The mail I was sent does match the the 1099's in irs.gov. So maybe the mail I sent back was believed and they just zeroed out everything as the only dispute left would have been around $13.
I'm sure it will play out over time. I've had a couple interactions with the IRS over the years and it's always been a fair experience. I'm sure Uber and Doordash will have a hard time providing any valid identification to the IRS.
But USGov would far sooner regulate the tax prep industry more heavily than simply take it over. We ain't no China.
IMO The government should directly be hiring the best and the brightest with the pay to match. I would be more than happy to pay more taxes at my pay grade (or would support higher capital taxes) for free e-filing that's easy, fast, and multiplatform. However my taxes are raised would surely be cheaper than what I pay my accountant annually to file for me.
It's ridiculous to me that government contracting is always expected to cheapen out for "efficiency". Governments should have excellent software and product minds on staff at all times to manage communication and data internally and externally, imo.
It doesn’t matter that someone working for the government has the potential to have a much higher impact on a nationwide level than some rank and file worker who works at some blue chip auto insurance company, the moment increased pay for government workers is even brought up, that person imagines it as coming directly out of their paycheck.
See teachers, urban planners, sanitary workers, NASA scientists, etc…
It’s a shame, because I have the unpopular opinion that _more_ government, filled with talented people who actually want to _fix_ the issues they’re passionate about, is the answer to almost all of the USs domestic problems. Right now the highest paid government workers are those on the brink of retirement in administrative positions so far removed from any real work. A bureaucracy of gerontocracy, if you will. I really wish the government (not the political world, but the civil staff) was seen as as a place for passionate young people to aspire to, with the pay to match.
I agree with the rest of your statement but while Conservatives exist with their two Santa Claus nonsense then it won't matter.
Why can't the IRS just send me a statement with my obligations and if I don't want to contest it I pay and I am done?
Folks argue that most of this information is available to some level of government already, but that’s a far cry from centralizing all of it in what by definition must be an easily accessible form.
Dramatically simplify the tax code and this approach becomes feasible without being a security and privacy nightmare.
There's nothing hard about updating a few values with these then you're done in five minutes. State governments already do simple walkthrough forms and federal is really no different. If you have a complex tax situation then that's your problem to deal with. Don't burden 99.9% of the population with something that should be free, should be simple, and should be fast.
I actually had to dig up pay statements, etc to confirm the information. I’m glad I did because my employer made a mistake on a retirement contribution.
So what did it save me? Maybe typing in some numbers, which is probably 5% of the total effort.
The issue is the complexity of the tax code. It would be great if the IRS pre-filled forms, but the forms aren’t going away.
Many people won’t review the dozen or so pages of forms to make sure they’re correct. No doubt that will favor the IRS, not the tax payer.
You could log into a website occasionally and upload charity receipts or click through a wizard to apply for a deduction for one of those deductions most people don’t use, but the flow for basically 80% of taxpayers, and essentially 100% of the bottom 70% of earners, should be a quick form update when life changes happen, and a yearly EITC-funded refund check that just shows up.
But of course everyone in that 80% uses a different 20%. When you consolidate the overlapping deductions, credits, exceptions, exemptions, … you end up with a staggering amount of data required to accurately “pre-compute” income tax bills for even 80% of taxpayers.
“Quick form update when life changes happen” is, I think, an overly sanguine way to express a requirement that grieving parents file paperwork with the revenue service when a child has passed. That’s a bit melodramatic, but my point is that centralizing the execution of a complex tax code inside a state bureaucracy creates a perverse relationship with the folks who are supposedly in charge.
Once all the calculations are taking place in an opaque, voracious IRS database, what constraint is there on even more complex taxes and exemptions? Your doctor knows you’re a smoker. Should you pay a Medicare surcharge? ACA plan purchasers already do, in contrast with most private employer plan members.
No, no they don’t. Because we already have determined what most people use and made a special form for them called 1040EZ. It only offers simple things but is enough for most people. Then there’s the 1040A which goes a few steps further but is still simple. Millions and millions of returns are submitted on these short forms every year. These filers are proving that they don’t need complicated deductions and stuff because they already don’t use them.
> grieving parents file paperwork with the revenue service when a child has passed.
What are you talking about, in our current system you’d be filing next April and omitting the deceased person from the list of dependents. Your grieving strawmen would be able to take many months to go update the info before the cutoff when they print your check/bill (likely it would be minimum 4 months after year end like it is today).
> Once all the calculations are taking place in an opaque, voracious IRS database, what constraint is there on even more complex taxes and exemptions?
I don’t really want to talk politics on here, but I think this is a separate battle to fight. The tax system is already ridiculously complex because it’s trying to use the tax system to incentivize/punish behavior and at least two parties/factions have engineered it, so it’s quite confused. All politicians will continue to use this to scam the people who they like less, for the benefit of whoever they like more (campaign contributors) and they obviously don’t mind complexity even when it’s on taxpayers to compute. All things equal I’d rather force a computer to compute it and know that I can’t be audited for not understanding tax code.
It’s a huge, political dark pattern designed to keep people angry at the government to lower public sentiment towards the government.
In the US there is a feeling of lacking representation on both sides, which I suspect is due to corporate lobbying and the culture wars, and I think a feeling of ineffective spending, again I think due to lobbying, and also pork barrel projects.
I think the answer is to remove corporate lobbying and limit campaign spending.
Except that a lot of tax filing companies require a bank account with an American address, so it's always an even bigger hassle.
(I.e., most people have already been deprived of the funds for some fraction of the year; what interest is served by making them waste time finding records and jumping through hoops and potentially paying a third party to help them provide the IRS with information that it mostly already has?)
To that end, I would like taxes to be due about 4 Tuesdays before the Election Day Tuesday. If you want to vote for politicians who are campaigning on spending a lot of taxpayer money for good programs, so be it, but do it with recent memory of having paid your taxes (assuming you are in the slight majority* who pay federal taxes on net). If you want to campaign on spending a given amount of taxpayer money, whether more, the same, or less than today, your campaign should be interpreted close to taxpaying time.
I don't want it to be more onerous or annoying to pay taxes. I do want people to recognize that taxes and spending are linked (and frankly, ought to be more closely linked than they are today, IMO).
* - which until very recently was a slight minority of households who paid federal taxes on net.
>I would like taxes to be due about 4 Tuesdays before the Election Day Tuesday.
Most people pay taxes in small increments every 2 weeks then get a refund around tax day, so your plan may not do what you think.
>I do want people to recognize that taxes and spending are linked
To your own point, they really aren't. [0]
>But do it with recent memory of having paid your taxes (assuming you are in the slight majority* who pay federal taxes on net)
To add some color on this [1]:
But, for the most part, people don’t pay income tax because they have little income. About 60 percent of non-payers make less than $30,000 and another 28 percent make between $30,000 and about $60,000.
Of the 72 million households that will pay no federal income tax this year, about 24 million, or roughly one-third, are age 65 or older.
[0]https://fred.stlouisfed.org/graph/?g=17dyP [1]https://www.taxpolicycenter.org/taxvox/tpc-number-those-who-...
Under that system, I'm totally fine if people get a $1K refund after writing a check for $15K in taxes withheld. That would still demonstrate the linkage sufficiently to inform their voting choices.
[0]https://www.kff.org/other/state-indicator/number-of-individu...
That's OK, especially since most of those who are now over 65 and retired worked and voted on reps/platforms/policies from 18-65 and earned income/paid taxes for probably ~40 of those years.
The problem is that would only apply to federal taxes. Not state or local income taxes, nor real estate taxes, or retail tax, or tax on gas or other things you might buy or use.
Paying estimated quarterly taxes four times a year wasn’t bad. I calculated my withholdings, remitted my tax payment through EFTPS, and was never surprised at tax time. I don’t think I ever got a refund or owed when I was doing it myself.
I learned that many people who have never contracted before are shocked they have to do this, lost on how it works, and had (then) no good place to go for actionable advice. I found that surprising and kind of sad in a way. We could be doing so much better with financial literacy.
But, get a raise, take a pay cut, find a new job, start or stop a second job, or a third, or fourth, get paid hourly, get sick, take time off to care for a sick family member, have a kid, go back to school, graduate, get married, get divorced, get a mortgage, pay down your mortgage, ... There are all sorts of scenarios that could change your tax situation on both the federal and state level, making it difficult to calculate how much you would owe up front.
What it really boils down to is our tax codes suck, and too many rich folk are keen on keeping it that way.
Setting aside the 90% thing, to your original point, paying taxes is not a voluntary thing. There is, however, at least some flexibility in how you pay them.
The flip side of this is: who cares, withholding is actually fine. For a vast majority of people, estimated withholdings is pretty close, and the few percentage points one might earn on a $1k refund in the meantime just isn't worth it.
In my opinion, the best easy tax situation would be that at the end of the year we can skip (most of) the filing step and I either get a check or a bill.
I also have a friend who left Google to join numerous other high performers at 18F and know for a fact that they have done good work benefiting taxpayers:
I believe the U.S. Digital Service is better than it once was, and while it's not all rainbows and unicorns and super efficient everywhere (no doubt there are tons of huge problems with money being wasted), I do think there is improvement, and hopefully some people reading this will go help out.
I'd much rather ATTEMPT to have an efficient free-file system than not try at all.
To be clear I’m not saying it’s a bad idea either, or not worth the money. But I would be surprised if it didn’t cost billions to implement.
https://www.theatlantic.com/technology/archive/2015/07/the-s...
In fact the IRS partnered with the US Digital Service to make this prototype in 9 months.
It's fair to be cynical, but also give credit where it's due.
How much is Intuit’s revenue? Is it “billions”? If so, they provide their service at a higher cost.
It involved systems from multiple agencies and jurisdictions that had been developed separately and not been designed to exchange data with systems outside their own agency.
The IRS systems already talk to everything they need to talk to.
For sure it could. Haven’t dug into the details yet but the #1 cause I’d expect if that does happen is if the government contracts the actual implementation out to…surprise, one of those same shitty firms, Intuit and H&RBlock. And they would build it to suck basically on purpose. I hope existing players in the paid tax return space will be excluded from being part of building whatever this is, as it would be a huge conflict of interest.
So then why would the taxpayers not want to invest an alternative that could spend "needless billions" to save additional needless billions?
I think everyone should use this to update their priors on the impact of lobbying. Government action is not contingent on a dollar vs dollar comparison. Citizens United did not result in a raft of unpopular legislation being passed. (Not saying it was the right decision, just that its impact was overstated.)
We should all feel heartened that our government is responding to good arguments over lobbying dollars.
Another one we should keep fighting on is Right to Repair. John Deere and the like can put as much money into the fight as they want - as long as we have people like Rossman being gadflies, sanity will win. Eventually.
What it needs is to not exist. The product does a fine job of doing an unnecessary thing. For the vast majority of users it should be a tax bill or refund check that arrives with no user intervention at all.
The remaining use cases should be handled differently -- perhaps by a professional. That professional may themselves want such software, but it's likely a different interaction than software also aimed at users with much simpler use cases.
This is undisputably true. H&R Block n Intuit are taxpayers, n free-file will cost them billions of dollars.
Being real, online taxes through the SII work great in Chile.
You can read about the settlement from ProPublica: https://www.propublica.org/article/intuit-will-pay-millions-...
The rich can pay someone to do the work for them. This saves them time, stress, energy, etc. The poor cannot. They have to do all this themselves and then they’re open to the risk of actually getting something wrong. And the impact of getting something wrong is highly imbalanced. If they get something wrong and end up paying more tax than they need to there will never be a second thought given to it. But if they mess up and pay less taxes than they should they will be hit with a penalty, interest, and even maybe an audit.
And the idea that everyone should be reasonably competent in taxes seems a little ridiculous to be honest especially when no one is taught how to do taxes in any point in their lives.
An alternative might be to teach how to do taxes in school, but at that point the cost of teaching taxation would far exceed the cost of developing this software, never mind the human hours that are wasted.
Anecdotally, I messed up copying tax owed from the table a couple years back, and the IRS sent me a letter telling me I made a mistake and overpaid, along with a check for the difference.
In any case, a lot of the complication in the tax code comes down to the government incentivizing certain behaviors, so it makes sense that we should put more focus on teaching people to read the rules and find out what those incentives are. Of course a free calculation tool to run simulations could help people to understand those rules, and we ought to make the actual filing more convenient for everyone.
~40% of households pay no federal income tax today. They'd literally pay nothing for this service.
Sure, but that's also how taxes generally work as well. People making less money will be paying less for the IRS service just as much as they would be paying less for the TurboTax system, as it currently is.
Not sure about that. They qualify for a lot of complex rebates and stuff. When you make a certain level that they consider middle-class, suddenly your taxes become a lot easier (in a bad way).
So last year I got a bill in the mail for $8,000; $7,000 for the actual taxes I owed, and a $1,000 fine. I was able to call and get the fine lowered (thanks to advice I received in HN actually!) and I wasn't "angry" with anyone but myself. I did owe the money, I didn't blame the IRS for wanting it.
But it did kind of make me wonder something: if the government was able to find out that I screwed up on my taxes, then why am I doing anything? Clearly they have all the data and information necessary to determine how much I actually owed, and clearly they were able to spot my mistake, so why make me pay $60 for TurboTax at all? Why not just send me a bill or refund every year?
This is a step in the right direction.
87% of tax filers could have their taxes filled out by the IRS because they IRS already has all the information.
And marriage and death records are public, as are probate. So they would have all of that too.
Or simply ask you if the most common situations apply to you, just like turbotax does.
The IRS could send a tax bill for what they do know, with an option to agree that is all you owe and pay, or an option that you will need to file the taxes yourself because they are missing information.
For the vast majority of Americans, option 1 will cover them.
I'm not saying a company like Intuit adds zero utility, I'm just saying that I think a lot of taxes are simple enough to where it would be relatively easy to just give people a default thing. If the IRS gets something wrong, or is missing some info, then I think a software like TurboTax makes a lot of sense, but isn't that much more of an edge case? Fundamentally, the complexity of my taxes didn't really change in the last five years.
But the IRS still knows about them.
Also they could put a website where you could spend five minutes entering the most common information they don't already know, and then spit out your bill.
It's not that hard. Most filers situations aren't that complicated.
That's basically what they're doing.
Which goes to another stupid thing, for some reason the RSU brokerage doesn't report the cost basis. I guess to make it more annoying to sell company stock.
This is because the employer doesn't tell them the cost basis, right?
Like it or not, tax law is complex. This is where a good CPA is worth whatever they might charge to do the work.
The could also put up a website where you spend five minutes inputing the most common deductions they don't know about. It's not that hard, most filers situations aren't that complex.
One of the most valuable things I got from doing my taxes through CPA's for decades boils down to a single word: Education.
Tax laws are complex and they are not going to change any time soon. As I said in another comment, we can't even build a damn high speed train --which is simple when compared to changing tax laws. So, let's not pretend the idea of simplifying tax laws is anything other than a fantasy.
The education I received through the years guided me towards understanding what one can do to use the legal tools available to all of us to reduce our tax obligations.
I emphasize "legal" because people somehow have equated paying less taxes to some nefarious thing. If the law says you can take deduction A by doing B. Well, do B and get deduction A. If you don't, you are leaving your money on the table out of pure ignorance.
The probability of and IRS easy file system providing this level of service to taxpayers is less than zero. I have never regretted paying a CPA to advise me and prepare my taxes. It's worth every penny.
So, yeah, reality-vs-fantasy?
Because we are effective parents and do our job, they don't get their way.
I can't see why our elected representatives can't manage to act with the same level of responsibility.
I have often wondered if we could split the house in two: one for people and one for industries. This would force transparency and bring the primary issue of double speak and lobbying to the forefront. It would turn them into official cogs in our body politik instead of forcing reps to work and speak in a duality.
>Republicans on the House Appropriations Committee in June proposed a budget rider that would prohibit funds to be used for the IRS to create a government-run tax preparation software, unless approved by a group of House and Senate committees.
>The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states.
Also, per the site guidelines, please don’t make unnecessary accusations that someone has not read the article. Pointing out what the article says is enough—the self-righteousness doesn’t add anything.
Let me introduce you to HFT.
The move “safeguards the IRS from an obvious conflict of interest where the tax collector becomes the tax preparer,” the bill’s summary states.
That’s a hard R in Republican
The one that affects most people is that the IRS system is "eventually consistent", but they do not currently have the information needed to file your return on the date your return is due.
If you don't believe me, request your transcript-of-records* on your account filing date. Then request it again in early fall. The latter will, IME, be complete while the former will not.
* - https://www.irs.gov/individuals/get-transcript
The one that affects only a subset of people is that many deductible items that go into tax returns are never shared with the IRS at all and only the taxpayer knows about them (today).
But we could also just make the filing deadline October for individuals. Most of those late arriving forms are K1s for partnerships that only file in April.
That said, I am solidly on board with the IRS just computing the taxes for taxpayers and sending them a bill. Taxpayers who dispute the bill can then just file their own taxes as normal.
Your personal data (age, dependents, marriage) is also in databases recording births and status changes.
For most filers, that's all you need.
I would think that they're only incentivized to accurately apply the existing tax laws, and those laws are written by a separate entity.
US taxes arent complicated because of tax software lobbiests. In fact they are already very simple if you actually value simplicity. But people dont - they value paying the least in taxes as possible (as they should).
You can dumbly supply a small amount of information and be in complete compliance with the law. Virtually all complexity comes from proving ways in which you don't owe taxes and calculating how much. Thus, reducing complexity necessarily increases taxes for most cases. That means reducing complexity will always have lots of normal people rationally opposing it.
Tax complexity reductions need to be accompanied by tax cuts across the board.
I do my taxes every year, sometimes long-form, sometimes with software like TurboTax. The complexity of my taxes is entirely the fault of the way in which I am required to provide information to the IRS, most of which they already know, even though I take the standard deduction and don't do any "tricks". A simply example is if you have any sort of stocks/bonds or other tradeable asset holdings. Reporting this is a massive pain in the ass, because despite the fact that Schwab/Etrade/et-al already report this to the IRS, they make you list the cost basis, date of purchase, and sale price of every transaction that occurred within the tax year as part of calculating whether or not you're eligible for long-term capital gains or are taxed at your marginal income tax rate (short term capital gains). Very closely related is transactions dealing with RSUs, which every tech worker (most of HN) has to deal with. This is despite the fact I work a relatively normal white collar job on a W-2 and don't even file a base 1099 on a yearly basis.
Taxes are complicated in the US because our tax code is bonkers and we're forced to precisely input a whole lot of spreadsheet bullshit that the IRS already knows so they can auto-check our work against their database rather than just telling me I owe them an extra $2k because despite having maximum withholding, the government wants to fuck me a little deeper in the ass. Exactly none of this is optional, I am /obligated/ to report all of this complexity, whether I paid enough or not, or I am legally penalized.
Taxes /could/ be simple, but they are not, for anyone who makes more than about $60k/yr, which is nearly half the country.
> You can dumbly supply a small amount of information and be in complete compliance with the law.
This is not only factually untrue, anyone who follows this advice is putting themselves in significant legal jeopardy.
Right/wrong and controversial/uncontroversial are not mutually exclusive. Look at the amount of people in favor of the notion that tax lobbiests are to blame for tax complexity. It's always the dominant narrative
> A simply example is if you have any sort of stocks/bonds or other tradeable asset holdings. Reporting this is a massive pain in the ass
Actually you just proved me correct. You could simply declare this income as regular income and forego the tax-advantage of the capital gains rate. But you dont want to pay extra in taxes. There is no penalty. The government might actually send you a higher return than your tax return indicates. And besides all that, that aspect is more tedious than complicated. You just write down whats in the box.
>> You can dumbly supply a small amount of information and be in complete compliance with the law.
> This is not only factually untrue, anyone who follows this advice is putting themselves in significant legal jeopardy.
What is factually untrue about that? I feel like I actually wasn't specific enough to be falsifiable (what exactly does "small" constitute?) so calling it factual untrue is funny.
No, you can't do that. It's reported by the investment broker as investment income, and you must declare it as investment income and provide the specific details /whether or not there is any tax advantage/.
> There is no penalty.
Prove it. Show me where the IRS says that you can submit investment income as regular income when it was already submitted on the backend by a broker as investment income and how that will not result in a penalty for misfiling.
> more tedious than complicated
This tells me you've never done it. Depending on your broker (and sometimes you don't get to choose, for instance as part of an ESPP or for RSUs) they may not provide it to you in a nice clean way and it's rather annoying to determine, for instance, the correct cost basis. At some point "tedious" and "complicated" are the same thing.
> complete compliance with the law.
Actual tax attorneys barely know what qualifies as "complete compliance from the law". You should probably simply refrain from giving legal advice about taxes if you are not in fact a tax attorney and the reader is not in fact your client.
I want the IRS to give me form - paper or digital - with the data they already know from my employer, bank, etc already in.
I'd be happy to enter the other things myself.
(IOW, if you rely on the IRS to tell you what you owe, there's probably a penalty attached.)
If you have choices (e.g. joint vs separate, itemized vs std deductible), then you want to crunch the numbers yourself so that you can make the best choice. You also need to be careful if you have reporting requirements that don't affect the tax total that year like IRA backdoors and AMT books.
However, it's not clear to me how self reporting/filling is not a 5A violation of self incrimination.
There's no reason why this has to be true. It might be true, but only due to inefficiencies.
The IRS already has code to calculate and validate everything. That's how they know if you make an error on your taxes or failed to report something. All they need to do is refactor it and turn it into an application. That's not a trivial effort, but all the functional code has already been written by the IRS.
My impression is that most of the cost of development for Intuit and H&R is keeping up to date with changes in the tax code (and possibly updating data import methods, since those are controlled by 3rd parties and may change). The IRS already has to do the same data checking and cross-checking and import. Therefore, keeping tax prep privatized is a massive duplication of effort.
That "not trivial effort" sure sounds like "will not be free – not free to build, not free to operate, and not free for taxpayers" to me.
Don't get me wrong; I'm entirely in favor of this action, but I have no illusion that it will be free to build, nor free to operate, nor free for taxpayers.
No, we pay Intuit (or H&R or an actual accountant), and the federal government also spends money so the IRS can develop essentially the same functional code to check tax returns that the third party is preparing according to the same rules.
In 2006 during the primaries, one of Obama's operatives floated $2 Bn as the cost of tax prep. Not all of that would be avoided by an IRS "free" e-filing app, but even if e-filing apps only represent 25%, it wouldn't take that long at $500 million per year to pay for the development of an app and refactoring IRS's existing code to be used in the app, even if it turns into a horribly inefficient project. How many billions can IRS spend on a turbotax killer without producing a turbotax killer?
They don't have everything, it's not all automatically reported to the IRS. Having you report it, instead of the IRS reporting it to you, means you can't be completely certain what they do and don't know, and have to report everything to be on the safe side. On the other hand if they just billed you and left something out, you could just keep it a secret and not correct them.
All they need to do is offer free e-file software and fill in W-2, 1099, and any other standard information that everyone knows is going to be reported anyway because it comes from employers or financial institutions. IRS could still leave it up to individuals to self-report any other sources of income, even income the IRS knows about through other data sources. They don't have to show all their cards.
Other countries already have systems like this. How do they handle it? Do they tell taxpayers what their tax bill is based on all data sources, or just the standard ones (incorporated employers, financial institutions) and expect taxpayers to fill in the rest even if the government already knows about them?
I think it's more a theoretical problem than an actual problem. Getting away with not reporting income at the time of filing because the government doesn't know about it sounds fun, until the government discovers that income later through updated or alternate sources, and then you have to pay that plus penalties. Betting that the government won't know about it ever because they don't know about it now seems like a bad strategy. Any income the government very likely doesn't know about, like cash transactions, is already reported on the honor system, and only because of personal ethics or fear of audits or employees whistle-blowing on their employers' tax fraud. None of that would change.
I will say it isn't the most user friendly application, as evidenced by the error I received this year by email:
Issue : Business Rule X0000-005 - The XML data has failed schema validation. cvc-complex-type.2.4.a. Invalid content was found starting with element `QualifiedCareExpensesPaidAmt`. One of `{"http://www.irs.gov/efile":IdentityProtectionPIN, "http://www.irs.gov/efile":QualifyingPersonSSN, "http://www.irs.gov/efile":DiedLiteralCd}` is expected.
The following information may help you determine the form at issue:
Field/Xpath: /efile:Return[1]/efile:ReturnData[1]/efile:IRS2441[1]/efile:QualifyingPersonGrp[2]/efile:QualifiedCareExpensesPaidAmt[1]
There is nowhere with a .gov domain you can go to, to send money to another US citizen.
https://www.federalreserve.gov/aboutthefed/fract.htm
https://www.pymnts.com/news/b2b-payments/2019/house-committe...
https://www.irs.gov/taxtopics/tc552
I wonder what happens if they make a mistake?
> If you want the IRS to figure your tax. Read Form 1040 or 1040-SR, lines 1 through 15, and Schedule 1 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedule 1 (Form 1040), if applicable. Don’t complete Form 1040 or 1040-SR, line 16 or 17.
> If you are filing a joint return, use the space on the dotted line next to the words “Adjusted Gross Income” on the first page of your return to separately show your taxable income and your spouse's taxable income.
> Read Form 1040 or 1040-SR, lines 19 through 33, and Schedules 2 and 3 (Form 1040), if applicable. Fill in the lines that apply to you and attach Schedules 2 and 3 (Form 1040), if applicable. Don’t fill in Form 1040 or 1040-SR, lines 22, 24, 33, or 34 through 38. Don’t fill in Schedule 2 (Form 1040), line 1 or 3. Also, don’t complete Schedule 3 (Form 1040), line 6d, if you are completing Schedule R (Form 1040), or Form 1040 or 1040-SR, line 27, if you want the IRS to figure the credits shown on those lines.
https://www.irs.gov/publications/p17#en_US_2022_publink10001...
Also, it comes with several limitations.
> When the IRS cannot figure your tax. The IRS can’t figure your tax for you if any of the following apply.
> You want your refund directly deposited into your checking or savings account ...
https://www.irs.gov/publications/p17#en_US_2022_publink10001...
And this is the IRS that wanted me to provide them with a selfie in order to make estimated income tax payments online.
That is pretty far from OK. I will be paying for tax preparation software one way or the other, I would much rather pay the private sector so that I have a choice if I don't like a particular application.
Reduce the complexity and size of the tax code to the point where an average taxpayer can complete it.
The asterisk to such a thing is that my understanding is that "ignorance of the law is no excuse" so changing from the official language of the country over to ... something else ... runs the risk of bringing back a "the clergy reads the laws and tells you what it says" style setup, but TBH even right now with the IRS tax code written in English I still cannot reasonably read it and conceptually author my own copy of Turbo Tax so I'll take my chances with the unintended consequences hazard
If Intuit can build a system and charge for it, it should be entirely possible to build it as open source, software, and it's the kind of think that some non-profits would probably go for.
THe IRS will have a slightly easier time building a system like this, as they can pre-fill some of the data that they already have, but it should still be possible to at least match Intuit here.
It feels like this is an area where competition would be a good thing. The IRS's system might be good or it might be bad. If the job was done by NGOs, you could have multiple systems, all learning from each other's successes and failures, and users would choose the one that is the most intuitive. Maybe a better idea would be to give taxpayer data to non-profits (after user authentication and consent, of course.)
These systems have been developed in other countries and I don't think this problem exists, even though it intuitively should.
Second, you'd have to give up substantial amounts of privacy (both related and unrelated to the banning of cash).
As an example, to make taxes automatic, you would have to annotate each electronic transaction with its taxable treatment.
If I buy a ticket on Delta to go on vacation, that has one tax treatment (no effect). If I buy that same ticket on Delta to go on a business trip, that has a different tax treatment. (Further, I would wager that telling airlines which scenario it is would not be helpful in terms of ticket pricing/terms.)
If I buy a sandwich on vacation vs that same sandwich on a business trip, different tax treatments...(and the business trip airline ticket even has a different tax treatment than the business trip sandwich).
IRS tests free e-filing system that could compete with tax prep giants - https://news.ycombinator.com/item?id=35950836 - May 2023 (567 comments)
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)
... plus dozens more: https://news.ycombinator.com/item?id=35970518
In Aus, I file it through a free, online government portal.
Most of my stuff is pre-filled: personal income, social support payments, bank interest, dividends/managed fund distributions, etc. Previous years' deductions are rolled over with relevant data pre-filled, which then prompts me to fill in the blanks through a series of steps. There's relevant depreciation calculators for various work-related purchases (laptops, cars, etc.) that all align with the tax office's advice around depreciation durations and rates.
All of this is known because most (i.e. bigger) companies are required to hold your tax file number and report on salaries paid, pension contributions and withheld tax. If you don't give them your TFN, they tax you at the highest rate and then you will get the difference back upon filing a return. If it's not pre-filled, you get your data on a payment summary at the end of financial year and just put it in manually - again, it guides you through this. For a standard white collar worker, because my employer knows how much they're paying me, they can accurately estimate the total income I'll get over a year and thus accurately withhold tax. This means my tax return is generally pretty much a wash until deductions or extra income starts moving it, but that's only a couple of percent usually.
For stuff like bank interest, you can choose to give them your TFN, or you can just enter it manually and the return process will calculate it out in the process.
You can of course delete and re-enter any of the pre-filled information if it's somehow wrong. You're not under any obligation to use the pre-filled data.
The upshot of this is that for the overwhelming majority of people who don't have complicated tax arrangements, it's entirely possible to do it all by yourself, for free. You are of course always able to have an accountant do it for you (the system has processes for them to file a return on your behalf). The underlying principle is that everyone can in theory do their own tax return no matter how complex, though of course that means reading up on a lot of the tax code (the tax office tries to provide relevant examples of how the various rules work). But if you're a standard white collar employee working a 9-5 with some basic investments (e.g. your pension and a small stock portfolio, maybe an investment property if you want to throw in some non-prefilled complexity, and you've got some basic deductions such as through donations and work expenses) it's going to be pretty easy to do with a few hours' research, max.
Hell, I think I could still even use the paper forms for this all, but why?
I suspect that US readers will, on average, baulk at this level of government oversight and the idea that big brother sees all of your income, etc. but the reality is it's still possible to do cash-in-hand jobs and lie on your return so if you're in for a penny re: committing tax fraud, you may as well be in for a pound. Besides, the main way of doing the dodgy on your tax return in Australia is via declaring deductions that you're not fully entitled to (e.g. 100% deduction of your mixed work/personal phone, rather than just the pro-rata amount of use for work) and hoping that you don't stand out too much on a statistical analysis to be audited.
No. Most US readers are aware that the US government already collects this level of detail, and are frustrated that we can't get access to the information the government already has and instead have to painfully collect and provide the information the government already knows.
I believe this system will only support the easiest of tax forms, the type any idiot can fill out.
Have one of these: 401k, pretax medical/college accounts, stock dividends, non-US interest, income other then wages from commercial for-profit companies, you will be SOL.
And I am sure many people can add to the list of these items. These are the items that make Tax Accountants the real money.
Government-prepared returns won't cover everybody, but they will cover a much larger share of the population than you're assuming. At an offhand guess, I'd say maybe 90% of people will be just fine.
I bought and sold two houses, moved between states, and our family had two businesses as well as W2 income - all this over an 18 month period. I went to an HR Block ('big name, offices in multiple states, etc') and they made a lot of mistakes, took about 2 years to unwind the mess.
No, they're not. Citizens was problematic. But it says nothing about bribes, whether that be handing a politician cash or promising them a job. Mischaracterizing it sucks the oxygen out of the room for the cause of reform.
Kind of disagree.
In 2016 Sheldon Adelson (a now deceased wealthy casino mogul) donated $25 million to the Super Pac "Future 45". The Pac's main objective was to run advertising against Hillary Clinton. To say that Sheldon didn't have influence on Trump akin to bribery is naive. Fun fact, Sheldon's contributions is one of the main reasons the US Embassy in Israel is now in Jerusalem and not Tel Aviv. (Just a minor example)
Unlimited corporate donations (as a result of the CU decision) and superpacs have been the most significant influence on American politics of this generation.
Influence can definitely be bought. But trading influence isn’t bribery. What Adelson did is closer to a manufacturer opening plants in a swing state—despite higher costs—to curry favour with its senators than sticking wads of bills in their pockets. It’s definitely not the same. That’s the problem. But it’s a far cry from wiring Trump money in exchange for an executive order.
Blurring the line between bribery, lobbying and campaign financing not only sucks the sail out of campaign finance and lobbying reform. It also destigmatises actual bribery.
I’ll put it in start-up terms. Do you understand the difference between raising and making a million dollars? That’s campaign finance versus bribery.
Which is fine. That would be a huge win.