The government has enough information to process the taxes for most of us or at least publicly make it super easy. TurboTax just lobbies the government to not do so.

About two weeks ago, I got a letter from the IRS telling me that I owe an extra eight-thousand dollars from my 2020 return, with a $1000 fine and $200 interest as a result. [1]

I'm not mad about owing the money, but what annoys me is if they have enough information to know that I underreported, then why am I part of this equation to begin with? Clearly they have enough of my tax data to know I screwed up, so why don't they just send me a bill once a year? I don't see why Intuit (or HR Block or TaxAct or Jackson Hewitt etc) need to be part of this transaction at all.

[1] It was an honest mistake on my end, I forgot to report a sizeable stock sale I did in 2020.

As others have noted, the IRS doesn't know everything, and some things may be to your advantage to report to them. They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

For example: RSUs and NQSOs (employee stock grants) are in my experience handled extremely poorly by default. If I have RSUs vest when the stock is worth $10 a share, then I pay income tax that year based on income of ($10 x share-count). If I sell those shares later on, my brokerage reports to the IRS either: unknown basis value or $0 basis value. The correct basis value is $10 per share. There's a spot in the tax forms where you can tell the IRS that you have the corrected basis, but if you don't do this, you will pay extra tax, and it's an easy one to miss, especially if you're just importing the 1099-B.

At tax time my brokerage does send me additional forms beyond the 1099-B that include the corrected basis values, so its not that they don't know the right value, they just don't give it to the IRS directly. I assume this is due to IRS/congress rules and not my brokerage being obnoxious.

> As others have noted, the IRS doesn't know everything, and some things may be to your advantage to report to them.

Sure, and I'd be ok with giving people the option to deny the default return and file their own using Intuit or something. For people like me, who don't have the ambition to try and do anything clever with taxes, I'd be ok with the default return that they generate from all the information sent via my employer and banks.

This is how it works in a lot of other countries. You get a pre-filled return and can accept it or file on your own.

> They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

Then people in that situation can do it from scratch like they're already required to do now. This is really not an issue anywhere else - this change wouldn't make the process harder for anyone.

I also have to deal with the cost basis issue every year, and it’s the biggest headache in the entire process for me and my partner. I don’t understand why the brokerage can’t provide the correct basis directly — it would lead to way fewer mistakes and more accurate returns.

> They could send you a bill and ask you to fix it, but many people wouldn't know where to look to find mistakes.

The overwhelming majority of people do not have complicated taxes. That is the exception and as others have pointed out, they could hire an accountant just like they do today.

Having the IRS mail out your bill would eliminate the need for most people to purchase accounting software each year, which is exactly what Intuit doesn't want.

Wait, do brokerages report stock sales to the IRS?

Yes, of course.

> A broker or barter exchange must file Form 1099-B for each person: > For whom the broker has sold (including short sales) stocks, ... etc., for cash

https://www.irs.gov/instructions/i1099b

To elaborate on the GP comment, the issue is not whether the brokerage reports, but how they do it. You generally compute capital gain income as (sale price) - (acquisition price). If you buy a stock on the market and sell it, brokers generally report both sale price and acquisition price to you and the IRS.

But for employee stock compensation, the broker can report sale price without acquisition price to the IRS. If you don't report the acquisition price yourself, the IRS will think that it's 0, and assume your income is much higher than the real value.

If it's the first time you've screwed up the return, you might try calling them and ask to have the penalty waived or reduced. That works pretty often on first-time penalties.

You know, it didn't even occur to me to try that. I'll give it a go tomorrow.

It's called a "first time abatement": https://www.irs.gov/businesses/small-businesses-self-employe...

General penalty relief: https://www.irs.gov/payments/penalty-relief

I just went through this for an honest mistake as well, though I didn't qualify for a first time abatement. It took months to get a response as well.

Prepare to wait on hold for hours, probably trying for multiple days. They are woefully behind.

I believe your best chance is dialing in right when they open, before the call queues build up. Also the folks answering the calls are in a better mood then, and you're more likely to get the outcome you're looking for.

It's too bad they're so far behind now. It used to be fairly painless to reach a human at the IRS, and they are usually pretty helpful. Kind of the opposite of what a lot of people expect.

Worked as a temp for the IRS equivalent in my country. The degree of understanding and professionalism was unexpected. We were just overworked, mostly because the systems were really not up to date and had a few directives that were a bit inhumane (first time asking for a delay=> ok in all cases, no explanation needed. 4th time=> NOK in all cases, expect interests.). For people who couldn't afford the taxes, we had really knowledgeable people taking a lot of time finding ways of rebating taxes, people who could make 10x working as taxes lawyers and making a better job at it than actual lawyer (in my skewed perspective, don't quote me on that).

You can file taxes without a software package, if you want. You have to file because they want you to report things they don't know about, and also if you want to claim itemized deductions.

Here in Norway, the government fills out our tax forms for us with all of the information that has been reported to them by our banks, our employers, etc. It is then our responsibility as tax payers to look over the tax forms, add anything not included, and adding any additional claims for deductions.

By comparison, the needless busywork that the IRS puts the tax payers through is nothing short of ridiculous really. It only serves to waste time and effort, and there is plain and simple no reason whatsoever why the IRS could not do it like Norwegian tax authorities does. Our system here in Norway is not perfect either, but the citizens of the United States, and the US government, would benefit hugely from a tax filing system built to help you file taxes the way that ours does for us.

The basic elements are not much busywork at all. For a person with only wage income, or maybe even a little interest & dividend income and perhaps one contracting payout, its pretty simple.

The busywork comes mostly from the arcane and convoluted nature of US tax code, notably the parts that describe deductions and credits. US governments use such things as a way to implement policy, and the crap just piles up over time. Can you deduct X? How much of X can you deduct? Are you eligible for a credit? Or just part of a credit? Or none of it? etc. etc.

It'd be great if they just billed me and I was on the hook for correcting them however. The current method is doing math homework under penalty of being fined.

> I'm not mad about owing the money, but what annoys me is if they have enough information to know that I underreported,

There's some chance that they didn't have enough information to know that until you filed. Maybe.

> need to be part of this transaction at all

Because Capitalism, in essence, is the optimization of one particular group’s ability to alter how people live their lives in a way that transfers the most wealth from the working class.

America’s economy is a house of cards built around financial middlemen.

I think you meant cronyism.

If you can find an example of the former that doesn't devolve in short order into the latter, I think you can "I think you meant" him.

I have looked, and I am still waiting.

Capitalism without cronyism isn't something people would recognize as capitalism.

Americans would probably still decry it as socialism or communism even though it is very far away from those.

How did the IRS learn about the stock sale?

I'm assuming that E*Trade sent them my consolidated tax form last year (that I forgot to enter in my tax software), but I don't know for sure.

Contact your congressperson and encourage others to do so too. Also contact their opponent in the upcoming election to make it a campaign issue.

I actually did pour blood and sweat to a campaign that did have this as one of their policies. I don't think this can be solved until lobbyist money and the Senate is fixed. Even if there's 90% support for an issue, politicians follow the money.

Heck I’m a high skilled, non-essential employee and I fell for this trap for years. Next year I’m using Cash App. But it’s wild what brand recognition can do.

TurboTax's dark patterns charge people $50, not $600. How exactly did she end up paying that much?

Have you gone through TurboTax's filing process? It starts with ~$149 upgrade for me, I believe. They have countless add-ons that popup throughout the filing process beyond just that (annual audit defense membership, get your refund faster, etc). So many up-sells and cross-sells, it is pretty disgusting.

I stopped using them last year because it was just too much. I can easily see how someone could end up with a multi-hundred dollar bill from them. Many of the popups are tailored to look like you need to say yes.

So they're trying to completely fill the price shadow underneath the $500 or so a very basic "entry-level" accountant relationship would cost — and fill it with a zero-marginal-cost roster of non-product products and non-service services. Terrible.

It makes complete sense if you’re utterly amoral, as long as you remain below “hire a cpa” threshold any money you can scam out is free profit.

It's more than that, tacks on even more for state. and every time you 'finish' a step it tries to upsell some stupid audit protection and also another one to get human involved. I somehow doubt 'audit protection' would even give you a certified cpa or attorney when the irs comes knocking for a real audit, it's probably some dumb small print

I personally use it because my taxes are too complicated to do it myself on paper.

I hope they are correct, I honestly do a good faith job but it's too complicated.... the pdf download for 2020 was 426 pages... that includes state. and it will be even more next this year about to file my 21.

way too complicated I only own a small s-corp (technically 2) and do some really small level investing with active trading.

Not sure, but I saw a screenshot of her return. (looking it up now) It was $539.

The sad part: she didn't think anything of it, and thought that's how it was. The reason for the screenshot is because last year, her daughter's dad basically stole her child tax credit. So she was celebrating getting her return accepted before he could pull the same thing.

For reference, her return was also five figures. I'm guessing these companies aim for a % of the total return. So perhaps a "$149" upgrade was $249 because of her return size. Like how online retailers bump up the price for goods based on zip code. I'm speculating though.

Agreed, I’ve used turbotax in the past and never paid anywhere near that much. You could get a real accountant to do your taxes for less than that, maybe depending on the state. I know because I’ve done so.

Some tax preparers offer "immediate refund" for a hefty fee, instead waiting three weeks for the IRS to deposit it.

Realistically, how would you do your tax return for free?

Keep in mind that every service worker is terrified of an audit. The cost is much higher when you don’t have resources.

EDIT: I think I didn't phrase this very well. My point was that the average service worker is trained to be terrified of the IRS. These people are already usually paying hefty fines because they missed their returns in prior years. That's why they take the path of least resistance, and just pay someone else as a shield against this.

So it's not particularly surprising that TurboTax has swindled this person out of $600 with their upsells. Nor should she be condemned as a fool. If you were in her shoes, you might do the same thing.

There are many free filing options for anyone with an average salary from a straightforward W2 source. I went years without paying to file, until I got into freelancing and a higher tax bracket.

Being audited isn't much of a concern if your only source of income is a typical W2 job. The average service worker isn't throwing money around in stocks, crypto, blackjack, and corporate entities.

Even if you toss in a 1099 or two taxes are still mostly straightforward. I’ve always had mine done but it’s mostly only in the last ten years or so that they’ve gotten genuinely complicated.

One time I had a single 1099 form, and I screwed it up badly enough that it took months to resolve, and dozens of hours on my part. Someone who understood the process probably could have sorted it out in minutes.

1090ez, or any of a dozen free-file options? State returns are cheap if not free almost everywhere.

The vast majority of the people who qualify for free tax filing have nothing to audit. The government makes enough money off their deductions, not to mention what they generate having to spend >50% of their income to stay afloat, to overlook a few unreported tips or sneaker sales.

Do you mean the 1040ez, which was discontinued, & no longer a form?

(I agree with the rest of your comment. While I disagree with the parent's perspective, I think the FTC's here is that Intuit's advertising leads people towards their not-free products, instead of the actually free stuff that does exist. I don't think most people have the self-confidence to do the 1040 by hand.)

You're correct, I did mean the 1040ez and was unaware of it's discontinuation.

Maybe look how other countries do it?

Like with your health system, a lot of us are slightly baffled by how broken things are in the US.

Most other countries are comparable to US states rather than all of US. The US is incredibly diverse (in humans and govermental systems) in a lot of ways. So using one system is not easy as in other countries.

I would get rid of the tax return process as the only purpose for its existence is to waste the time of poor people and thus keep the government boot on their face.