Hacker News Reader

Comment by MenhirMike | Hacker News Reader

Which is really the main issue. Offering a more accessible free version to file taxes is great, but the real problem is the need to file taxes at all for a lot of people. The IRS already knows the relevant info: Your employer sends W-2 information, your bank and broker are sending the various 1099 forms for interest, dividends, stock sale gains/losses, etc. Same for your spouse and kids/dependents. Don't even need to itemize in a lot of cases, since the standard deduction is preferable in many years.

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.

View on HN

> 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.

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&...)

I have no idea what "wash sale" is. I only heard that term when I was reading the help page in TurboTax, which I'm effectively forced to use.

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.

Beware the paradox of averages. I bet a lot more than 99% of people have some wrinkle with their return.

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).

It’s probably less than 99% but it could be the majority in a given year.

> TurboTax, which I'm effectively forced to use

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.

Literally anyone that owns stock could generate a wash sale.

Only 15% of Americans directly own any stock[0]. Vast majority of people who do is done through a 401k or other retirement vehicle.

[0] https://usafacts.org/articles/what-percentage-of-americans-o...

Wash sale rules apply to mutual funds and ETFs also, not just directly holding stocks.

Note the proviso, taxes should be automatic "for a lot of people." Will taxes be automatic for Warren Buffet? No. For GE? No. For Suzie Q. Public? Yes.

IRS already audits at least 10% of the returns. They should have the entire tax system implemented as a software. It is madness that this part was hidden from the wide audience.

As many software projects, the internal system may not be appropriate for external use, but still they should have components very long time ago.

>IRS already audits at least 10% of the returns. They should have the entire tax system implemented as a software

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)

This is a good first step. Ideally it turns into a "verify this all looks correct & add anything we're missing" kinda thing.

The article says that "in one possible scenario included in the agency’s report to Congress, the I.R.S. could fill out tax returns with information it already has." We can only hope :)

Great way to look at it. It is a significantly smaller jump once the Federal system is in place and already handling returns for millions/years.

That is how it works in many (most?) countries already - the US is an outlier in requiring every citizen to handle their own taxes.

A lot of US GDP is Rube Goldberg machines to skim off the economy. Intuit, Visa/Mastercard, private health insurance industry, etc. Lots of pushback to be expected as government fixes this (FedNow for payments, IRS improvements for taxes, healthcare reform, and so on). Onward.

It is how it works for most people in both the countries (on different continents ) I have worked in. Only people with high incomes or investment income or who are self employed or similar need to file their own taxes.

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.

> but the real problem is the need to file taxes at all for a lot of people.

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!

Reply on news.ycombinator.com