IRS to begin trial of its own free tax-filing system
nytimes.com
nytimes.com
The “IRS will functionally increase taxes” argument is a distraction and I doubt anyone here takes it seriously.
But the argument matters because it has given Congress political cover to let Intuit keep leeching off the system, so a response is in order.
Congress should require the IRS to give every person an auditable receipt of every tax they paid in a standard format.
Then, truly public-minded services can use the receipt to help people understand if their filings were correct.
There’s no good reason automated IRS filing would result in tax increases for anyone, it’s a fixable problem, and good grief I’m ready to stop paying TurboTax $180/year.
It seems illogical for the government to not have a free, easy way for the taxpayer to remit their taxes to the government (or submit the paperwork that should generate a return from that government). But at the same time I think it's fine to be skeptical that you should trust the government to be honest in showing you what amount of taxes you actually owe given how complicated the tax code is, and because there exists, ahem, a bit of an incentive problem there.
Is the free-filing system designed to maximize your return? Is it designed for ease of use? Generally I agree that TurboTax is a leech, but just because they're leeches doesn't mean there isn't an incentive problem that should be addressed.
>Then, truly public-minded services can use the receipt to help people understand if their filings were correct.
Do you mean a private company does this? Or something else?
The solution to this is for the government to publish the source code in the public domain. Then anyone who can do better can fork it and sell it, which will make that market more competitive when it's cheaper to enter because the government has already done 80% of the work, but there will only be a market for this if the government isn't maximizing your return. "Better return than the free system or your money back" would be a great way to get customers, and they'd be viable with fewer customers when they're only paying the incremental cost of doing what the government failed to.
And then the government system would be embarrassed if private forks could frequently beat them, which improves their incentives.
The US Digital Corps has the technical chops to do that well if the politics could work out.
To the Intuit folks reading this because your boss told you to keep an eye on the sentiment on Hacker News…don’t worry you can _totally_ have your own fork and since you’re the best you would have nothing to worry about. Since you care so much about the American tax payer, I look forward to your enthusiastic support of more transparent tax filing.
"The rules" in this case is the tax code, which is thousands of pages and written in lawyer. You can imagine how converting that into computer code is a non-trivial undertaking notwithstanding that it's public information.
Is it that hard? Americans filed about 260M returns last year. 10% of it is 26M. Let's say you get only 10% of those - since you're not the only person on the market - to pay you $100 (if you save a significant amount on taxes, paying $100 for it would make sense, won't it?) - that's $260M, or about as much as the government says their whole system, for all 100% of taxpayers, would cost. If you can do better job than the government on the efficiency (not a very high bar), and you only have to support 1/10 of the volume the government does, I think these numbers look ok for you.
> You can imagine how converting that into computer code is a non-trivial undertaking notwithstanding that it's public information.
It is. But there are multiple businesses who already have been doing it for years, so it looks like a solvable problem.
TurboTax is ~$39. Also, the cost of developing the system doesn't depend on how many people use it, and those are only the development costs, not anything else a business has to pay, like marketing, billing or interest on capital.
Moreover, suppose a business could actually get away with charging $100 and that would be enough to cover their costs. Why would you want this as opposed to releasing the source code, which reduces their costs and allows them to get by charging $25, while driving the market price down to that level by reducing the barrier to entry?
> It is. But there are multiple businesses who already have been doing it for years, so it looks like a solvable problem.
That was when you don't have a taxpayer-subsidized competitor providing an almost-as-good service for free.
BTW, that's the cheapest offer TurboTax now does, where you do all the work. They have full-service offerings now, there it could be 3-4x from that easily. So I don't think their business is much threatened.
> That was when you don't have a taxpayer-subsidized competitor providing an almost-as-good service for free.
They already have the platform and 99% of stuff implemented. The only thing they need to do is year-to-year updates. True, it's some work, but as I just shown, their potential market is in hundreds of millions of dollars. Every year, recurring. I think many VCs would look favorably at such potential - and here we're talking about already established companies with all sunk costs already processed and paid off, needing to spend just on maintenance and recurring updates. I don't think it's as bad as you think it is.
That's the right now pricing, which is basically an attempt at price discrimination or bait and switch -- lots of people have common deductions like that and then they get sucked in with a free offer or $39 only to learn it's going to be more. But those are the kind of things a government system would be likely to handle well, because they actually are common deductions.
Whereas what you'd need from a private system then is that they don't phrase the questions in such a way that it pressures you to be unnecessarily fearful and overpay your taxes, and strike the right balance in the interface between simplicity and complexity so that you actually find every deduction you're entitled to without having to spend many hours looking through forms.
So then the customers are the people who have weird taxes, rather than the ones who have some mildly complex but fairly common deductions they can navigate in the free system. And yet not the people whose taxes are so weird or complicated that they end up going to a private accountant.
That's not necessarily a huge market.
> They already have the platform and 99% of stuff implemented.
By "they" you mean an incumbent. What about anybody new who wants to enter the market once the dynamics are different?
That's a different approach, for sure, but a viable one nevertheless.
> That's not necessarily a huge market.
It's not huge, but our tax system being a byzantine spaghetti mess it is, it's bigger than you think. I have relatively simple taxes, yet I certainly wouldn't want to do it all by myself and I do shell out over $100 each year to do it right now - so I probably would at least consider using such a system. The rest depends on how well it works, of course.
> What about anybody new who wants to enter the market once the dynamics are different?
That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so. It's hard to deal with incumbents - and yet it's possible, I myself am an evidence for it - despite Google being a giant of an incumbent, I am a paying client of Kagi, who are a startup in the space. I don't know if they will survive long term, but that's nothing new too.
Now consider that the people with a $100 need are going to depend on how good the free system is. If the free system sucks, it's a lot.
But if the free system sucks, lots of people are going to be complaining about it because they don't like paying $100, and then it might improve some. The number of people who need something else goes down from 15% to 8%. Then there are fewer complaints, but the paid system has that many fewer customers.
At some point there are few enough people complaining and the free system stops being responsive to their complaints, but the main thing that depends on is how much the government cares about making their system any good.
If the premise of embarrassing the public system when a private system can do better is successful, the public system could get arbitrarily good over time -- until the private system doesn't have enough revenue to do better.
You push that point further down the line by not forcing the private system to duplicate the public system's work.
> That's no different from entering any other established market right now. Yes, incumbents have an advantage, this is always so, always have been so and always will remain so.
It's not the incumbent's advantage which is the issue because that isn't the change. What you'd be doing is closing the door to new entrants regardless of whether the incumbent continues to exist.
Even if the market provided enough revenue for Intuit to continue if well-managed, if they were to become mismanaged or otherwise go out of business, or just do a crappy job while not actually ceasing to exist, no one could replace them because no one else could cover the initial entry costs while competing with the free system.
Anyway, I guess that means my answer is "yes".
>If you think the government’s tool is overcharging, you are welcome to file your own taxes and deal with the possibility of getting audited.
"Pay what we say you owe or we'll nuke your finances with an audit". Yes this is exactly my problem.
You might be misunderstanding in what an audit entails.
There’s no direct “nuking” of finances due to an audit.
In the vast majority of cases an audit is nothing more than “you claimed this on your return, can you please provide the documentation that supports it?”
More specifically, I believe most audits are about claiming child tax credit and them wanting documentation to support the claim.
If your finances get nuked that means you lied on your return, with very few exceptions.
Main exception that comes to mind is claiming expenses that are up for debate.
Also circling back to your earlier comment. Yes the tax code is needlessly complicated, Intuit et al. are the ones who caused that and are actively lobbying against simplifying it because their paid services would become obsolete if the tax code was nice and simple.
>Is the free-filing system designed to maximize your return?
Why does it need to? I mean, why do you need a tax return, if your taxes would be lower if you just got charged the right amount in the first place? And then isn't the role of society to audit their own taxes, and at the same time support candidates that vow to simplify the tax code?
> if you just got charged the right amount in the first place?
right amount is loaded phrase. There is big range and disagreement over what is right amount.
> And then isn't the role of society ... to simplify the tax code?
It is about as intelligent as saying isn't it role of society that ensure we all live peacefully, then we don't need armies, defense budgets and so on.
But most of the time our government does sketchy things away from the attention and affliction of the selectorate.
If millions of influential people were using a system, the IRS would have an extremely strong incentive to avoid negative PR through chicanery.
And we already have an incentive problem in the current setup, anyway.
I just checked and it looks like a good start, even though I’d like it to be fully granular.
Intuit would do fine with it - yes, they'd lose some income, but they have more then enough other business, both in more complex taxes and other ways of organizing business, they don't need to be able to fleece every single taxpayer. In fact, if such IRS system is built, they'd probably will make a good buck by providing added value offerings to it, just as they do now for existing tax filing systems.
Even if the system to do that costs double to the high estimate - let's say $0.5B per year, given the government projects are always over cost - it's still about 0.15% of the taxes collected every year. There's no reason why it'd have any influence at all on the level of taxes collected.
A relevant quotation for much of the discussion here:
> And, relevant to the question of whether Intuit controls U.S. tax policy: it can’t, because that would imply they have wrested control from Norquist. Norquist considers a public filing option a tax increase by stealth and opposes it automatically.
When phrased that way, it sounds ridiculous. But those are the author's words, not Norquist's or ATR's.
What Norquist and ATR want is for people to be aware of taxes. In their words (from the article): "More than any other public policy, the way the government raises revenue—how much, at what rates, under what circumstances, from whom, and for whom—has the greatest impact on our economy’s performance."
And even the article admits that making taxes easier to file has the side effect of "decoupling public sentiment and policy changes" (that is, making "tax increases by stealth" easier):
> ATR [Norquist runs Americans for Tax Reform] is institutionally skeptical of withholding, because they believe that withholding allows one to increase taxes by stealth. I don’t think it is excessively partisan to say that, if one phrases that claim a bit more neutrally as “withholding increases tax compliance by decoupling public sentiment and policy changes,” the people who designed the withholding system would say “I’m glad the National Archives makes our design documents so accessible. We wrote them to be read!”
A perfect world would have people writing a check for their entire annual tax just before stepping into the voting booth.
That would definitely be a horrible idea. No, I won't vote for drivable roads because I just payed my taxes, potholes be damned. And afterwards complain about the potholes anyway.
I’m saying those that do pay taxes should have the totality of the amount of their income that is going to the government in mind when they head to the polls.
I honestly think the issue would instead be people not wanting to pay for the public service pensions for the former pothole-fillers.
I don’t think that will accomplish what you expect.
One of the main reasons conservatives and libertarians want filing to be hard is to confuse people into thinking the income tax hurts them, when in reality it benefits many of them.
You do not get a net payment. You paid your taxes throughout the year every paycheck. Your employer likely files quarterly.
At the end of the year, if you tally up your taxes and figure out you’ve given too much of your money to the government, you get some of your money back.
It’s called a refund. Not a payment.
I’d put those ongoing taxes throughout the year into the bucket of “shadow taxes” GP refers to. I suspect many people do not view their refund checks as a no interest short term loan they floated to the government. Their refund check came from their paycheck.
Every tax form I’ve ever filled out has an instruction like:
> Enter the lesser of lines X and Y
when applying deductions and credits to prevent them from exceeding some value.
I’m surprised to learn that the EIC isn’t clamped like this.
How on earth is this possible? Instead of not having any clue, you actually get to see everything. My taxes have been automatic for years and I still have to approve every step of them along the way and I get to see and approve everything which had been filled in. The big difference is I now not have to spend hours researching everything if it remains the same as it was last year and only check if it changes.
It's one of the reasons why every company in the world wants you on auto pay. It's a lot easier to keep you as a customer through the price hikes if it's only a line item on your bank statement rather than an explicit payment you're making every month. If most people are the same every year, then a small increase from one year to the next barely gets noticed because people are going to be looking for changes to their records, not changes on the bottom line, so the fact that the bottom line is 0.5% more this year will be more likely missed in the face of answering "are the records the IRS claims they have about me the right ones".
The other is related to the concept of "price anchoring". Approving pre-filled numbers becomes more about validating that your information is correct, rather than determining (and looking at) the tax value for the year. It pre-assumes the amount owed is correct (in both the calculated and the policy sense) and sets the expectation that you probably owe whatever the pre-calculated amount is.
Whether it actually plays out in reality and tax payer behavior is up for debate. but certainly there's a reason why so much of sales and financing tactics throughout commercial world tries very very hard to steer you away from the actual math when you pay for something.
Considering the penalties for getting it wrong. Simply no. You assume it is correct if it matches the data you have, not by default.
What it does do is stop you from having to calculate the nitty whitty parts of the statements when the data from the tax agency matches the ones you got from the bank, your employer etc and you have the partial coverage of having been provided wrong data. You are still wrong but -most likely- you can amend if there are discrepancies outside of your control.
You get an extra point of reference, not a -get out of filing for free card-. Since the system I'm part of also forces companies to provide specialized summaries it's a lot easier to get the right data as well. Correctly filing (which includes ALL deductables) should never be so complicated you require a special degree or a leeching company to do it for you.
We live in a world where people routinely borrow from "tribal lending services" at 500% APR. Where they buy a car on the monthly payment value without consideration for APR or loan term. Where an entire financial crisis was caused in large part by people taking out bad loans they knew (or should have known) were impossible for them to service properly despite the consequences. Where people don't review their own pay stubs only to discover their employer has been cheating them for years or has improperly withheld taxes. And a world where despite the existence of both the 1040EZ and e-filing people still find tax paperwork confusing and too hard.
Forgive me if I don't share your optimism on whether most tax payers would assume the answer the government got was correct or not, regardless of the consequences. It's also not an unreasonable assumption either, why in the world would you want a system where you couldn't assume the result was correct most of the time?
Rephrasing your response, it sounds like you would say you expect most tax payers lack the ability (or interest) to compute their taxes correctly under any circumstances.
Review has nothing to do with it.
I believe that providing people the correct numbers is just going to increase compliance. They don´t want to audit anything. They want to pay what they have to pay and get on with the rest of their lives.
Beyond that though, the thread discussion was about whether there are any mechanisms by which the government pre-filling people's taxes could '[make] "tax increases by stealth" easier'. I proposed there were, though with no claims to the degree to which that actually had real world impact on tax payers and their behavior.
If we assume as you say that people "want to pay what they have to pay and get on with the rest of their lives", then it seems reasonable to think that anything which reduces the amount of effort and thought necessary for the process also has potential to '[make] "tax increases by stealth" easier', simply by the fact that it reduces the amount of thought one needs to afford to the concept of taxes in the the first place.
The alternative would be to propose some mechanism by which the government pre-filing people's taxes would increase the degree to which they pay attention to their taxes. Or at a minimum one needs to argue that people would pay exactly as much attention as they do now and thus it would be a net-zero change in focus on taxes, but if that's the case, then any compliance increase would be a function of making it easier to be in compliance at all, which is tangental to whether or not it '[made] "tax increases by stealth" easier'
I think you've answered your own question. If it weren't automatic, you would spend hours learning about tax policy, what is taxed, what is deductible, and what credits exist.
Personally, I learned most of what I know about taxes while preparing my own.
Norquist is entirely disingenuous. Nothing would stop a tax payer from looking into the details of taxes assessed just because the government prepared something for them. (In fact, nothing would prevent a tax payer to continue to use TurboTax to verify and understand the taxation.) On the flip side, nothing about the current system actually makes tax payers more aware of the taxes they’re paying. Half the marketing of TurboTax is to allow you to finish your taxes quickly by basically just clicking through and adding basic information.
Speaking for myself, I would definitely be _more_ aware of taxes I’m paying if the government would prepare taxes for me. When comparing my filing of taxes in the US to the filing in Sweden that’s definitely the case. Sweden sends me information which I can then verify and correct if necessary. The grunge work is done and I can focus on details. In the US, I need to waste a bunch of time duplicating work and the go through the details later (and hopefully have enough time and energy to do so).
P.S. I keep using TurboTax as an example but they’re obviously not the only one. I chose them since they’ve parasitically attached themself to the current system and lobbied government to keep it from making things more efficient at a detriment to their bottom line.
A comparison of tax filing in the United States with other countries, including those where governments are much bigger and more interventionist, leads to a different conclusion.
Similarly, it took the US forever to implement an instant payment system (commercial banks built Zelle via Early Warning Systems and RTP via The Clearinghouse, and the Fed finally built FedNow after Congress directed them to in order to ensure universal access) while India and Brazil rapidly rolled out their implementations (UPI and Pix, respectively).
These are intentional choices.
https://www.nytimes.com/2017/04/14/opinion/filing-taxes-in-j...
I shudder to imagine how bad the American system is to make Japan look good :/
To be fair, our taxes are more complex than many people's (I live in a different state than my employer and we have some stock market investments), but it's still ABSURDLY difficult.
And I'm not counting the time needed to respond to Federal or State follow-ups 9 months later where they question the values we provided. That happens to us about every 2-3 years. So far it has only once found a minor error on our part.
I do my taxes myself for my family. I have W2s, K1s, various 1099s for investments, own a home, and deal with carry overs from the previous years.
It takes me about an hour to do it. And then another hour to amend them many months later when I get my actual K1s.
How hard is it to answer 100 questions and copy numbers over from one place to another? W2 box 1 goes to W2 box 1. No I don't own a corn farm. I donated this much to these organizations. I would consider 25% of my rent for my home office.
Both turbo tax and tax hawk will connect to your investment bank and populate all the obscure 1099 stuff there. Dealing with international investment was definitely confusing the first time around, but definitely not 40 hours worth.
40 hours is 8 hours a day for 5 days straight. I don't know what you value yours wife's time at, but if it really takes that long you might be better off paying a CPA a few hundred dollars.
Perhaps the poster is including the accounting in the tax prep.
Yes, because there is only one tax authority (国税庁, Kokuzeichou, National Tax Agency).
Here in the US, we have more than one tax authority:
We have the IRS, which is the federal tax authority.
Each state then has their own tax authority.
Each county then has their own tax authority.
Each city then might have their own tax authority.
And we must submit filings and returns with and pay taxes to all of them as applicable, and they all operate on their own laws, regulations, and taxes.
To reframe this, let's talk about sales tax. In Japan, there is only one nationwide sales tax; because there is only one tax authority.
In the US, sales tax might be levied at the state, county, and city levels as applicable (federal doesn't levy sales tax, as far as I'm aware). Some might not have sales tax, others might, and they are all different rates. The sale tax in one city will be different from its neighbouring city.
TL;DR: Paying taxes in the US is complicated because everyone wants their taxes.
Everyone wants their taxes and refuses to cooperate. Most countries have some kind of local or regional taxes, and the single tax authority is responsible for collecting and distributing them all.
I get that the federal level in the US is a bit special (EU for example doesn’t tax citizens directly, instead the member states pay fees from their tax revenue). The local tax authorities per county surprised me though - what a mess…
Most states operate this way. Counties will often collect city taxes, and in some states the state will collect the city and county taxes. There are obviously exceptions but within states there's a lot more cooperation than you might think
And most individuals are not paying income taxes to cities or counties, they're paying property taxes and that is typically automatically handled via their mortgage company
the US Federal government was not suppose to tax citizens directly either, thanks to the 16th Amendment that was passed under the lie that it would only ever be a "Tax on the rich" of 3% and only apply to 1% of the people, now the federal government takes nearly 25% of all citizens incomes,, and uses that money to bribe people for votes and extort states for policies they desire...
Also as a side note why you think economic policy from hundreds of years ago is the pinnacle of excellence is a more than a but confusing.
In Alabama the county and city I lived and worked in both had what they deem occupational taxes which are effectively an payroll tax, but there was no system of exemptions or refunds, it operated as a payroll tax only. My employer had to file the taxes, not me
I suspect the vast majority of people in the US only ever file state and federal returns, although a lot of people live in small states or along state borders so a lot probably have to file two state returns
Most crucially, it's still unclear to me why a return has to be filed at all for any tax that is already paid (from wages), and why it has to be manually compiled in cases where the agency has all the information about taxable income. If I don't owe anything, I shouldn't even need to file anything. If I do owe taxes, send me the forms prefilled and let me either sign off on them or add any missing info as needed. Anything over and above this is just pure waste of everybody's time and an opportunity for parasites to profit.
Forget about the evidence of other countries (which is completely valid), I just hate the argument that government inherently because it's government is inefficient and will never be effective
In the US half the people in charge of the government hate it and want it to fail. Of course it's going to be bloated, inefficient, and costly. It's being sabotaged from the top. If everyone agreed that, once we make a choice on what the government is going to do we should do it well, we could have government services that are just as effective as whatever private enterprise example people always like to cite (being from the South it's usually the Chick Fil A drive-thru)
Calling Trumpism an extension of Bircherism is a coping mechanism, seeing as how the GOP is winning record shares of minorities under Trump. Instead, the Trump GOP is a hybrid of the Reagan GOP and Jacksonian/Jeffersonian populism. The opposition to immigration given the prospect of cultural change also appeals to many immigrants who left those places for good reasons. My parents immigrated to Ronald Regan's America, not Kamala Harris's America.
Florida is a tremendously well governed state. It has great schools, low taxes, low debt, a booming economy, etc. I know multiple families that moved there from Illinois and New York in the last couple of years.
So, letting any veteran be a high school teacher without any further qualification makes it great schools? The governor purging state universities makes it great schools?
And curating the education offered in public universities is a great idea too. Public universities must serve public purposes. CRT serves to undermine the society, not reinforce it.
It’s especially important to get rid of it in a majority-minority state like Florida. CRT education is racism. It teaches minority kids a different worldview and values from white kids—and an inferior one. My mom was born during British colonization, but she was educated as an equal person. She can tell you about Plato and Tolstoy. My kids—thanks to living in a blue state—are learning how to whine about “white men” and see themselves as different, and aggrieved. They will not be equal citizens when they grow up, because they are being socialized to be a lower, dependent class.
Another important point is that in 1947 right before independence the Muslim League in Bengal (remember AIML was founded in Dhaka and sponsored by Nawab Dhaka!) was demanding parity of representation (professors, etc) in the education system with Hindus and the Hindus were refusing and telling them to set up their own educational establishments.
> Another important point is that in 1947 right before independence the Muslim League in Bengal (remember AIML was founded in Dhaka and sponsored by Nawab Dhaka!) was demanding parity of representation (professors, etc) in the education system with Hindus and the Hindus were refusing and telling them to set up their own educational establishments.
Is your point that CRT is a good way to turn America into a third world tribal society?
In my view, this is a big problem with the Muslim world. We have this tremendous victimhood complex. Contrast the East Asian countries, who have just sucked it up and focused on getting rich.
Return to office seems to be changing that flow.
Cities like Seattle generate inexplicably little public value for the extremely high per capita spending. It should be much nicer for the amount of money it spends. The quality of services relative to expenditure is not defensible. Many cities do far more with far less. I’ve lived in Seattle around downtown for a long time, but it is far from the only city I spend time in. If per capita spending was correlated with quality of city experience, Seattle should be one of the best cities in the world to live in, but I don’t think anyone would make the argument that this is the case. As with San Francisco, most of that taxpayer money is lit on fire with no accountability and no contribution to the public good.
This is similar to the observation that on the same stretch of highway, California somehow manages to spend 10x per mile as its neighbors for visibly and audibly worse roads. People have made jokes about it for decades because the contrast is so stark if you drive on those roads.
It is not unreasonable for taxpayers to expect better than what is available in other cities when they are spending several-fold what those other cities are to achieve, at best, the same results. It doesn’t have to be a total shithole to be grossly mismanaged. People in Seattle spend enough tax money per capita that their city experience is far worse than what they have a right to expect.
It isn’t a political issue.
Those are the shining beacons of success?
The more general argument is that monopolies are inefficient, and most instances of government programs are monopolies.
> In the US half the people in charge of the government hate it and want it to fail.
This is uncharitable. It's more accurate to say that they expect it to fail and hate government programs because they regard them as inefficient and net harmful on average.
> If everyone agreed that, once we make a choice on what the government is going to do we should do it well, we could have government services that are just as effective as whatever private enterprise example people always like to cite
The inefficiency is caused by the principal-agent problem more than anybody's ideology. Even if every politician wanted and expected the government to be effective, you still have the problem where a government program is providing a service consumed by e.g. 5% of the population and is serving 20% of them poorly. This is only 1% of the voters, who themselves have to balance their vote against their positions on every other issue on the ballot, whereas in a competitive market the company doing that would be losing 20% of their customers to a competitor and a competitor would be available to satisfy that 20% of the customers.
Meanwhile if a program is inefficient but its total cost is <1% of the total government budget, nobody is paying attention to it, but the same is true of most other programs which causes the average efficiency to be poor. Whereas the proprietor of a small business which is <1% of the economy is going to care quite a lot if it's wasting money and be paying attention to that business in particular, because it's their business and it's their money.
We don't have great solutions for these in the public sector. The best you can say is that sometimes it's worth it. For example, every taxpayer can use tax filing software and it has no unit cost, so even if the government is less efficient than a private company, that could still be worth it because you can spread the fixed cost of developing it over so many people. This is a general argument for the government to create and publish open source software whenever there is a reasonable expectation it would be widely used.
What it isn't is a general argument for government programs, because products with zero unit cost are relatively uncommon and so are software products that are both widely used (as opposed to having a particular niche) but not already well-served by existing free software. Software in the service of regulatory compliance is unusually well-suited to being published by the government. (And they should definitely be publishing the source code.)
Even more general, markets where it is hard for new competitors to enter are inefficient. It's perfectly possible for a market with 10 or 20 competitors to stop competing for mutual benefit. I'd even argue a monopoly (a single dominant company) is fine, so long as it's easy for competitors to enter the market.
Consider the WW1 Christmas truce and other fraternizations. If the same actors are together long enough, they'll act for mutual ease. That was a good thing in WW1, but it's not a good thing when companies stop competing in a capitalist society.
As I remember it, the empirical research says two competitors can keep a stable monopoly cartel going for a long time. three can maybe do it for a while. With larger numbers things get very unstable.
It's kind of both.
Try to name a market where the largest company in the market has <15% market share but they still have a successful cartel going. They exist but you're going to keep finding that their enforcement mechanism is some kind of violence or (equivalently, through the government's monopoly on violence) regulatory capture.
Drug cartels can have lots of members because they murder you for defecting. Landlords collude through zoning boards. OPEC is literally a cartel of governments.
You can also kind of reason this out.
Suppose a market has two companies and the smaller one has 40% market share. If they could increase their market share to 60% by cutting their margins in half, that's losing money, so screw that. The bigger company doesn't even have to buy them off.
Suppose a market has eleven companies and the smallest one has 1% market share. If they could increase their market share to 20% by cutting their margins in half, they're making 10 times more than they do now. The other companies would have to buy them off. But how? More market share without lowering prices? Even if they could arrange it, any company with less than 10% market share would rather have 20% at half the margins, but in a market of eleven the smallest company can't have more than 9% without making someone else the smallest company. And that's if having the lowest price only gets you 20% market share and not more.
Now, you can make up numbers that allow coordination with arbitrarily many companies. Maybe lowering your margins to zero doesn't get you any more customers at all and then no one would have any reason to do it. But how many real markets work like that?
Some things work well in government given limited resources. Other parts of government seek bigger and bigger budgets to implement ideological goals, no matter their efficiency.
(Any amount of money spent is justified by the end goal since the purpose of government is to print however much money is required to ensure complete social welfare.)
The big incentive problem here is that democracies reduce the power held by private individuals. So (primarily wealthy, powerful) private individuals have an incentive to market the idea that government is inefficient to reduce the impact of decisions made by democratic choice.
This same conflict occurs throughout history. For example, the Magna Carta was a major concession of the power of the English King to lower nobility. There are always going to be people who dream of running their own fiefdom and see democracy as at best a nuisance and at worst an active impediment.
...what? Are you seriously trying to claim that absolute monarchy is a form of democracy?
What I'm saying is that there has always been this conflict where (some) private individuals want absolute reign over others, and democracy limits this power. The Magna Carta is just one classical example of that.
The distinction between private and public is a little blurred when it comes to absolute monarchs, but the general trend is that the more absolute power a monarch has, the more they're running it essentially as a private estate. That's why lists of the wealthiest people in history often include rulers with absolute power.
Due to the conflict, the private power of monarchs has weakened. That's why, for example, in The Crown we see a monarchy that has to concern itself with public perception and the Prime Minister. But William the Conquerer essentially owned much of England.
How are republicans sabotaging New York City, San Francisco, etc? Historically, half of all governmental spending in the country happens at the state and local level—-and that comprises most of the services that affect people’s daily lives the most. Blue states could have big, active, well run governments if that were possible, and republicans could do very little to “sabotage” them.
In practice, the most well-run places in the country tend to be moderate red areas where government has limited objectives but does it well. I grew up in red state Virginia and it was very well run. When California was well run, it was a red state. Florida is a well run state. I live in a Romney ‘12 county in a blue state, and it’s really well run, unlike Baltimore, where I used to live. I actually love going to the county landfill/recycling center, because it’s so neat and orderly and well run.
Efficiency seems inversely correlated with the size of the organization. Public sector usually has large orgs, but they are not run less efficient than equivalently sized enterprises.
You might jump to the conclusion that smaller entities would be the efficency solution, and even observe how this allows sometimes for a smaller entity to outcompete a big enterprise. However, if you approach it from a more systemic analytical point of view you have to take into account that surrounding the 'small' efficient business, there are dozens if not hundreds of unsuccessful competing small entities vying for the same niche. Taken together and purely looking at aggregate efficiency, this collection of competing businesses is even less efficient. The strenght of an openly darwinian struggle lies in innovation and adaptation, not in aggregate resource waste reduction.
This whole system stinks. The overly complicated tax code, the sleazy corporations making tons of money on it, the entrenched politicians and bureacrats who make a living on it, etc.
Although if the IRS is gonna audit when I under pay, they technically already know how much I owe. Why not just tell me? Reckon it's since people also over pay, and there's no refunds for doing that.
Sure there are. I've gotten refunds from the IRS when I made a mistake on my tax return and overpaid.
The vast majority of people don't need to file taxes but even then it somehow still comes out wrong and you occasionally get a refund.
It’s crazy stuff like this that means the IRS can’t really calculate your taxes for you.
But as I wrote, I think things are mostly pretty good these days. But who knows with things like RSUs you have limited visibility into.
Instead, it’s because they want to make sure you were truthful in what you reported, and may have some reason to believe you were not. Often, they don’t know how much you owe in this case.
So not only can they do it for you, they can do it better!
> Most of those states don’t tax income at the state level, but the four that do...will guide participants to a state-supported tool that they can use to submit their state returns.
Which means it's _more_ incomplete in states with income tax (federal return through IRS pilot, state return through a state system) than in states without income tax (just federal IRS pilot return).
1. All my incomes are automatically filed. 2. Each month I say "yes this is correct" on the website, and pay immediately via any bank. 3. At the end of the tax year, the system calculates if they own me money automatically, I give it my bank account and in some days I have my return.
It even handles tax deductibles and everything.
An archaic, windows-only Java app to generate pairs of password-protected keys, which then have to be fed back into the system to declare your tax status. And they expire every so often, so you have to track down your old keys from years ago and remember the password. Confused? Just set up a SAT appointment, they'll be with you in... weeks.
Having to declare your tax categorization multiple times per year.
Facturas that companies will only generate for you for a limited amount of time, and complicated questionnaires to fill out if you DO want one so you get the right type. Assuming they'll even give you a factura at all.
I fully admit that I have an incomplete understanding of the system, this is just what I've seen my wife try to deal with. And she's the equivalent of a 1099 so her situation may be more complicated.
They do have such a portal which does some of the things you list and several other things too.
https://www.irs.gov/businesses/business-tax-account
How do we know that your list better matches the most common desired/needed features than the initial implementation by the IRS?
IRS business features:
Sole proprietors with EIN
A sole proprietor who files with an EIN can:
View business balance due
View business tax records
View select digital notices
Request a tax compliance check
View business name and address on file
Give account access to your employees
Register for clean energy credits (if eligible)
An individual partner or shareholder with access can:
View business balance due
View business tax transcripts
View business name on file
Unfortunately it can't do everything, but you can get your tax notices there, check filing status, refund status, get tax transcripts, etc.
Still worth using though and is pretty straightforward and easy to use.
So maybe it's an optional thing for some employers?
Of course, would be great to just skip the Turbotax portion.
But yeah, for the large majority of us, having the option to skip TurboTax and just use a pre-filled, government generated tax return would be great.
It is a lie by MSM
Shocking.
Yes, it could be better. But an mvp-type launch that does some things well, without trying to achieve everything on day one, would definitely not be a "complete waste". If successful, it's laying the base for the next iterations of functionality.
For a lot of folks, they have one or two W2 forms to enter, and that's it. It's really not that hard. If even a million or so folks get benefit from it to start with, that's great, and we should then build on that.
Then allow companies or open source software to create whatever value add they want on top of these APIs.
That sounds like a minimalist launch.
Agreed - public API first is the wrong place to start.
How does it feel to be the smartest person on the planet?
Edit: actually looks like it doesn't reach parity with the existing free e-file system and only covers the simplest cases, and "the annual cost of a direct-file system could range from $64 million to $249 million" sounds absolutely absurd to me.
Putting some concrete numbers on the infrastructure, for $500k you could have like 10 servers each with 60 cores and 32 TB of mirrored NVMe storage. Any one server could handle the load while being almost completely idle (i.e. you're really just buying extreme redundancy). So what are the other $6.5M for, and how is that an annual variable tech budget?
But when a government agency is working in software, suddenly all the best practices are a “waste of tax payer money”
Seems silly
You have an accountant, so you're already a minority of citizens. Open your mind.
If I have to fill out the forms myself, then it's utterly pointless. I could already do that if that's what I wanted. Not rhetorical: what is even new about this, being able to do it without using paper and pen? Big fucking whoop, thanks for nothing IRS.
Certainly no worse than the decades of fees taxpayers have been sending to Intuit and co.
It is free.
A little obnoxious but the forms do have instructions/directions.
One time I reproduced the forms in a spreadsheet following the instructions and it wasn't much different from doing the online wizards. I would have liked to mail it in but I just paid to e-file anyway.
That is, the last time I filed online it took I think practically a year before they got to it (I think the year of the pandemic)
I figure there's so few people filing by mail these days that they're able to process them faster than the huge amount of online filing.
I'm guessing they're separate teams (online vs mail). However I have no idea.
Regardless mailing has worked better for me the last couple years.
Additionally I do not have to use the third party ID verify thing (might just be for accessing information on irs.gov) that I am just sure is going to have a breach and can not for the life of me fathom why our government (Federal) needs a private company to verify the identity of a citizen via government (State) resources.
Now we're also not talking a lot of money. +- a couple of thousand, usually less. But you would have to compare apples to apples which would be the e-file fee vs. the compounded inflation rate for the time difference in receiving, presumably, your refund. I suspect it's a wash.
You need to also factor in the ${turbotax} fee and/or the accountant, as well, if you don't actually fill out the forms yourself.
Fun fact: We moved from AZ to GA last year, and dutifully filed in each state. I am pretty familiar with AZ due to filing our own taxes for most of 25 years, but GA is much more complex, verbose, and quite stupidly, even aggressively, vague.
I produced a spreadsheet for my wife to evaluate that presented my first time interpretation of the GA partial residency filing. We're both B.S. ChE, she's an MS ChE, I'm a MS App. Math. So we know our numbers. The tables were low risk, low refund, medium risk, medium refund, high risk, high refund. She chose medium risk. Fine with me.
Both AZ and GA refunded something like 50% higher than what I filed and expected.
Some sort of emoji here.
I can't really make an authoritative comparison of filing methods because I'm mostly a die-hard paper filer and have only ever e-filed maybe twice in my life at most. And it was long enough ago that I barely remember, and in fact never really cared, how fast my refund arrived. I embrace and savor the luxury of simplicity. When will my refund arrive? Answer: sound of one hand clapping. It's a reminder I put in the calendar for like, mid-June, to the effect of "Hey did I get my tax refund yet?" Usually the answer's, yep, and you dismiss the reminder. I can't be arsed (as they say in the UK) to be more interested in it than that.
In any case, I’m complicated enough I just outsource to an accountant. Yes it’s expensive but I’ve never had an issue even with very thick tax filings.
No restrictions on income, etc. but federal returns only. You get an email from them within 24 hours of whether your return was accepted or not. It's still obnoxious but for easy returns it seems better than buying turbotax or whatever people use instead.
Basic point is that if your taxes are simple enough to just say that yep these numbers square with the few pieces of paper I received in the mail, filling out a return is maybe 30 minutes work.
I would say (as someone whose taxes will never take less than several hours) that those 30 minutes are about 28 minutes too many.
That was also the year when they intentionally broke the withholding calculations so that people end up owing a big unpredictable amount of money when they file, are more likely to be fined for it, etc.
It also eliminates tax loopholes, and prevents people from accidentally being paid not to work, being denied bending on a technicality, etc.
Are you forced to use third party services ?
How exactly is it hard to do your taxes on your own ?
No, nobody is "forced" to spend $60 to save hours of their free time researching tax code. If the tax system were simpler, doing it yourself would be more appealing.
Every February everybody who paid you or got paid tax-deductibly mails you a form with the finals amounts for last year. On the back are instructions for where it goes on the forms.
The basics are simple, but few people really understand taxes at all let alone care to look at the forms. Instead probably 70% of people go to an accountant and give them the forms to punch into a program which generates the IRS forms and e-files them. Cheap places are maybe $100, but complicated returns at good accountants run like $500.
The other option most people who "do their own taxes" do is to purchase a yearly license to software which you can punch the numbers into yourself and it'll generate and e-file a return for you. It's like $50–$70 normally but some are free.
Most complications arise either from:
* You run your own business and have to do two returns basically without getting nice filled forms for all the numbers. * Congress constantly wants to incentivize behaviors and give people breaks on their taxes so there are a lot of little things you can get credits for like having kids and buying electric vehicles. It's really easy to miss deductions you're entitled to. * States have their own separate taxes, so you have to do everything twice and lots of programs have less support and make you pay extra too.
Adding to this, even if you have a small side hustle with low overhead (no employees, few expenses, etc.), the labyrinthine process of filling out all the additional forms is just plain ridiculous.
How do people against free e-file justify their anger, unless they are employees of a company leeching off taxpayers' money like Intuit?
Wow, I thought that Intuit would have gone for a little more subtlety.
Now, that said, the way you debug your submittal is to paste an entire page of error gibberish that looks like very low level database error output into an entry box they point you to. Sounds gross! Ewwwww! Well actually I've been debugging c++ templates since forever and hohum it doesn't bother me. However... every single time it decoded the problem and told me exactly what I needed to do. It has taken me 2-4 tries each year to get it debugged and then it sails right through. The final result I've fed into two different state forms and that has sailed right through too. All free, and not that much of my time.
Now if they can get the UI for normies painless, which I suspect is the main programming problem (I don't say that UI programming is trivial), this will take off like a rocket ship and the US can the join the coterie of civilized nations that do this for all their citizens.
I agree that it would be much nicer if they said "The amount of line 29 of Form ABCD does not appear at line 18 of Form WXYZ".
Even nicer if you never had to manually transfer amounts between forms.
I was thinking when I scanned the message was that I bet I could reverse engineer the problem from this back end generated text but why not do what the instructions say and just feed it into the parser box? And every time the next email message gave me exactly the thing I needed to do. It was cool, for a weird sort of nerd.
So no, I was casting shade where the process was right in the sunlight: I made the mistake, and the business logic caught it, and told me correctly every time what I needed to do to fix it. I liked the whole process a lot.
We need more people who are immune to lobbying in government positions. We’ll see how this goes.. depending on the next election cycle this will either get quashed quickly, or, fingers crossed, might fight on against a growing backlash.
What we need to do is stop pretending people like that exist, and come up with a system that works despite people's self-interest, greed and corruption.
Maybe what we have is the best we can do.
https://www.opensecrets.org/federal-lobbying/clients/summary...
Unless you're dealing with foreign income, are a business, or do a lot of contract work for cash, I don't see much reason why the IRS can't just handle all the taxes automatically - apart from the fact that some company wants to charge me $150 a year to file my taxes and making sure that my tax situation (which would fit on a beer coaster otherwise) is as complicated as possible.
There are also cheap systems even for business returns - mine cost £12 for the company and I will use the free HMRC system for my personal return. It might be easier to use more sophisticated software, especially if your finances are complex.
I imagine there are heavy software development costs, on par with what it might take to build Turbotax itself.
For instance, someone is going to have to figure out wash sales. Right now your broker does it, but you can wash sale across accounts, which requires you (or more reasonably tax software) to both detect this and track the adjusted basis in perpetuity. More complex events, like straddles, further exist, and even consumer-grade tax software won't handle it correctly.
Even implementing the tax code correctly for regular income is difficult. Examples of calculating Net investment income tax correctly due to ambiguous tax code changes (https://www.bogleheads.org/forum/viewtopic.php?f=2&t=271074&...)
Seriously, I doubt there is more than 100k people in US that have this "wash sale" any year. I'm so tired of every time someone suggests automatic tax filling, there is always one guy bring up some tax term that 99.99% people never heard of. Sure, if auto tax filling doesn't solve your wash sale calculation, feel free to go back to TurboTax. Let the other 99% people who have one job and no other complicated tax situation skip this yearly nonsense.
[0] https://usafacts.org/articles/what-percentage-of-americans-o...
One person has a wash sale, another has some real estate stuff, another became disabled, another has child care stuff, another has education credits, etc etc etc.
Actually now I am curious how many people file the “simplest” return (wage only, standard deduction, and absolutely no other adjustments).
FWIW TurboTax is easily piratable. There are even instructions out there to crack it yourself with a .NET assembly editor.
I do my taxes in a VM without Internet access and mail in the filings, so there's no way for any information to be backhauled to Intuit or anyone else.
As many software projects, the internal system may not be appropriate for external use, but still they should have components very long time ago.
The audits are accomplished by a human re-doing the return with the submitted information. (As no surprise, the low-complexity returns are often chosen)
Yes
In New Zealand where I live most people do not file at all. Tax is all "payroll tax" and sales tax
I have just joined that system myself (after several unpleasant years of not being on a payroll. Whew!
Key word: "intentionally".
You mean the congressmen are bribed by free food and alcohol? Asking as a non-American.
Bill Gurley: "2,851 Miles" https://www.youtube.com/watch?v=F9cO3-MLHOM
He mentions Obamacare and the digitization of records, which is very on point and a similar issue. In the interview he mentions, Obama says:
“In some cases, you have economic incentives against making the system better; you have service providers — people make money on keeping people’s medical records — so making it easier for everyone to access medical records means that there’s some folks who could lose business. And that’s turned out to be more complicated than I expected.”
I think “more complicated than expected” is a hilarious and sad way to sum up the whole mess that is greed and Washington DC combined.
2. Politicians need to know how the businesses they're regulating work, and theoretically they gain a lot from being able to talk it over with the businesses themselves (the existing ones, mind you - not the future ones which might be stifled, and currently have $0)
3. Lobbying is another word for talking with your local politician, what megacorps do (and what basically everyone means when they say "lobbying", really) is paid lobbying, i.e. run the "lobbying" errand on your behalf. Banning the former type of lobbying is impossible, and banning the latter is hard to do when it's a legitimate service for people who have more money than time (and also might violate free speech laws, and also is hard to actually stop)
4. Fuck paid lobbying, it does more harm than good
"For the pilot participants will have to enter their own financial information, the I.R.S. said."
It is indeed a complete waste of taxpayer money unless they actually prefill with the IRS' data.
The next step of citizen's countering Intuit's particular complex is for automatic tax filing to occur.