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Comment by LordDragonfang | Hacker News Reader

See, this is the thing that gets me. For almost anyone who fits in this box, you shouldn't have to file in the first place. Not "shouldn't have to pay", but literally, "should not have to send documents to the government telling them how much you owe them" - because they already have all of that information. They should just give you an itemized breakdown and ask if it's correct.

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Yeah, this has been my frustration too; I got audited by the IRS in 2021 because I forgot to declare stock sales, and so I owe about $8,000: $7,000 for the missing taxes and a $1,000 fine.

I wasn't terribly mad about the money (if I owe $7,000 then that's what I owe, it was my fault), but what I was mad about was the fact that I had to do anything in 2021 at all. If the IRS knows enough to know what I owe them, then why exactly do I have to file, just to have them validate that the numbers I give them match the numbers that they have on file.

They don’t know enough to know how much you owe them, but they do know that you got $xx,xxx from a brokerage account and that the tax would be $7,000 unless there were some things unknown to them that would make it a lower amount. You didn’t tell them about any of those things, so they assumed the full amount but were perfectly willing to be shown that that this assumption was wrong.

my favorite part is how brokerages like morgan stanley don't report the cost basis when they report your sales to the irs, and for no reason I can find.

This means that if you don't report sales from your side so you can note the cost basis, the irs assumes a cost basis of 0 and calculates owed tax on the entire sale value - this applies to stuff like RSU grants as well, and trips up a great many people entering the tech sector ( especially young people who may not have much tax filing experience )

I legitimately don't know why brokerages don't all include the cost basis by default ( or why they aren't required to by law )

Cost basis is not so cut and dry. In fact, the IRS (federal law?) allows you to use almost any reasonable method for determining it as long as you are consistent.

An example of where the brokerage wouldn't know:

You buy 5 shares of stock at $X and then a few months later buy 6 more shares at $Y. Later on you sell 3 shares for $Z. What is your cost basis? It could be $3X or it could be $3Y. Or maybe a blend of the two $(2X + Y)! The IRS thinks that you should be the one to decide, not the brokerage.

You might have additional deductions they don’t know about. There are also things like your filing status, # dependents, etc that can change.

>They should just give you an itemized breakdown and ask if it's correct.

I'm sorry, but this response comes up every time, and every time the answer is "yes, that's why I said you should be able to just tell them it's correct." It doesn't have to be any more difficult than checking a box.

90% of people are just going to use the standard deduction (no, seriously: in 2019 it was 87.3%[1]), and for most people their filing status will only change a handful of times in their lifetime. It makes no sense to waste everyone else's time for what should be at most 3 or 4 yes-or-no questions.

[1] https://www.irs.gov/statistics/soi-tax-stats-tax-stats-at-a-...

It's very reasonable to take the standard deduction with other deductions and credits. The standard deduction only replaces some of them.

edit: It's also possible you file before things are reported to the IRS about you.

And in each case those additional deductions apply to a small minority of people, and they are often things the IRS can probably already know. All of which you can choose to add with a question or two. You're missing the point, though - the IRS already has 90% of my data. Under no circumstances should I be having to re-enter my W-2, a document they already have on file, and stress about making errors in data entry.

Then people with informal income streams will systematically underpay.

...Which is exactly how it is now, because there's nothing stopping you from not reporting payment under the table. The marginal increase in the number of people who might decide to commit tax fraud because they see the government doesn't know about all their waitressing tips (but were previously dutifully doing all the bookkeeping to report them?) is negligible compared to the hundreds of thousands of potential economic activity the current system wastes per year.

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