Is the system in the US much more complicated to require software purchases?
I get it that it is not prefilled, but is there a lot to actually input in the system?
You're expected to enter all of your income, sort out what portion of your income is taxable, determine the amount you can deduct from your taxable income, figure out what tax credits you're entitled to, calculate how much tax you already paid and what you still owe or should be refunded, and decide how you want to pay or be reimbursed.
In the simplest case it's straightforward.
But for anything other than the simplest case it quickly becomes a mess of additional forms (called schedules). Currently there's 3 main schedules (1, 2, 3) for Income Adjustment, Additional Taxes, and Additional Credits. And each of those references addition schedules and forms. Here's schedules 1, 2, 3: https://www.irs.gov/forms-pubs/about-form-1040 Here's a list of the other schedules: https://www.irs.gov/forms-pubs/schedules-for-form-1040 and a search for all the forms and instructions: https://www.irs.gov/forms-instructions-and-publications
The good news is, after all that, if you make a mistake the IRS will tell you what you actually owe and send you either a bill or a check for the difference.
It's intensely more complicated.
My 2022 Federal tax filing was over 50 pages. I gave up trying to do it myself with TurboTax about 10 years ago and that was one of the best decisions I have ever made. I can sleep well at night knowing that as long as I provided the necessary information to my accountant, all the right forms will have all the right stuff on them.
IMO, nobody but the most trivial W-2 only taxpayer should be doing it themselves.
The state filing in my state is much simpler because it mostly piggybacks off the information in the Federal return and doesn't require dozens and dozens of additional forms.
I'm in the same boat and I don't even think my situation is especially complex. I can also ask my accountant questions in advance for tax planning purposes.
On the other hand, a lot of people do just have a W2, maybe a 1099, and take the standard deduction.
The average American can easily fill out their tax papers by hand. TurboTax just sells the dream of finding "hidden" deductions and credits, which basically don't apply to 99% of people.
Forms are things like: main employment, side jobs over 600, bank interest, car/house loan and tax payments, stocks, and other things.
The forms are often not ready until late feb to mid march.
Mid april is the filing deadline.
Mind you - the gov already has copies of ALL the forms. They just want you to f it up.
Now, it is your responsibility to make sure that all of the sources are indeed there but for normal people it is the salary only. It happened to me once that one source was missing and I was not happy at all (but said source provided me pronto with what to put where in the form).
Overall I would say that our tax system is complicated (as all trax systems) but made really simple for average people.
Also we do not have any companies such as yours that would provide software to make your taxes. If you want some help you can either contact a specialized finance person (this usually costs 200€ and is useful only if your case is really complicated) or you have free help areas at town halls (mairies). Or clear directions from the providers.
But as I said, it is for a select population, not for the everyday Joe who just clicks three times. There was even national ads on the radio about that.
Not completely accurate - you’re required to pay tax on side jobs under $600 for instance, but neither you nor the IRS get a 1099 tax form for it. Reporting it is on the honor system. Cash tips are supposed to be taxed but rely on self reporting since the IRS has no idea who handed you money, etc.
There are also many deductions and credits that the IRS does not know about unless you self report and claim them.
You have 3 kids registered in school? It’s in a db.
Buy an EV? It’s in a db.
But yeah- fair point. There are lots of “quiet” transactions for sure, but that’s likely no different in any other nation with better tax cycles.
I don't expect car purchases to be in a federal database (or the schools my children attend, for that matter).
I would not expect that all the data in 50 states' (plus additional territories') databases end up reflected into a federal database today.
Heck, I’m the first to say 99% of this should not exist in the first place. (That means I think the nation state concept should not exist.. there should be none.)
But be honest with yourself: you know society tacitly accepts interfaces between dbs for the corporate purpose of profit… (advertising, etc)
The rationale is that for the vast, vast, vast majority of people there is nothing to do so it does not make much sense to bother them at all.
A lot of things changed when we finally moved to have taxes automatically deduced form the salary (before that you had to pay separately three times a year, and later you could make it a monthly payment). This means in practical terms zero contact wth your taxes when you are in the general situation.
If you want to optimize to death yeah you start dealing with deductions and all.
I think people just use a software cause it gives them peace of mind and it helps them understand all the "life events" they could use to reduce their taxes.