Comment by MisterMower | Hacker News Reader

Comment by MisterMower | Hacker News Reader

The biggest issue with Direct File is the conflict of interest created by having the government who benefits from your tax payment also prepare the return for you.

Given the massive amount of IRS shenanigans over the years, it is easy to imagine certain groups unfavored by the government conveniently being led to file returns that cause them to miss out on subsidies they are actually eligible for, or to pay higher taxes based on filing their return in correct but unfavorable ways resulting in higher tax payments than necessary.

This risk is particularly high given that the program was intended for and marketed to low income filers who typically rely on their tax preparer as an advocate to ensure their tax payment is as low as legally possible.

As other comments have mentioned, the program also exceeded statutory authority. Congress authorized the IRS to study a direct file system, not implement one on a permanent basis. It is a good thing when our government is restrained after it oversteps legal boundaries.

This is especially true in the case of this program because it was being intentionally implemented on a massive scale in order to make it politically unpopular to shut down. A program that allows 10% of all tax payers in 25 states is obviously much more than a study.

> The biggest issue with Direct File is the conflict of interest created by having the government who benefits from your tax payment also prepare the return for you.

The amount of distrust in the USA is truly bonkers. What about the conflict of interest for the tax preparers, actual companies with profit as a motive wanting nothing more than to pretend it's all complicated.

As the document says, the government prefilling your return is commonplace in many countries. And it actually makes sense when they already have the data. Less work for the taxpayer, fewer mistakes resulting in fewer cases in need of investigation. Everyone wins here...

> This risk is particularly high given that the program was intended for and marketed to low income filers who typically rely on their tax preparer as an advocate to ensure their tax payment is as low as legally possible.

Over 30% of returns don't even owe federal taxes [1]. So when they file, and get a $1000 credit, it's really crappy to then have to pay $100 or so of that to a tax preparer.

> to make it politically unpopular to shut down

So the government doing something people like is... Bad?

1: https://www.ntu.org/foundation/tax-page/who-doesnt-pay-incom...

Until you’ve had an IRS audit you truly can’t even imagine. I hope you never have a similar experience that knocks those rose tinted glasses off your head.

A buddy of mine took the home office deduction for a few years in the late 1990’s. He read the law and was in compliance with it. The IRS audited him and claimed he was not eligible. He lawyered up and spent thousands of dollars fighting it. He was ultimately successful, but his subsequent distrust of government was entirely merited.

Tax preparers at least have incentives to compete with each other on price and quality of service. They also often guarantee return accuracy. Tax law can be complicated and there are legitimate questions about how to treat certain kinds of income or expenses. These are questions you really don’t want the government making unilaterally.

And if you really hate tax preparers, you can always file a paper return for free using forms available from the post office, as my father and I do to this day. And honestly, if a taxpayer doesn’t owe federal taxes, submitting a paper form 1040 is the simplest route. Slap your W2 income on there and fill the rest out and you’re done. No fees, just a stamp and envelope.

A direct file system will inevitably morph into a black box where the government tells you an arbitrary tax liability amount and 99% of taxpayers just accept it at face value and pay it. You really see no problems with such a system?

Arguments of the form “everybody else is doing it, can’t be that bad” are not compelling, in my opinion. Slavery was common everywhere for a long time. I suppose that made it a good thing?

The government entrenches its power by implementing programs that hand out benefits at the cost of your liberty. Those benefits are always popular, and the loss of liberty is only realized after it is far to late to ever get it back.

But hey, the government claims people saved an average of $240 a year and 6 hours of tax preparation time because of this system. What a smashing success!

TLDR, this is not for you. No one is forcing you to use it. The people that did use it were apparently happy with it.

> Tax preparers at least have incentives to compete with each other on price and quality of service. They also often guarantee return accuracy.

> He lawyered up and spent thousands of dollars fighting it. He was ultimately successful, but his subsequent distrust of government was entirely merited.

So your friend filed himself, or his tax preparer didn't back him up?

The US tax code is very complicated and claiming deductions seems to be a national sport. I'm sure there are plenty of deductions taken that might not be illegal but questionable.

However, your example here wouldn't be what this service was aimed at to begin with. If the bottom 90% or so of filers can use this because their incomes are simple (paycheck, some savings, standard deduction) why would that need to be done by a tax preparer?

> You really see no problems with such a system?

I do not because it won't be a black box anymore than your tax preparer is a black box. Again, think of this as for the simple returns. If you claim standard deduction and have only a W2, it will only be a black box if you're unable to do the simplest of math.

> Arguments of the form “everybody else is doing it, can’t be that bad” are not compelling, in my opinion.

Counter argument being, if the rest of the world does it differently, shouldn't that mean there might be some reflection needed?

For your slavery example, that's why it's no longer a thing?

> The government entrenches its power by implementing programs that hand out benefits at the cost of your liberty. Those benefits are always popular, and the loss of liberty is only realized after it is far to late to ever get it back.

I'm going to make a guess that you've never lived outside of the US.

> But hey, the government claims people saved an average of $240 a year and 6 hours of tax preparation time because of this system. What a smashing success!

If it means that the lowest incomes now get their $1000 dollar credit and get to keep it, I think that's a lot of money for a lot of them.

> No one is forcing you to use it.

No one is forcing me to use such a system today, but I was also assured that if I liked my doctor I could keep my doctor, and that there were weapons of mass destruction in Iraq. You are naive if you think the government will act altruistically.

> I do not because it won't be a black box anymore than your tax preparer is a black box

How can you say that with any amount of certainty?

Congress asked the IRS to conduct a feasibility study and instead they went and created a full blown system to accept and process tax returns, in violation of what they were statutorily required to do, spending millions beyond what they were legally authorized to.

If they can't even do the study correctly and in good faith, what assurance does anyone have that they won't build a system that will be used to abuse taxpayers? If the government wants me to trust them, then they should act in a trustworthy manner.

> I'm going to make a guess that you've never lived outside of the US.

I'm going to make a guess that you've never studied history.

> If it means that the lowest incomes now get their $1000 dollar credit and get to keep it, I think that's a lot of money for a lot of them.

I too like it when poor people get money they're entitled to. But that doesn't mean we need to bend over backwards and give the IRS massive new powers to accomplish that goal.

There are tradeoffs involved that need to be seriously considered when giving an agency that has consistently abused its power for at least a century more power in the service of that goal. [1]

1. https://en.wikipedia.org/wiki/List_of_allegations_of_misuse_...

> You are naive if you think the government will act altruistically.

It's funny how a large swath of America in their opinions has already given up on the concept of America. Government by the people, for the people?

> How can you say that with any amount of certainty?

Because direct file is just the messenger. If you don't understand what's in it, then who prepared it didn't matter does it? You put as much trust in you tax preparer as in direct file.

The only way this is not true is when you actually review everything they've done, at which point you might have done it yourself. And let's be honest, with the US tax system, you need to be an expert to file anything nonstandard.

> But that doesn't mean we need to bend over backwards and give the IRS massive new powers to accomplish that goal.

They don't get new powers through this, it's just another option for filing.

So with this being killed, you can sleep better at night and the lower income people will suffer as they can go back to being overcharged by tax preparers for filing the simplest of returns. I guess that sums up murica pretty well.

> has consistently abused its power for at least a century more power in the service of that goal. [1]

That's mostly presidents and their party abusing the executive branch, although it's all allegations.

You must really like this current administration, really raising the bar on what retaliation is.

How would direct file lead to more audits? The same documents end up with the government either way. And no, the argument that its just a slippery slope to a non working system isnt an argument at all. Thats a near religious belief.

Mind you, direct file did not prevent third-party filing.

I'm not saying a direct file system would lead to more audits. I simply shared the story of my friend to illustrate how abusive and underhanded the government is capable of being, and to make the point that under a direct file system these same people would be completing your tax return for you.

All slopes are slippery. The question is to what degree, and my contention is that this slope is far more slippery than most people want to admit. You are welcome to make the argument that the slope is actually not that steep, but you're going to have to bring more to the table than the insult that my concerns are no more than "religious belief."

> I hope you never have a similar experience that knocks those rose tinted glasses off your head.

Buddy of mine, circa 2020. He owns a small plumbing supply business in the upper midwest. Think like fleet of a dozen box trucks. Friday night ~7pm (so well after close of business) he's at the warehouse doing stuff. Notices a couple guys outside slinking around his row of parked trucks, looks like they're stealing fuel. He and the other couple guys with him goes out to see wtf. Yelling match ensues, guns are drawn on both sides. It's a couple guys barely speak english, have no badges, no papers, look like they could be uber drivers. Police show up and mediate the yelling, phone calls get made, etc. Turns out, these guys are like an Nth layer subcontractor of the IRS who are dipping his fuel tanks to check for red diesel because the N-<whatever>th layer subcontractor decided that this business needed to be checked for that particular sort of tax evasion.

He's been audited every year since then. I guess someone must have set the "screw this guy" flag in the database.

No this doesn't have anything to do with 3rd party filing software.

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