How the Maker of TurboTax Fought Free, Simple Tax Filing
propublica.org
propublica.org
I don't care about the 30 dollars turbotax charges me, I'll send 30 dollars straight to the CEO or promise to burn it. What bothers me is that I've been forced to do manual data entry - a pet peeve of mine as a programmer - because the government has been lobbied specifically to be less efficient.
I am sure we could find counterexamples here.
I made an appointment for mid-afternoon to register my motorcycle. I was in and out in 15 minutes.
When I had gone in 2 years ago to get my drivers license, I didn't know about making appointments. I spent 5 hours at the DMV that day.
This convenience or a single roadside service call can make the annual fee worthwhile (but check first if they can/will tow/service a motorcycle!)
in a larger area, it's a 'pick a number' and wait drudgery.
ymmv
You can also make mistakes too. However, if they are going to be easy with it, many people are also going to make "mistakes".
I say this not to say that you're wrong by any means, just to offer another anecdote.
In my state, actual government offices are generally less seedy looking, better staffed, and friendlier than the universally-privately-run DMV offices are.
Deputy Registrars are independent contractors and are selected on a competitive basis as described in the Ohio Administrative Code and RFP. Deputy Registrars receive service fees of $3.50 for each vehicle, driver license and ID card transaction; and $0.90 for each vision screening performed. All fees are established in accordance with the Ohio Revised Code. Contracts are generally for two or three years per Section 4503.03 of the Ohio Revised Code.
All that said, the private contractors do get the job done, but they do it in a way that's efficient with employee time, not in a way that's efficient with customer time.
DMV in Connecticut is horrific. One of the worse "customer service" experience.
Which says to me, all of the reflexive "DMV sucks" comments are missing the real question - why does it suck in some states and not others?
It also depends greatly on which office you go to. Trenton is, unsurprisingly, horrible.
I'm aware this isn't the case in all states, but that says more about the priorities and competence of the people running those governments than it does anything else. Unfortunately a lot of people seem resigned to the idea that things are going to be run poorly and don't even bother punishing the politicians who are shirking their responsibility of administration and blaming their own failures on some abstract idea that government is always inefficient.
Good government service.
Service wise they do a pretty good job. They've spent the past decade or so beefing up their online and automated services. In most cases you don't even need to go to an actual office if you're dealing with a license or plate renewal.
I think you probably get the point.
If the government was able to fund it's IT operations at market rates, or pay outside the GS we'd all be much better off. I don't know about the federal level but my state relies on outside contractors to make web applcations, who mostly do a half-assed job and disappear when maintenance becomes a problem.
Whether those benefits are worth a decreased salary depends on the individual.
If you're young and job hopping I wouldn't look at a gov't job just yet. 35 with a family of 4? I would seriously consider it.
I can't speak to market rates but the Federal government does indeed have alternate pay schedules that they can use (in theory) for IT expertise. E.g. scientists and researches have their own specific pay grades for their work, "hourly" workers have FWS pay instead of GS, etc.
You're right that the government workers are generally underpaid in my experience though. I struggle with the same thing here in DC, except that I'm trying to fill GS-5 positions to do work which involves knowing lots of policies, manual interpretation of individualized orders, and having to do all of that in a "customer service" environment.
Within 10 years you'll get a capped GS-14 spot (105k-136k) and by 15 years, you'll have 5 weeks vacation, 13 holidays, alternative work schedule, 13 days of forever accruing sick time (think family medical leave for having kids). Oh, and you can't be fired unless you do something really stupid -- so clock in and out 9-5.
Oh and you get COLA increases even if you don't get step or grade raises.
I only lasted a year, but I have friends that are still there. The fact that you can't get fired also applies to the colleagues you'll be working with...
Rather than leaving any hiring decision to anyone who knows the issue at hand, hiring is done based on a process which is optimized to be legally unimpeachable. When government succeeds, nobody gets credit, but when they get sued, its cover your ass time. This is why ALL government processes, including hiring, are first and foremost about CYA.
First the RFP has to be written, which itself is a very political process and may have been initiated by a contractor/sales-person convincing someone they need the software or process in question. They'll often help write the RFP if you let them. These RFPs are often signed off on by non-technical people who are not qualified to really understand the technical details.
Then the state has to get multiple bids. Sometimes the RFP is written so specifically that many options are excluded. For example, I've seen an RFP that required the state pay for the software. The way it was worded excluded an OSS contracting company from providing support for a Linux solution. A more public example is the LA School District looking for computers for their students. They are required to support both a keyboard and touch, which is prime market for Windows Surface devices. It could theoretically go to something like an iPad, but it makes it very hard for laptop makers to compete.
Finally the state is required to take the lowest bid that meets the requirements of the RFP. To reject a bid the state has to show that it does not meet the requirements. They can't simply take something that is better value, they have to take the cheapest solution that meets the minimum requirements.
I'm not saying the whole system isn't needlessly complex, but don't make it out like the IRS is actively out to get you.
Incredibly easy to resolve the entire ordeal within weeks, including full payment.
I have no doubt that if the IRS truly made it a policy to extract as much money from everyone as they could, they would have just audited me and nit picked every math error ad nauseum until I was drowning in penalties and interest.
This is part of why I have a CPA now.
I ended up challenging one of the three and I spent more time writing that letter and including supporting documentation than anything else.
If I pay too much, do I get interest back on the overage?
Of course, I'm not allowed to just pay the full amount when due, which would solve the problem (for me, but potentially cause much larger problems for people and the government w.r.t. those who don't/can't budget appropriately).
It is nice to hear (from fotbr) that in the case of an actual mistake on behalf of the IRS that they actually pay interest... I did not know that, and wouldn't have expected it.
I treated myself to a bottle of Lagavulin 16 and a couple good cigars.
Besides, if you think about it, even if you figure the IRS is greedy and only motivated by money, the biggest returns for them are catching fraudulent millionaires dodging tens or hundreds of thousands, rather than slapping you with a $100 fine over a $2.38 mistake.
More to the point the thing that causes stress is the fear of the unknown. The fear of "what if" where you don't know the outcome. One of the ways I have found to at least reduce a bit that stress is to come to the acceptance that the outcome even worse case scenario can be dealt with or how it will be dealt with which seems to work for me as a mind game.
Add: Also the parent's wife may have a different financial upbringing and might have a case of ptsd because of family history or other factors.
With that in mind, we keep a certain amount of "operating expensed" liquid, since we both tend to work in smaller companies than can go sour rather fast. Paying out that check to the IRS sucked up the majority of those liquid funds. If you've read some of my posts in the past (not that I'd expect you to have done so...), you'd see that I'm on the upper end of the age scale here, have been around a while, and managed to enjoy a run through the dot-com 90's. So, I do not have the finances of a single 20-something college graduate.
I looked at this IRS payment as an investment. I was very highly confident that I would get my money back (and then some), so that was the easiest path, all things considered. Had I been more in doubt I would have certainly kept the money, reasoning that I'd rather have them pry it away from me if it came to that.
I didn't mean for my comment to sound like I just go around writing 6 figure checks as the path of least resistance.
If you think it's a brag, I apologize, I try to offer as much insight and perspective from my "learnings the hard way" as I can.
Well that's the thing, the IRS can wait 3 years (or 6 if the error was bad enough), then look at your taxes, and pound you with 4%/year, instead of setting up a job to look at everything right away.
Now your claim is that they're... what, lying in wait? Deliberately maximizing penalties? That's not my experience (our mistake was caught after about 5 months I think). You have a counterexample?
(Edit: and reading the replies, the discussion has now slipped yet further afield from the original assertion, and in two directions: on one hand, it's now outrageous -- yet somehow still an argument against the reforms in the linked article -- that some people merely have "bad experiences" with the IRS. On the other the IRS are apparently now highway bandits literally robbing people with threat of force. I give up.)
You used yourself as an example, he used himself as an example, so I fail to see how he is required to provide another counterexample to you at this point.
I got hammered owing 6 or 8 hundred dollars for a $200 mistake when I was 10 years old and making money off of my paper route. (No, my parents didn't cover the bill nor do my taxes.)
And I made $10,000 mistake five years ago and they said "Oh - whoops, pay your bill and be more careful next time" and then called it a day.
However there were 20 years between the 2 events.
And the first was found because of an audit, while the second I found and reported within a few months of filing.
There’s a lot going on here. The lesson I draw is: different circumstances different results. But both good and bad results are possible, for fairly similar inputs into the process.
The IRS audited a 10 year old?
Other than the huge (for me) fine, it was a fairly painless experience. My parents did handle it - but even for them other than the stress of knowing it was happening, I think it involved not too much work for them, and as far as they where concerned had not too bad an outcome.
I do suspect my parents double-checked my filings from then on a lot more closely than they had before.
Downvoted for egregious politicking. Let's skip the drive-by attacks on FOX and MSNBC, dailykos and drudgereport ... unless they're relevant.
I actually do wonder a little what Grover Norquist's deal is here. I understand his politics (sort of) but I assume receiving a statement laying out the calculations the government is going to use against you could only be an advantage when strategizing how to reduce one's tax bill. That he'd be against it is odd.
Maybe he really wants the whole process to be as inconvenient as possible so people will sign on to some of his other ideas.
With him, it's always a question of whether he's crazy in the obvious way or in a more subtle way.
I think the reason Norquist opposes measures to make the existing tax system easier to live with is that such measures would tend to reduce pressure to implement his proposals to change it. He doesn't care one way or the other about Intuit, H&R Block, or your friendly enrolled CPA, the demand for all of whom would be reduced if he were to succeed in getting his proposals enacted.
As for myself, I happen to believe tax withholding was not one of Milton Friedman's finer inventions[1]. You should get your full paycheck every payday. Then, every quarter, you should have the privilege of cutting a check to the United States Treasury. That would keep taxes on everybody's mind!
[1] http://www.stephankinsella.com/2009/10/fck-you-milton-friedm...
Citation needed.
Like I said, it was an error on our part. I don't disagree that at all. I have absolutely no qualms in paying what I owed. But I wouldn't have paid a dollar over the amount owed if they had adequate systems in place to catch my typos and immediately notified me to fix it. But a lack of proper processes on their part meant it took them 2+ years to find an error and now I owe them taxes + interest. Whether I would've made or lost money if I had invested in mutual funds, stock market, or horse races is not the question. The problem is by making a mistake, I am now at their mercy for an unspecified length of time.
Also the error could not have been avoided by us. My wife was in school and we took the American Opportunity Tax Credit since it was higher than Lifetime Learning Credit. But turns out my wife's estranged stepdad had years ago, unbeknownst to my wife, taken Hope Credit for her by claiming her as a dependent. Long story short, we owed some taxes + interest after filing a correction.
I mean, really: how is paying 4% APR on a loan[1] you got from the government "at their mercy?". It's not even a bad rate for an unsecured loan! People routinely pay much higher for car loans, and even now mortgages (which are at historic lows) are only a little better.
[1] Which is what this is. You walked around with extra money in the bank for three years, albeit accidentally. Why doesn't that fact figure in your analysis?
(FWIW: if the stepdad was really "estranged" and still claiming your wife as a dependent, then you should have been able to fight that. That's not how tax law works. My guess is that they weren't actually "estranged" three years ago, and she probably did meet the definition of a dependent. Again, that's your mistake if so.)
Because I didn't want the loan. What's not to understand. I wouldn't have had a problem paying the full amount if they had told me sooner. Also it was over 6% because it was 2+ years and not 3.
> My guess is that they weren't actually "estranged" three years ago, and she probably did meet the definition of a dependent.
I'm certain it met the definition but not the spirit. It wasn't worth having us fight or prolong this. As it is it took 8 months, four registered letters, 20+ hours on the phone, and numerous meetings with my tax attorney to get this resolved. IRS didn't just say "Cannot qualify for Hope Credit because lifetime limit was reached." They outright denied it and asked for the full amount with interest immediately. If this was a business deduction like restaurant bill, we would've paid it immediately. But denying education credit without any reason why? We had no idea her 4 years credit was already used. We had to contact her school, Sallie Mae, review all of our past records etc. and finally our accountant suggested that maybe when she was younger, someone claimed her.
This 2 year $500 'unsecured loan' at a wonderful interest rate cost me easily over $3k and delayed my citizenship process by 8+ months. Did you know if IRS has an open claim against you, you cannot file for citizenship even if you're married to a citizen, lived in US for 13 years and have a green card? I'm not angry. I'm just saying their systems and processes leave much to be desired.
The one item that strikes me is the bit about the citizenship. And I can clearly see how that would be a huge disruption. But frankly I'd blame an unjust INS policy here. I don't see how you're pinning this on the IRS for correctly (if inefficiently) enforcing its tax code.
I'm not saying the citizenship was IRS fault. I said a $500 'loan' that I never asked for, had no intention of 'stealing', had no way to know was pending, ended up causing months of paperwork, hassles, and undue stress. It is appalling that people expect me to treat this like a wonderful tax refund instead of what it was - absolute waste of productive time.
All of this could've been avoided by a single rule in IRS tax processing system that auto-sends a letter or email saying 'Our records show X yrs of Y lifetime credit have already been claimed. Please refile.' And I'm certain that I'm not the only person who had to go through a similar thing.
You had the use of the money in the meantime, which has a value. As for the delay in your citizenship, IRS does not make that rule, it's written into the immigration law.
My first reaction is "agree" as I have been through this as well.
But now I will modify that agreemet to recognize that not everyone is smart or capable enough to know how to approach fixing something like this with a letter. Or to take the time to read the letter or understand what is going on. Or maybe they go to the clerk at the tax prep office and they are clueless so they ignore the letter and then they have a bigger problem. Stuff like that does happen. There are probably more people who don't know or have the resources to handle this then people that do.
As an aside many years ago I received refunds of thousands of dollars of overpaid sales tax to a state by simply submitting a letter and a spreadsheet which they never audited or checked. I could have said anything with practically any amount (iirc maybe 20k was the amount requested inflation adjusted approx.). By simply presenting a spreadsheet showing the errors each month and writing a letter a check arrived back cheerfully iirc 6 mos. later. Just like that.
But I'll also say that if you want to address tax complexities in a way that will most help those in need, catching unclaimed EITC returns (something like 30% of eligible filers don't claim it, I believe) is a much better use of effort than trying to eliminate underpayment mistakes.
A few months later I got another message from the IRS. "You made a mistake and got $300 too much! Pay us back + interest."
Didn't feel like fighting it because I heard that can go south easily, especially for such a tiny amount, so I paid it back with the interest.
The IRS needs to have this logic and data import anyway to be able to verify the return. So, all they really need to do is process everything by say March 15, and allow someone to see the data on a website and click (Accept).
I went through the same thing as the commenter above and it was OBNOXIOUS. Even worse, there's no real reason for it be done the way it is.
Oh, and then I realized I'd made a really stupid (but easy to make) mistake that altered the amount I owed by $12 and had to file an amended return.
Really really obnoxious.
I'd bet anything people would care 10x less about getting taxed if filing weren't such a hassle.
> I don't care about the 30 dollars turbotax charges me, I'll send 30 dollars straight to the CEO or promise to burn it. What bothers me is that I've been forced to do manual data entry - a pet peeve of mine as a programmer - because the government has been lobbied specifically to be less efficient.
in which the author reveals that he or she uses Turbotax, but finds the manual entry of data into the program onerous. I found this interesting as a criticism, since my own experience is that I virtually never have to manually enter anything into Turbotax. There was no endorsement of Turbotax or other judgement about the primary question under discussion in the article.
Well, they won't be doing that again!
(Note To Self: Eventually, I might regret this.)
In Norquist's opinion, making taxes too easy to file will make citzenry too complacent about how they're being nickel-and-dimed and will lull them into not pursuing reform. OK, fair enough.
But what about a scenario in which for 30-50 million Americans file for their taxes by sending a SMS (as it's apparently done in Scandinavian countries)? And all the other taxpayers, they're wondering: "Why the f-ck can't my taxes be that easy??"
Isn't this scenario as likely to lead to overhaul of our complicated tax code?
That's why Grover Norquist and others are lobbying against this. If taxes weren't a hassle, their movements would lose an important emotional touchstone that fuels many people's aggravation against the government. Being able to tap into that frustration, in order to enrich themselves and their political donor class is very effective.
How does your independent consultancy cram all of its income and expenditure items into an SMS?
Less snark version: the main cause of complicated tax code is needing to have rules about how much you can deduct for an expense when determining net income (for entities taxed by net rather than gross income, like corporations and independent contractors), not from special credits or varying rate schedules.
That problem, in turn, is amplified by the size of the taxes, which gives people an incentive to abuse whatever leeway is given by the deduction rules, forcing them to be more precise, leading tax experts to abuse the new language, and so on.
Btw, just did my taxes. Did you know that the cost of classes to change your career or improve earnings isn't deductible unless it's from an institution on an approved list?
Sorry, I wasn't clear enough, so snark accepted...what I meant is that if there are Americans who are in the "SMS-and-done" category, then there is a group of Americans who are almost in that bracket. But because of our convoluted tax code, they are ultimately forced to use a third-party to deal with filing taxes.
In my imaginary unicorn world, this group of Americans would be the critical voting bloc toward either an overhaul of the tax code that makes tax filing simpler, if not SMS-simple. There will always be entities that need dedicated tax accountants...but tax reform is about reducing the overall number of entities
Not as simple as "yes, that looks right" that happens in a bunch of places, or the UK system (no tax return unless you have special circumstances) but it works well.
I've actually had my return automatically amended a couple of times to give me more money back based on tax rulings on deductions.
1) The IRS itself gets most of the tax advice wrong that it gives out to taxpayers
2) Paying taxes is one of the few transactional relationships you have with your government. If you ask me, a government representative should come to your office and you should pay him in cash, not hide and automate taxes so that they disappear.
3) There is a difference between a simple tax system and a tax system that is simple to operate. Taxpayers deserve a simple tax system. Continuing to automate the byzantine monster we already have is a terrible, terrible idea. How would reform ever take place?
4) Think for a minute what this implies: that a government agency that is responsible for collecting money should also be the sole source for computing how much money is owed. Where else would you allow such a conflict of interest? Should the police come by your house to determine what crimes might have been committed? Would you want inspections by the local health department of your private cookout? Right now we have administrative courts and such, but the principle is fairly clear: reporting by the citizen, oversight and acceptance of reporting by the government, and the court system to sort out problems. You don't start putting everything in one bag under the name of ease-of-operation. That's whacked.
5) I do not believe these candidates campaigned on this. What I believe they said (or meant) was that the system should be simple enough to eliminate the burden on the taxpayer, not that compliance with a bad system should be automated.
As a side note, have any of these people ever created software or worked for a project inside the IRS? The guys I know that have could tell you horror stories. Testing alone should give anybody who knows programming and the IRS nightmares. This is a tremendously bad idea, both from an execution and a structural standpoint. When something doesn't work, the answer isn't to just do it harder or throw computers at it.
Having said all of that, having the IRS give you the information that's already been entered once so you don't ever have to re-enter things? Excellent idea.
ADD: Completing taxes is not hard because we don't have technology applied in the correct manner. It's hard because the tax code is a complex, unintelligible POS. The only people benefitting from continuing to hide the POS that the tax code is are those folks who made it complex in the first place (And will continue to add to its complexity the more that we ignore it)
Yep. My brother resists giving his credit cards to businesses to keep on file because it makes it much easier for them to get your money habitually, unconsciously, accidentally and by sleight of hand. There should be a little friction at every transaction wherever possible. Frankly, this goes double for the government, which has way more power than any business.
I like the government. It does lots of good stuff for me. But I like it at the right price, and I know that just like any other powerful entity, it will take more than its best share given a bad dynamic. In the same way that unconscious eating habits make people obese, unconscious tax policies makes the government obese.
I can't emphasize how much that making this relationship go away is a tremendously bad idea. Yes, tax paying can be easy -- if the tax code is easy. But you should do something on a regular basis to think about the agreement you're part of, even if it's just sending an SMS every week to transfer your funds.
The late Senator Daniel Patrick Moynihan is the person responsible for making sure the Social Security agency sends out statements to show how much you've paid into the system. He felt, and I agree, that government systems for which there's no interaction eventually become perceived as either magic or worthless -- and either choice was really bad for a democracy over the long term.
You shouldn't run a government the same way you'd run one of those companies that wants to automatically deduct money from your account every month -- hoping you'll never miss the charges once the benefit goes away and then they can continue billing. It just won't work.
Same thing with drug prohibition. I mean, my friends and I are clever and all, but there's no way in hell we could ever scrape together the money, material, and manpower to lock up a bunch of darkies for putting the wrong chemicals in their bodies. I mean, SOMEONE has to keep them off the job market and from providing for their families, and we can't trust them to just go attempt rape on a white woman anymore. That's lots of prisons we've got to put up and manage.
Golly gee, I'm just ECSTATIC to pay for these things.
This analogy doesn't make sense since unconscious eating habits do not have a causative link with obesity and existing studies about correlative relationships are fraught with issues.
The tax system in Denmark is 100% automatic for almost everything. Most people don't have to do anything at all. Once a year, you get a letter or email asking you to check the numbers, you can then go in and add extra information if needed, and that's it. If you discover an error back in time, you can fix that too and get money back or use a credit card to pay if it's in the other direction.
Despite this level of automation, the Danish government manages to change the tax rules almost every year.
Did you even read the article? All they are saying is the IRS could "pre-fill" your forms. If you don't agree, you can change the values, or get a CPA and do the whole thing completely independently. Where did you get the 'govt would be the sole source' argument?
Baseless fear-mongering like this doesn't do any good for any one (except Intuit maybe)
2-3) The idea that it should be painful to pay your taxes so that people won't want to pay their taxes is a political idea, not a technocratic idea. But I don't give a shit about your politics. Keep your politics out of my government services. Political meddling by ideologues is what makes government services so awful. Whatever the government is required to do after the law is passed should be done in as friendly and efficient manner as possible. Advocating for the most painful possible experience for millions of people is evil in my opinion.
4) Nobody said anything about "sole source". You could still get your taxes prepared by whoever you want. The rest of this paragraph doesn't make sense.
http://www.nbcnews.com/id/7492730#.UVHtJBkuF7c
I would agree with your statement about politics and whatnot.
As for "sole source"; yes, you can have anyone prepare your taxes but the IRS still says yes or no to what they were provided. If the IRS decides that your preparer was wrong then that's where it might get interesting. I read it as saying there are possible issues with having one agency having both judgement and collection powers. It's much like the complaint lately about prosecutor offices benefiting from seizure laws leading to obvious abuses, such as the attempted hotel seizure in NY I believe.
There is literally no reason to do this if it's opt-in.
Making your tax return a "click here" effort while on the one hand appealing has the disadvantage of further reducing your awareness of how much you are taxed.
This is why I do my taxes by hand, with pen and paper. I want to read the instructions and fill out the forms so I never lose awareness of how insane the system is.
Via internet: 19,9%
Via PIN code: 20,1%
Via telephone: 12,5%
SMS: 6,6%
Smartphone app: 2,3%
Total: 60,4% filed electronically
The rest sent in papers via the mail. (the old method)
Source: http://www.skatteverket.se/download/18.71004e4c133e23bf6db80...
Personally I have filed via the internet since 2005 both private and for my company.
And a few seconds later you get a reply SMS that confirms that your taxes are indeed filed for this year.
Done. Simple. And awesome :)
Recently most things are automatically filed and unchangeable, even down to something like charitable giving -- if you send Amnesty some money every year, they are responsible for telling TAX so you can get a deduction. If there's an error, you have to contact your charity, not TAX.
If you paid too much money in tax, there's one specific account every citizen has, that's used by government to send you money. No checks.
"On Monday, March 11, the state released a list of 13 specific line items that led to errors on Minnesota tax returns filed through the Intuit software and other tax-preparation products from the company.
"These were very serious to us," Terri Steenblock, the state's assistant commissioner of individual taxes, said Monday at a news conference. "We've never seen issues like this."
Last week, the state advised people not to use Intuit products to file their state taxes. Those products include TurboTax, Lacerte, Intuit online and ProSeries."
Yes, we definitely need to remain free and diverse, but we need to figure out how to factor more actual science, especially science related to human needs, into our decision-making systems. Right now its just whoever manages to collect the most money buys the policies.
I think that the concept we have of money is inadequate. We need to start tracking and taking into account more data rather than just how many points everyone has regardless of how they got them or how they want to spend them. And I think to make things fair and effective the rules and enforcement need to be automated.
Imagine a computer game where there was only one stat. Does that sound like a fair, fun, or sophisticated game?
I can't even begin to grasp what part of lobbying the government to prop up your business via threats of penalties and imprisonment you are interpreting to be "the free market."
What I am saying is that we need more variables. There needs to be some math equations and technology that actually support and automatically enforce the market ideal. Because making laws and relying on people to do the right thing just isn't adding up, since there is no money in doing the right thing. We need to improve the nature of money so that doing the right thing adds up.
This is an oft-repeated conversation but I just don't believe that fair and free market ideal ever actually existed.
What we need is philosophy and persuasion. People need to learn better and understand why there actually are benefits to doing the right thing, not have an algorithm monitor them and punish for deviations.
Doing the right thing already is in one's self-interest. The problem is bad philosophy claiming otherwise. The solution is things like Objectivism which explain why the free market is good for people like you, why smaller government is better for everyone, how to live the right way and be better off (and how to think well in order to understand these things clearly. a great deal of the opposition to these things is confused and up to low quality standards).
The whole process takes about 10 minutes, the deductibles are calculated and returned quite quickly, this year I was returned about 100euros, mostly because of my daughters dance lessons that are exempt of tax.
I dont see the reason people try to defend TurboTax here, yes, taxes are more complicated in US, but still, government does the same calculations anyway, have the same data anyway. Why not do this automatically. And if government wants to screw you, well, then I dont belive that turbotax or alternatives could help you anyway.
It's a bit like letting the user car salesman set the price you pay for the auto versus haggling for yourself. It's also simpler, "free", quicker, and less intensive to let the professional do it for you.
But free can sometimes be the most expensive way of all.
Go reread the article, unless you're really in pro of companies charging for what should be free.
Pro-tip: if the government thinks you owe X, it's not Turbotax that's going to change that.
On the other hand, you have a government entity whose sole charge is to collect revenue. Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses (just to pick one example)? Maybe, maybe not. The question is legit though and thus causes us all to say, "Wait a minute... maybe, since there is a financial incentive for them not to show me deductions, that they will hide some of that (or make finding it as complex as the tax code)."
If Intuit/et al help you save $5000 in taxes this year by helping you deduct all that you can, Intuit/et al do not make one penny more - that money simply stays in your pocket. If the IRS helps you save $5000 that you would have otherwise paid (b/c you did not fully deduct all that you could have), then the IRS loses $5000. That in and of itself highlights the problem.
That has a lot less to do with software and more with you knowing the allowed deductions.
Funny how I have no problem finding these deductions using the free sw provided by the government (in more than one country)
I understand this is strange, but it works because deductions are often balanced. For example, you filing a deduction for medical expenses signal a correspondent owing of taxes by the doctor/hospital, so you're helping with enforcing collections.
" Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses"
More or less yes. There may be the case where the software is going to be completely useless (like Argentina), but then you just skip the sw and go for a tax consultant.
"If Intuit/et al help you save $5000 in taxes this year by helping you deduct"
If you really can save 5k you 1 - probably know it 2 - may get the help of a tax consultant
But most people don't have deductions and should just file the 'default' for free.
For more complicated tax situations where you are trying to minimize your tax based on information not available to the government this type of a system wouldn't be applicable.
My tax experience is light–it takes me maybe an hour of data entry after all my stuff is gathered–so this wouldn't actually help me at all. But for others? If you could shave off as little as 20% from time spent on taxes, that sounds worthwhile to me.
In both Spain and Denmark the system works excellently and all the information is available for you to verify. You just dont have to do any typing.
So if you are paranoid you can spend as long as you want verifying pre-completed information. If you have better things to spend your time on (family? friends?) you can just do a quick check to see that the numbers look right.
It's free and on a donation basis. I switched from TurboTax to this and I'm really happy with it.
I'm surprised there isn't a open-sourced free way to do taxes. That way we can address the tinfoil hat based worries of the government doing your taxes and have free and easy software.
Coming from the UK where it has been automated all my working life, I resent having to file my taxes each year. As others have said, the government has nearly all the information anyway.For anything else, then only short declaration forms should be necessary and not a full return.
I also don't like the lump sum return or payment if there's any discrepancy. In the UK the most common option is to have an adjustment to your tax code, which simply deducts more or less tax at source over the following tax year. You don't even need to give them your bank info.
Once we have a tax code that's simple enough and a government that's competent enough to get things right, then we can talk about having the government fill out our tax forms. Until then, the government's just going to be ripping off the blindly trusting, a little bit at a time.
How do you foresee this happening if we -- the government and the public -- maintain a status quo in which feasible optimizations are never pursued because hey, we have a private alternative that doesn't charge too much to do it?
For the government to become more competent, the people have to demand reform. For people to demand reform, they have to be aware of how much better things could be. Private competition helps spur that reform, but this doesn't mean that the government shouldn't itself be expected to optimize things. This is not an either-or zero sum game
People certainly should demand reform, but not this particular reform at this particular time. People should absolutely demand a simpler tax code - I don't know about you, but I'm still holding out hope we'll see some tax reform in 2013.
'Competent government' is a harder problem. Americans aren't Norwegians or Germans, and simply aren't good at large bureaucracy. Unless America starts subcontracting out its administration to the Swedes, better government is going to take either a change in American character or something smaller and less-centralized.
This is a strange assertion, as if Swedes had an innate gene that allowed them to be more adept when they joined public service. Let's assume that that's not true and it's an ability learned through environment and civic education...I'm arguing that that reaching this ideal situation of "good character" will require -- when it is possible -- to make interaction with the government more efficient. Else, you may end up in a situation in which citizens are so distrustful of the government that they never see the point of achieving good civic character. And then we never end up being as good as the Germans and the Swedes.
That is the way it works NOW. With the described changes the difference is that you would hear about it earlier rather than later.
Today, the IRS absolutely will send you a letter with a bill a couple of years after you pay your taxes if your calculations don't match theirs. For an ordinary tax bill getting your interpretation on paper first isn't really a big advantage.
> Once we have a tax code that's simple enough
I wonder if simplicity isn't overrated, particularly in this age of computers and so on. It's not like we have to calculate everything with an abacus. On the other hand, I've noticed that the tax plans that are touted by political groups as being simple would generally cost me money to the benefit of people who make more than I do. This holds true pretty close to 100% of the time.
I don't value simplicity THAT highly.
Prefilled returns are the opening round in a negotiation with the government. In any bargaining situation the opening offer is the weakest party. You should prefer them to make the opening offer, especially if you distrust them. Better that you check their numbers rather than them checking yours.
I've always thought the IRS should provide us with a lot of the tax info, since it gets reported to them so regularly.
I'm not exaggerating; I've done this a couple times because I'm terrible at keeping track of the paperwork otherwise. (Protip: you can file an extension until October with no penalty.)
Caveat: This is true ONLY if you are due a refund. If you owe tax you will be charged interest (and possibly penalties) for paying after the deadline[1].
> It's already a reality in Denmark, Sweden and Spain.
This is roughly equivalent to saying: "New York, New Jersey, and Louisiana already do it, why not the whole country? Lobbying must be to blame!"
> William Gale, co-director of the Urban-Brookings Tax Policy Center.
So the left agrees with it, I wonder what the right thinks?
> Conservative tax activist Grover Norquist
Now things are getting interesting.
> opposes IRS government tax preparation. > allowing the IRS to act as a tax preparer could result in taxpayers paying more money > calling return-free filing a "massive expansion of the U.S. government through a big government program."
> In 2005, Norquist testified before the President's Advisory Panel on Federal Tax Reform arguing against return-free filing. The next year, Norquist and others wrote in a letter to President Bush that getting an official-looking "bill" from the IRS could be "extremely intimidating, particularly for seniors, low-income and non-English speaking citizens."
> The letter says the IRS wants to "socialize all tax preparation in America" to get higher tax revenues.
> A year after Norquist wrote Bush, a bill to limit return-free filing was introduced by a pair of unlikely allies: Reps. Eric Cantor, R-Va., the conservative House majority leader
The article says Intuit spent $11.5 million lobbying in the last five years (which in the U.S. is table scraps--see $30 million paid by Yahoo! for Summly).
What is really more likely here. That Intuit has managed to buy the government for $2 million a year, or instead that they've successfully hit on a message (free tax filing = government takeover of return preparation) that resonates with rightists and billionaires who have good reason to not want the IRS to have any part in tax return preparation, not to mention ideologues who see simpler tax filing as a slippery slope to making it easier for the government to raise taxes without push-back (on the theory that citizens are more likely to push back against taxes if they are forced to face the numbers every April).
"A year after Norquist wrote Bush, a bill to limit return-free filing was introduced by a pair of unlikely allies: Reps. Eric Cantor, R-Va., the conservative House majority leader, and Zoe Lofgren, D-Calif., a liberal stalwart whose district includes Silicon Valley."
1. As a whole, it seems to operate on the assumption of guilt; and
2. It seems bought and paid for by special interests, pork barrelling and so forth.
As a foreigner I of course have foreign retirement and bank accounts. If they total more than $10,000 (at any point in the last calendar year) you need to report them. This is FBAR (Foreign Bank Account Reporting).
Failure to do so can result in civil penalties up to the 300% of the balance and/or criminal prosecution. Why? To fight money laundering, drugs, terrorism or child pornography (every piece of onerous US legislation or prosecution is justified by ostensibly fighting one of more of these things; even sharing MP3s).
How are foreign retirement accounts treated? Are they taxable? How do you report them? Nobody really knows. Just tick "Other" and write "Retirement account" and hope for the best.
If your foreign assets are above a certain amount there is another separate form you need to send to the Treasury department IIRC.
You can e-file this form... if you use Internet Explorer. The JavaScript actually doesn't work in any other browser in a way that locks your account after 2-3 attempts.
In Australia the ATO (Australian Tax Office) produces e-tax, which for most people allows you to file taxes for free. But beyond that, the ATO doesn't seem to have this same level of mistrust of its citizens that the IRS does.
In Australia it doesn't scare me to make an honest mistake. In the US it does. This is not only for taxes but things like immigration issues.
In some European countries, once a tax return is accepted, that's it, it's done. The government basically can't reopen that later in an audit. In Australia I think they can go back 7 years. No idea what it is in the US. Probably to the day you were born. Now I'm sure there are exceptions to that rule (as in if you commit deliberate fraud) but the point of the system isn't to punish innocent mistakes.
All the while corporations and high net-worth individuals get away with blue murder as far as tax obligations go. The US could solve a lot of problems if it treated foreign corporate earnings the same as foreign individual earnings (in that you owe taxes on foreign income even if it isn't repatriated but tax you've paid with double-tax treaty countries offsets that obligation).
Yes by all means send me to prison for failing to mention a $24,000 retirement account in Australia I can't touch until I'm 65 instead. Great use of resources.
EDIT: to clarify (2), which is the major point relevant to this article, I don't understand why other governments don't seem so easily bought and sold for a pittance (in this case $1.5M over 5 years).
Another example: toxic fire retardants used in pretty much all couches due to a California law bought by an industry only worth tens of millions a year [1].
In the case of TurboTax specifically, I think so many people use them because of (1) and the complexity of the tax system created by (2).
Many people use TurboTax. You can say that's because of lobbying but that's only part of the story.
[1]: http://www.nytimes.com/2012/09/09/magazine/arlene-blums-crus...
I would've thought the British passport would've offered the best tradeoff. Large enough to do something, small enough to escape notice.
This is, unfortunately, true of the US tax code in general...
This is an article about private interests lobbying to obstruct government reform for their own gain, and you've launched a screed about interesting but really quite irrelevant matters that disturb you about government. Please stop trying to hijack the thread to push your own political agenda. What you wrote has literally nothing to do with this story.
I take home less money than someone with the same job and same expenses. In addition it's so cumbersome to file from abroad that I have to pay someone.
It's like the king of England collecting taxes from the ones who left.
We also have to declare the entire finances of any company that we own more then 10 percent in which is a huge problem for the other 90 percent owners that aren't Americans.
I don't think this will ever get fixed since Americans abroad also don't have any representation in congress. :-(
You can resign your citizenship. I remember hearing reports of people doing this last year (going to Singapore)
For instance, Saverin nominally gave up his U.S. citizenship in order to make doing business in S.E. Asia easier.
http://en.wikipedia.org/wiki/Renunciation_of_citizenship#Tax...
Perhaps some European country would like to start offering citizenship to anyone that renounces US citizenship, as a way to encourage immigration of skilled and high net worth individuals.
Overseas Americans are theoretically represented in Congress at their last American domicile. In practice, this is difficult to achieve. For example, many places will not mail absentee ballots overseas.
And of course, the Congressman for your last American domicile probably isn't that concerned about your interests overseas. This makes it disturbingly similar to the "virtual representation" that the colonies had in Parliament.
Also, the United States now practices more "taxation without representation" than the United Kingdom. Commonwealth citizens residing in Britain can vote in British elections. EU citizens cannot vote for the British Parliament, but they can vote for the devolved Scottish and Welsh Parliaments.
I was in Scotland with my US born wife. The airwaves were rife with outrage. Politicians had expensed $200 radios to government accounts that were for personal use. My wife could not believe the country was so focused on a pittance.
I think of it like broken windows and graffiti in New York. Once in a while, something big like Watergate or Blagojevich comes along. Otherwise America doesn't care. Other countries do care. There is a principle at stake.
New Zealand for instance, is one of the least corrupt countries in the world. One of the oldest and most popular TV shows is called Fair Go. Fair Go largely deals with tiny little grievances. But the country, as a whole, cares.
It's 3 years. And fairly easy to look up:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Em...
Those records generally should be kept for three years from the date the tax return was filed.
>Yes by all means send me to prison for failing to mention a $24,000 retirement account in Australia I can't touch until I'm 65 instead. Great use of resources.
The IRS doesn't put anyone in prison for making a mistake. You have to willfully try to cheat on your taxes, multiple times, before you're even close to the position of facing jail time.
You only really face jail time if you do something else on top of tax evasion (like money laundering for a drug cartel).
"On September 18, 2012, in Cincinnati, Ohio, Larry Lough, of West Chester, Ohio, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $757,751 in restitution to defrauded investors and $145,175 in restitution to the IRS. Lough pleaded guilty on February 15, 2012, to conspiracy to commit mail and wire fraud, conspiracy to commit employment tax fraud and income tax evasion."
Doesn't this just mean that he submitted his fake tax return via the US Postal Service and he paid his (falsely computed) taxes electronically?
I'm sure it's not a lube from apple. However a quick google search didn't turn up anything.
This is why many American commenters feel the need to add an "I Am Not A Lawyer" disclaimer when commenting on any legal issues.
I doubt if the IANAL acronym would be enough, though. Either spell it out, or leave it out.
http://www.amazon.com/Republic-Lost-Money-Corrupts-Congress/...
The FBAR requirements and penalties are completely ridiculous, I couldn't agree more on this point.
On the issue of the ATO e-tax system, it's not that incredibly awesome. I still use an accountant to maximize my tax refund. Costs me $250. Totally worth it for the additional taxes I save.
For my USA taxes, I use TaxACT. Completely free and that includes one free e-file.
From a practical perspective, this is a complete non-issue. You CAN e-file your taxes easily and for free in the USA, it's just not a service supplied by the government.
There are already scads of people trusting too much to other entities rather than figuring it out on their own. These people leave their tax withholdings at default levels, then walk down to the local Wal-Mart and trust the Jackson-Hewitt crooks to do their taxes. Jackson-Hewitt files a 1040EZ for them, charges $300 bucks and they leave happy because it will be automatically be taken out of their $10,000 refund. They feel rich for about two weeks.
The solution is not more government nanny-state ideas. The solution is to find ways to require people to be MORE accountable for their own well-being.
How about requiring every person who receives 10% or more of their yearly salary back in a refund to attend classes on how to maximize their tax benefits? It would be paid for out of their refund. After they go once, they don't have to go again for 5 years.
If you're too dumb or unaware of your surroundings to know that you can file your taxes for free with a little bit of effort, you need education.
There are people in the military who get married just to claim a higher housing allowance (this despite it being against the UCMJ). Yes, we should be individually responsible but it's not practical to actually expect that from people.
(And re: "default", I've looked and looked, and can't find such a thing. How do you determine a "default" withholding from a W-4 other than just taking your expected income tax for the year and dividing by pay days? If you do that, you shouldn't have a $10,000 refund...)
For what it's worth, in 2012 I made less than $100,000 in AGI, withheld the W-4 default for my filing status (Single, Independent), and my refund was $650. More or less right on the mark.
Edit: Aha! Found it[0]. $100k biweekly is $1923/week of gross pay; let's ignore medicare and social security, etc. For Single/HoH, that's $344.20 + 28% of 1923-1732 = $397.68 weekly or $20679.36 / year[1]. Since our expected total tax is $18,500, we get back $2,100 in refund. Big-ish, but not $10,000. And only 2% of $100k.
[0]: http://smallbusiness.chron.com/calculate-employer-federal-wi...
[1]: page 44 of http://www.irs.gov/pub/irs-pdf/p15.pdf
> The solution is not more government nanny-state ideas.
> How about requiring every person who receives 10% or more of their yearly salary back in a refund to attend classes on how to maximize their tax benefits?
> If you're too dumb or unaware of your surroundings to know that you can file your taxes for free with a little bit of effort, you need education.
I'm well educated, good with math, and generally observant....and yet I would still be up shit-creek if I had to do my taxes all on my own. I wouldn't know where to start, other than just searching around the 'net. I could figure it out eventually I'm sure, but it'd be a no-frills return that would probably rank very high on the "audit me!" list, and inevitably I'd end up spending more money, and taking around 10x's longer, than if I just settled for an online service (free or otherwise).
Just because I see spending a smallish amount ($25-50) to save several hours (if not 12+ hrs) of time, with the a decreased chance of audit, doesn't make me dumb nor unaware of my surroundings.
"requiring every person who receives 10% or more...to attend classes"
This seems like a bit of a non-sequitur. Don't provide an easy (and free) way for people to submit their taxes without going to a CPA, but do force people to go to some classes? How is that less of a "nanny state"?
To me, a required educational course about taxes and personal finance would be akin to a driving course--not so much absolving you of responsibility as preparing you to accept it.
If you get a libertarian paternalist who really doesn't know what he's talking about, you can easily watch him justify totalitarianism in the name of freedom. It's horrifying.
A simple official paper stating your basic tax figures (gross/net income) can also be used as a simple way to verify low income when asking for scholarships and other financial aids right?
We might all be outraged about this, but we're not going to change who we vote for based on whether a given politician supports tax reform or not, we reserve that for things that directly effect us like SOPA. Likewise people who prepare taxes for a living will change their vote to punish politicians who are taking away their jobs, but will ignore stuff like SOPA.
Gee, you think? Thanks for saving us Intuit.
Say What?
All it takes is a fear monger with an agenda like Intuit to whisper "Our experts estimate that you will lose $X billion in uncollected taxes with this new scheme" to send congressmen from both parties running.
Ideally, we would see state governments take the lead here and innovate. If they can show meaningful gains then maybe the Federal government will pay attention.
But there is a huge industry built around servicing the complex tax code, many of whom wont be needed if the tax code is simplified. Just like any other industry disrupted by changing business environment, they will fight to the death to keep their industry alive and necessary.
The opposition comes from business interests whose revenue comes from helping taxpayers navigating a complex code and processing.
Tax reform.
Woah. I mean make it simple enough that there isn't any need for tax specialists, because it's just not that involved. Then filing takes seconds for most people, audits are trivial, costs go down for everyone, and most importantly, companies that shouldn't exist die (H&R Block, TurboTax, the many law firms that help major corporations exploit tax loopholes). Win win win win?
sigh. Never gonna happen.
Y'all know this is inefficient. I spend at least 20 hours of work filing my taxes each year, and as a fairly intelligent citizen I always make a mistake anyway.
I haven't used this personally for filing because it doesn't handle certain forms like 1128, but I'm told it's pretty good for basic stuff
It's about the IRS pre-calculating everything for you, so you don't have to input anything. You just say "yes, that's right", unless there are errors or additional information needed.
What the fark.
Is this correct? Yes. No. buttons. Workflow is present to deal with incorrect data.
The data is already submitted electronically by employers, brokerage/retirement asset management companies, states, etc. Why should I have to pay a private company (I'm looking at you Intuit) when the IRS should have the ability to provide the same service FOR FREE.
Read the article. That's the idea. Check the math if you want, file your own paperwork if you want.
The portion of that cohort that file 1040 (generally those that make over 100K and have situations that make itemized filing more efficient than taking standard deductions) is pretty small.
You were outraged at hedge fund managers classifying their income as interest (15% tax) rather than "earned income" (~35% income tax)? Well, wait until the income tax goes back up to 50+%, and see how many non-"earned income" ways there are to compensate employees...
Honest question. Are you saying that this particular site is less secure or all online e-filing services less secure? This is one of the options recommended by IRS[1] for e-filing.
[1] - http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-...
The situation is a farce and a disgrace to our country; the pockets of a few are getting lined at the detriment of the many. Wait, are we discussing taxes, or healthcare, or big banks....?
What I find insulting is having to pay to file my taxes, then having to pay sales tax on top of that.
Agreed about the "paying taxes on paying taxes", and of course the general idea of there being a for-profit industry centered around a requirement of citizenship. This is clearly another area that furthers the agenda of the Plutocracy, whereby the wealthy are at a great advantage on account of being able to afford a CPA to find all the loopholes.
So what I do is prepare the return in Turbotax, then print it, then file it electronically on the web for free. Fun thing is that Turbotax calculates the tax a dollar different than the state's web site.
There was an interesting article posted on HN on how Intuit manages its 10 million lines of code for QuickBooks. I wouldn't be surprised if TurboTax is built in a similar fashion. https://news.ycombinator.com/item?id=4315578
They're instantly submitted (or at least they appear to be) and combined with direct deposit I get my refund within days. In the old days I had to either drop my paperwork off at an accountant and wait, do them myself and mail them in, or make an appointment with a preparer.
It does try and help you find more things that you might have missed, walking you through a series of questionnaires to try and uncover deductions you might not have known about or forgot you could take this year. And, like another reply to this comment, a basic 1040 is free to file. You have to pay if you want to file your state return through it.
Turbotax should have a tree-like navigation pane to the side, showing status icons for each section.
I don't know if it's horribly coded though. One test would be how quickly they could add the navigation pane. If the underlying code is properly designed, it would be a minor project. If the entire codebase is designed around forcing people through the back/next workflow within each category, arbitrary navigation might require major code surgery.
If I recall correctly, it involves loading your existing return, making changes, and at some point (only vaguely defined in documentation), changing something different (err, this is a very bad description, obviously - but suffice to say, as someone who has no issue navigating complex systems, the times I've done it, it's been a horrible and fraught experience).
It cleared up somewhere along the line, I think with IE8 circa 2010, but I'm always still not quite trusting of TurboTax's code quality.
In the US, you have two sides of this: (1) the IRS, and (2) CPAs, CPA firms, and software firms like Intuit who profit from helping customers file taxes. The question always is, "Why would I pay someone to file my taxes?" The answer is, "If they can save you more than their fee, it's worth it." In other words, if they charge $100 but save you $101 in "tax due", you have a net "win" of $1 thus you should hire a professional. Why does this work?
For the CPAs, CPA firms, and software firms like Intuit, you have a professional who is taking your money and offers a reasonable expectation that, as a result of using their software, you will save more money than you pay in fees because they will help you find deductions and tax credits that you would've been hard pressed to find yourself. These companies compete in a free market for your money, both with other software companies and with CPAs/CPA firms. The "winner" (for a particular user/client) is the one who (a) has the best reputation of not getting you audited, and (b) who gets you the best price:deduction ratio.
On the other hand, you have a government entity whose sole charge is to collect revenue. Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses (just to pick one example)? Maybe, maybe not. The question is legit though and thus causes us all to say, "Wait a minute... maybe, since there is a financial incentive for them not to show me deductions, that they will hide some of that (or make finding it as complex as the tax code)."
If Intuit/et al help you save $5000 in taxes this year by helping you deduct all that you can, Intuit/et al do not make one penny more - that money simply stays in your pocket. And you probably smile, buy a new car/vacation/etc. And you certainly tell your friends, "You should use Intuit!" If the IRS helps you save $5000 that you would have otherwise paid (b/c you did not fully deduct all that you could have), then the IRS loses $5000. That in and of itself highlights the problem. Do you trust the IRS to say, "It's okay if we lose $5000 - you're happy, right? That's what matters!"? Of course not. Having the separation works in the US for this clear conflict of interest.
Again - I don't know the tax code of the Euro countries but I'd be interested to hear if they have a similar setup and how they work around this. It's logical to think that the IRS could invest $500 million building such a system and then no one uses it because paying $30 to Intuit/etc results in a higher refund for the above reasons...
I think lots of people will see your point and still believe that a system where the IRS tells you what it thinks is true would be an improvement over the current system (somehow, pre-filled forms, whatever).
I get W2s, 1099s, 1099-Rs, 1099-INTs, THX-1178s, ABC-123s, etc. I have to manually copy the stuff from boxes 1-30 on each of those onto my returns. I'd file my taxes in January expect it takes weeks for all the various organizations I deal with to make those and send them through the mail.
I shouldn't have to enter any of that. The government already knows it, they'll check my return against it. When I start my return, it should be pre-filled.
It's sad that Intuit and H&R Block fight this; though I'm not surprised. I'd say the government should provide a direct copy of the 1040 form online with this boxes pre-filled. Intuit and H&R Block should make their money by making easier forms and providing guidance.
Note that "keeping the government forms complex" doesn't count as "making easier forms".
I'm not sure this is the case. IRS funding is not a static percentage of tax revenue. Sure, the tax money goes into one big pot, but IRS funding is not dependent upon the money they bring in.
Total operation cost: six thousand credits under budget. Congratulations. Be efficient, be happy.
Source: http://taxfoundation.org/article/most-americans-dont-itemize...
To give a sense of how big a problem this is, here in the UK a report came out last year that pointed to £12.6B wasted. In Portugal, waste is around €2B if our math is right.
(Shameless plug): At http://gosimpletax.com we're actually helping taxpayers save as much as possible with as little friction as possible. We're currently operating in the UK & Portugal and would be great to have your feedback if you're in any of these countries.
Sold!
Regarding your site: The "Learn more" isn't a link. Why not? I don't want to go to your blog, I want a clear statement of what you provide without registering first. I'm not going to register without a very clear idea of what you offer. That I can register for free makes no difference to me when there's no clear statement to explain what I get if I sign up for free, given that the service costs money to use.
Looking at your "pricing" page, I see fear-mongering. "Hours wasted"? Only if your tax affairs are terribly complicated. "Painful and confusing forms"? Only if you failed basic English and arithmetic. I find the UK self assessment (having dealt with the Norwegian one before Norway went "pre-filled"/online) very well designed. "No guidance or help"? The HMRC guides and website are actually very good.
You seem to be positioning yourself for people with lots of money (to be able to save on average 2000,-, given that the average British taxpayer pays somewhere below 4k in income tax and 2.5k NI, and very few pays more than 10k-15k...), who are confused and clueless about the tax system, yet willing to sign up to an online service rather than get face to face time with an accountant...
If that's your intended market, and that actually brings the revenues for you, then your site is well targeted...
Go pre-filling!
I have deductions to offset paid interest. If I hire a person to do some renovation in my home, the tax office pays half of the fee directly to them and I get a deduction as well. I sold my flat this year and will need to pay tax from the winnings, deducting costs. Almost all of this will be pre-filled.
In Iceland I had a slightly more complex tax situation. I filed jointly with my ex wife. Mortages, minimum wage deduction (i.e. you don't pay tax of the amount that is the legal minimum wage), property tax (house, cars), stocks and bonds, bank deposits and earned interest, deductions for rent compensation, was all prefilled.
Compared to this, filing my dead-simple US taxes with one deduction, filling in a two page calculation worksheet, feels like the middle ages.
No matter the complexity of the tax code, there are systems in place for all of them to evaluate and error-check tax declarations. The information is most likely all there already. All you need to have is a way to authenticate tax payers, and a front end.
And if I have a reason to think the tax authorities will not include items that lower my dues, I can always hire an accountant to file for me. I simply give them my "third-party filer access code" and sign the final return.
http://www.vero.fi/download/noname/{302EA05D-2530-4021-8931-...
And instructions here:
http://www.vero.fi/en-US/Precise_information/Forms/Tax_retur...
I really think you misunderstand the intent and mentality of the IRS. You seem to be projecting a capitalist objective to their actions with the motive of obtaining the maximum amount of money. The IRS does not have any direct incentives for bringing in more money.
If you are audited and the auditor finds you missed deductions, they will tell you. I would hope that information should be enough force a change in your perspective.
As a tiny nitpick, I think that, in this case, it is the absolute difference `deduction - price`, not the relative difference, that matters: given that I have the money available, I'm happier to spend $2000 to get back $2100 than I am to spend $10 to get back $11.
Many Americans have a (one-sided) adversarial relationship with the IRS, thinking it is some kind of evil entity that only exists to financially destroy everyone in America.
But the IRS only exists to implement the tax code enacted by the "representatives of the people" (ha), the US Congress. When the IRS saves someone $5,000 because of a deduction that Congress specifically created as a tax expenditure, the IRS doesn't "lose" $5,000, they are simply performing the function that they are required by law to do.
To expand on your thought that people view the IRS as the evil entity. They are just misguided, the true enemy is the overly complicated tax code that is rife with abuse by many people within the IRS, Congress, and the private sector to the detriment of the majority.
For capital gains vs losses, when you trade with stock, you however have to do it "manually" (not pre-filled). (For Swedes: K4 I think is mandatory but can easily be computed by your portfolia broker such as Avanza).
I think today the website that the Swedish tax office provides for you to actually fill in and confirm your tax statements is like a free, online version of what previous generations commercial tax software was about. Every year it includes yet another bit of functionality that simplifies it or handles a new corner case. For the majority it has been very simple for quite some years - send an SMS to confirm the pre-printed statement for example. But if you trade with shares, or if you have a business, or for example own forest (which automatically makes you a business), it is not as simple yet.
The swedish tax authority also incentivizes people to e-file: if you e-file, you'll get your tax return before midsummer, which in Sweden is a BIG holiday, when most people kick off their summer vacation. Even if you accept the defaults, but file on paper, you'll get your money in August instead of June.
That's how it works in Chile, for about 10 years now :D
It's a crime, isn't it? Your government is doing it on the behest of all those companies who fund the lobbyists. You must be having some public litigation system.
It disturbs me when in countries like USA such policies that directly and greatly affect the citizens are controlled by lobbyists. My hope and enthusiasm for changes in my own country dims by a bit.
(BTW taxation has become very simpler off late here, relatively I mean).
Ref. http://opinionator.blogs.nytimes.com/2013/03/24/is-the-estat...
Real Estate ownership is already tracked (you can argue it shouldn't be, but that would upend the real estate system). And unlike cash sitting in a bank account, it's already fairly common to tax real estate. If someone wants to keep 5 houses and leave 4 of them empty at any given time, as a status symbol, shouldn't they be taxed punitively? Real estate is not an unlimited resource. Occupation of any sort would disqualify the taxation; this could be verified easily in most cases by data from utility companies.
Pure libertarians tend to argue that rational individuals will not let assets go unused. I think rationality as a model for human behavior has been thoroughly debunked. And if they don't let their real estate go unused, if they invest, lend, rent their property to others, taxes under the described system wouldn't apply.
Some of these arguments can be applied to hoarding other assets (like cash), but it would be an uphill battle to tax cash (not cash inflows -- as in the income tax -- but static cash). One place to start might be cash held by public corporations, which have no privacy interest.
No.
The government are not incentivized to do a good job preparing your taxes. I'm not a tinfoil-hat conspiracy theorist. I don't think the US government wants to institute a program to systematically defraud the population. But I do believe that governmental inefficiency and incompetence is nigh-limitless, and the very people who may need their tax returns the most could end up being cheated out of them, not by malice but by indifference or stupidity.
(And there are many opportunities for the poor and underserved to have their taxes prepared for free. Many credit unions will do it, for example, and they are incentivized to do a good job because the tax returns will likely pass through their hands).
I realize the counter-argument is "but you can just opt-out if you don't trust the government". Sure. I can also choose to drive if I don't want my civil liberties violated by the TSA (and I do, except when traveling internationally). If the easiest and most convenient option also involves giving away rights, most people will take it. And then when later it turns out that it's being abused, there will be insufficient infrastructure in place for many people to choose an alternative.
I hope this is just paranoid ranting.
A more accurate way to extend the analogy to transportation would be a company starting a free bus service for lower-income neighborhoods. All you have to do is link your grocery store rewards card and scan it every time you use the bus, which will authorize the company to access all your purchase data from that card.
You could very easily argue that this is a good thing, and perhaps at the outset it would be. But if it turns out that the company is doing something sleazy--rewards cards sometimes also encode personally-identifying information which could be used unethically, for example--then at that point a person's livelihood could very well depend on continuing to use that bus system, especially if the convenience of the system forced other free or low-cost alternatives to stop serving those neighborhoods.
In both of these cases (the IRS preparing your taxes and the company holding your personal information), the organization is not incentivized to do a good job. In fact, especially in the IRS case, the worse a job they do, the more tax money the government takes in.
Tax deductions are (supposed to be) made not because government wants to give people a break and be nice, but because it wants to influence certain behaviors. If those cuts are not used then they don't serve their original purpose, so that is an incentive for IRS to count deductions properly.