If an entire industry can be killed by a public service, it probably didn't deserve to exist in the first place.
If anything, this will compel the tax preparation software companies to get even better than before, and offer an increased value proposition.
Competition benefits the consumer, and for a long while there's been limited, mostly fixed competition (via Brand awareness mostly).
FreeTaxUSA is amazing, and cheap, but it does not yet have the brand power the incumbents do.
It's unlikely the IRS offering will be as easy to use or as pleasant as the existing offerings, but it will be a huge shot across all of their collective bows.
Keep in mind the IRS offering a free online service for tax filing does not reduce the complexities of the current tax code - nor does it make for a more fair tax system (one where having means to access professionals reduces your perceived tax liability). This system merely means fewer people need to pay $49 a year to file taxes...
I believe that these companies lobby to keep IRS from providing free tax prep, but I do not think that they lobby to make the tax code more complicated.
It’s my understanding that the tax code is complicated as a result of disparate efforts to increase support among voting blocks, to encourage/discourage behaviors, and to reward supporters/backers.
Did you have a specific counter-argument, or just thought-termination?
The government isn't aware of your donations or losses, or whatever. So you have to tell them about it. Tax preparation software, historically, was designed to make this process easier by prompting you for all sorts of details you may have forgotten or were un-aware of. In essence, the software was supposed to replace a paid tax professional.
Today, most people use Standard Deduction since it was raised so high by the Trump Administration, and the need for credits and deductions has been greatly diminished. However, the need is still there for many folks, and not all tax filings are simple.
The nirvana for tax filing would be a single page online that disputes any facts the IRS already knows (such as informing them about donations or the like). But, our tax code itself needs to be vastly reformed and simplified before that can become a reality.
This implies that the state of tax preparation software is "good", which really doesn't line up with overall consumer sentiment. Personally, I hardly consider clunky UI/UXs loaded with dark patterns to be anything but good.
Though, I also do my taxes on TurboTax to double check my work (I don't submit until both programs report the same amounts to the penny). I just don't submit using TurboTax.
Yes, there are alternatives, but what possible enhancement could any of them provide that is worth anything? Tax preparation is largely deterministic, and maximizing deductions is a largely human-lead task that is only beneficial to higher earners who have an accountant that does their taxes for them and don't care about services like TurboTax and FreeTaxUSA.
For most working class Americans a guaranteed free solution provided by the IRS itself is a no-brainer. You know that the government isn't in the business of maximizing profits at all costs, and you get the peace of mind that the IRS itself calculated your taxes, and that you are unlikely to get the blame if there is an error.
Tax collection is a critical function that the government relies on, it should overwhelmingly be a government-lead process that doesn't cost people any more than what they owe in taxes. I hope all of these predatory tax filing businesses go under, because paying taxes is a civic duty that people shouldn't be reliant on private organizations to fulfill for them.
It's not that deep, man. Not everything in life has to be an all-or-nothing scenario. This is a big win for a solid percentage of Americans who have a relatively straight forward tax situation.
Tax fairness, IRS tyranny, bought-out politicians, corporatism -- let's leave that for another day.
Let's learn to celebrate wins no matter how small.
I don't know that this is really true anymore. Maybe a little, but mostly just no.
I support many public goods, including this one, but they are a tool with appropriate uses just like private enterprise is. I don't want operating systems to be a government-provided 'public good'. Also, I think freedom is the core, but not only, value here, including in commerce. When government takes over, it's no longer a free market with free people.
Huh. Interesting example. I actually do want to see a government produced public good operating system.
Where we're going, operating systems will either be ad filled messes or locked down walled gardens. A public good option would be required to meet high bars for interoperability while also not ad funded.
It's one thing to regulate away a market (make things illegal) and a very different situation if the government is just setting a bar for quality within a market.
Linux?
China has given money to FOSS projects far more than the US does, and there is an official Chinese Linux distro available to Chinese users. Nobody is forced to use it, outside of Chinese government employees on their work machines, but like a library, it is something of value that the state can provide to those who might need it.
Some things should not be privatized. The government allowing corporations to profit off of a civic duty like taxation, while offering no free public alternative, just anoints a handful of corporations with the gift of extracting profit from a mandatory governmental process. You should not be required to understand the intricacies of tax code, or pay for someone who does, just to file your taxes as required by law.
If a criminal has the right to be provided a public defender, then every American with an income should have the right to be provided with public tax preparation service from the same government that mandated tax collection in the first place.
I support the IRS's new service, as a general matter (i.e., without knowing details), but you raise a serious issue.
If an industry exists because of the government and it can be replaced by a public service, then it doesn't deserve to exist.
FWIW, public defenders are a public service used to interact with a government-created system, but the private legal defense industry is alive and well. So, it's not like making a public service is sufficient to kill any government-created industry.
It's a start, but I'd need to think of examples. I'd say if the government creates inefficiencies, such as for basic tax filing, it should remove them if possible regardless of the effect on businesses profiting from them.
Off the top if my head, there could be cases where government makes a change that shifts the demand from one industry to another (that donates more to politicians).
The complexity of the US tax code is certainly inefficient from the perspective of someone trying to get through their taxes, but many economists would argue that it enables a very economically efficient way to soft-enforce policy and influence behavior without resorting to regulation and law enforcement.
Whether the economic efficiency outweighs the bureaucratic inefficiency... I'm not sure. I guess that's where public tax software comes in.
If you had a national VAT instead of a national income tax and the government wanted to subsidize e.g. solar panels, they would simply exempt solar panels from VAT and individuals wouldn't have to file anything, they would just pay less for solar panels because the seller wouldn't have to collect VAT.
The system we have now is unnecessarily complicated because the subsidy is essentially always for something you buy, but then you have to go and file paperwork to deduct it from your income tax. On top of that, then penalties have to work differently -- if you want to impose a penalty on cigarettes then you can't just change the amount of the existing VAT on that product, you need a whole new tax with a duplicative collections infrastructure.
The justification for this is nominally progressive taxation, but you could get a progressive effective rate curve just by giving everyone a fixed "standard refund" (i.e. a UBI) against an otherwise flat rate consumption tax.
* Marriage is incentivized via the advantageous married-filing-jointly option.
* Donations are deductible.
* Employers are incentivized to replace part of wages with benefits packages including health insurance, which incentivizes people to not be unemployed.
(I'm not saying any of this is a good thing, especially that last one :)
For 99% of people the 2023 brackets for married filing jointly are just double the ones for being single, and actually penalize two-income married couples in higher income brackets. Moreover, this wouldn't even do anything in a system with a flat marginal tax rate.
But if you actually wanted some marriage bonus you could increase the amount of the UBI for married couples.
> Donations are deductible.
So you don't charge VAT for donations or let the charity buy things without paying it.
> Employers are incentivized to replace part of wages with benefits packages including health insurance, which incentivizes people to not be unemployed.
This is definitely not a good thing and should be burned to the ground. But you could get the same effect if you wanted it by not charging VAT when e.g. employers pay for healthcare.
The better solution would, of course, be to not charge VAT when anyone pays for healthcare.
Do X? Get Y!
instead of:
Do X? Fill out 3 forms, cross-reference to 2 others, be eligible for a tax credit if you earned enough, file ....
The reason public tax filing software makes sense is that the government imposes this cost on the public so the government should collect the money to pay for it in the usual way (i.e. from taxes paid in proportion to ability to pay) instead of imposing a fixed fee on everyone.
It was created by a public service. It would be better if they'd just made a rule that those with super simple tax affairs just didn't need to file, as we have in the UK. But there's probably no pork in just making things better.
If I have to manually input 5 billion crypto and stock transactions including every damn weekly staking reward just to pay taxes it's just bleh.
It doesn't to suck.
Also, my wife paid a joint filing online under my SSN, and the system couldn't figure that out and claimed we were in arrears. I'm not hopeful.
* cost of TurboTax Pro Ultimate will be deducted from your refund amount, plus interest.
Either way, the $49 to use the software is trivial (under this situation) and often is only paid if you use that software to submit your taxes (meaning you can "get a second opinion" for free).
You can always choose to print out your forms and mail them though.
It's not surprising the system couldn't figure that out. There is no such thing as a joint-filing under a single SSN. You need to include both spouse's SSNs or ITINs on the 1040 to file jointly, and the return is treated as a "joint" return (meaning, equally by both spouses).
It's really not a hard problem.
It's actually an extremely hard problem if you try to match payments by name, since there are a lot of people with the same exact name, many of whom even live in the same state or same city. Most checks don't include an address, and even those that do don't always match the address the taxpayer gave on the return.
It sounds like you failed to include your SSN on the check, which means this problem was one of your own making. That being said, if you could provide proof that payment was timely sent and the check details (check #, account, etc.), the IRS can match the payment received and will void penalties and interest that were assessed.
Of course it was cleared up, but the point is that at least one of our SSNs was on everything. That should be a trivially easy for record merging or linking.
[1]: https://www.ibo.nyc.ny.us/iboreports/understandingthebudget....
All other taxpayers will continue to use systems that ideally maximize deductions as government continues to tax endlessly.
Because the "problem" they're solving has been solved in other countries without a profitable middleman. Intuit's continued existence in this space is dependent on their lobbying team.
I suppose if you are arguing that the one and only reason that tax preparation software is needed is because of Intuit's lobbying then that could be true, but Intuit's lobbying is only part of what has led to a complex tax code.