The overwhelming majority of taxpayers claim the standard deduction - since 2017, it's something like 90%. Most people have a W2, and 1099-INTs which are far less than their W2 income.

Only a small percentage of stupidly rich people really need to consult with tax advisors to construct elaborate stories about their complicated and catastrophic investment losses which mean that in spite of ever-growing wealth, they actually have negligible taxable income. The rest of us are suckers for taking a W2 and have really simple taxes.

But if that is your situation it's actually really easy and free to file your taxes today. Meaning a couple clicks and done. I'm all for an IRS solution but let's not blow this out of proportion.

Yes, thank you intuit for making the process of filing taxes so easy and free but only if you make less than 70k a year or whatever their threshold is! Just a couple of clicks is all it takes!!

It’s such BS that these companies cause this tax mess to begin with and then get free goodwill and advertising based on them making it “easier.” It’s so infuriating.

https://www.washingtonpost.com/business/2022/05/04/turbotax-...

Yes, there are now also other companies that offer free tax filing. That’s literally not the point, is it?

Also who the hell is TaxHawk and why should they have my tax filing info lmao. The IRS already has everything. A simple letter, text message, or email from the government I pay taxes to is all it should take for me to get taxes complete. I review what they have, do nothing if it’s correct, and either pay taxes or get a tax return. Anything beyond that is a complete and utter waste of time.

Not free for state returns

Right but we were talking about an irs free file which would not make state returns free either.

California taxes are free when done from their site, which has been working fine for ~15 years. And it was late then considering much of the birth of the internet and web happened there.

https://www.ftb.ca.gov/file/ways-to-file/online/calfile/inde...

No excuse justifies the current situation.

I’d take my states 2% tax rate over free file. But this is way off topic as the discussion was about the irs.

The free part isn't particularly important, as the price is built-in. It is that it's centralized. Paying the organization directly with no potentially malicious actors brokering the transaction. (Also, low income tax states typically have higher taxes in other areas to compensate.)

Not at all. There are limits that amount to poverty wages in CA. Not to mention squeezing an unwanted, insecure rent-seeking third party into your finances.

> it's actually really easy and free to file your taxes today.

Really? How?

That's not really true. The IRS knows exactly what your investment income is if it is invested through a reputable broker. They all have to inform the IRS of all your transactions, dividends and interest.

Even for property, the vast majority of the property that people own is the house they live in and sales on home real estate are public information.

You're missing huge segments of income and deductions that are opaque to the IRS. In other cases, the information the IRS needs to calculate your tax isn't available until everyone else files their taxes (cyclic dependency). Some examples:

- Investors in a local restaurant may receive dividends which are not disclosed to the IRS until the restaurant files taxes.

- Those dividends may reach a person via intermediaries. For example, a person receives her share of dividends from all the investments from an investment company in which she is an investor. That company may also have in turn invested into other investment companies.

- A person inherits stock and migrates it to her brokerage account. Subsequently, she sells it. Neither the original brokerage nor her brokerage knows her cost basis and therefore can't know what portion of the proceeds are taxable.

- Inheritances can get messy, in particular because in some cases the IRS needs to know the size of the estate where the inheritance originated in order to calculate the tax.

- Taxes, tips, and direct crypto sales are all taxable events of which the IRS may have no data.

- Rents: you don't tell the IRS how much rent you pay; the corollary is that the IRS doesn't know how much rent the landlord took in. And even if they did, to calculate the tax they also need to know the sum of expenses for the year. To calculate that, you may need to know the financing of the property.

There are similarly many cases on the deductions side of the ledger where a naive approach will end up over-collecting from taxpayers (people would love that).

(Yes, some of these could change if we changed our tax code. But that's not something the IRS is able to do.)

I think the idea is the government notifies you that if you do nothing, this is your tax situation. You still would have the option to file if you are one of the few people that have the issues you list. The idea is to get a better system for most people, not a perfect system for all people.

Exactly. A requirement for a perfect system would mean a better system for the vast majority would be impossible.

How many people do you think are getting any of these types of income? The answer is almost none. Almost everyone in the country has nothing but W2 income and maybe a few things on a 1099 from a broker.

(Tips are supposed to be in your W2, FYI)

Basically every small business owner gets a schedule K

Which the government already has a copy of and can add to your taxes automatically.

Reporting of basis (to the IRS) for publicly traded shares was required only starting for purchases in 2011 (2012 for dividend reinvestment plans).

Sale prices of houses are public in some jurisdictions but not in others. Improvements are not reported to the IRS of course, some of which add to the basis.

Schedule C would be entirely impossible for the IRS to calculate for you.

Automated filing is not an impossible task for everyone, but it’s far from perfectly automatible.

Almost no taxpayers have that kind of income though. Most everyone just has W2 and maybe some 1098/1099s.

If you only have W2s and (most) 1099s and make <$200,000 it's pretty straightforward to use free file fillable forms for federal and your state's free electronic filing service. You can also mail the forms in. You just do 1040 and skip all the schedules.

Only about a third of tax returns have no schedule 1-6 or schedule a, which was very surprising to me. https://www.irs.gov/statistics/filing-season-statistics

I've only had such simple taxes for like a couple adult years. I've had at least 1 other complication every year since. The stats seem to imply a similar pattern broadly too since each schedule is only filed by a minority of returns, but most returns file at least one schedule.

There were about 28 million Schedule C filings against about 148 million humans filing returns in 2019.

Yes, and they could still file those Schedule Cs against their automatic tax bill. Schedule C is totally separate, and could even be filed totally separately just like a business return.

Schedule C is not totally separate under current tax law.

1040-Schedule-C feeds into 1040-Schedule-1 (line 3), which feeds into 1040 (line 10).

But they easily could be. You fill out a Schedule C and it changes one line on your 1040. If the government filled out your 1040 for you, you'd do your Schedule C and 1, and then fill that into the one line on your pre-filled 1040.

Who says the current law has to stay as it is? If you're looking to simplify, simplify

hear hear, it's umimaginably dumb that we don't just do a flat tax on income over say 80k. feds can have 12%, state can have 8% and all this complexity can be burned down.

The problem with these "who says the current law has to stay as it is" discussions is that the more that is proposed to be changed, the lower the likelihood it will ever happen

For purposes of this discussion, and most importantly for the tax payer for which this system imposes the most pointless hardship, absolutely, yes, let's get it done. Now.

But. The tax code is needlessly and intentionally convoluted. For a large number of tax payers, you get all sorts of choices on how to file things, how to declare things, what years to declare what, etc, etc, etc. Many of these choices will be based on what you expect to occur next quarter, next year, etc. People in these situations can typically afford to pay an accountant several hundred or thousand dollars a year to help them make the optimal decisions.

I think a large part of the population fits in the above bucket and the processes for handling the above issues could be simplified. Perhaps those looking to itemize could complicate their yearly tax calculations or hire a CPA, but the rest of the population would be well served by having an automated process (whose numbers are already in place as is)

Why are investments a problem? The IRS gets a copy of my capital gains at the end of the year. For probably 90% of people, the IRS has enough info to do their taxes for them (as evinced by all the times where the IRS tells someone they were $2 off or whatever on their calculations).

Even if you are just a home owner that buys a high efficiency furnace the IRS doesn't have enough info to do your taxes properly.

And in most countries, you'd just add that to the tax return information they send you. And if that furnace gets you discounts over years, you should only have to do that once - the next years, they'll have the information.

Or alternatively: They can directly subsidize high efficiency furnaces, which would actually allow more people to have them than a tax credit will since it would lower the barrier to entry (price).

Sure they do. They would send you a bill, you'd say, "hey I bought a furnace", they would deduct from the bill and you'd pay the rest.

> Taxes are complicated because in reality they are actually complicated for many tax payers.

I have property, investments, multiple incomes, including international stock compensation that involves three countries, dependents... and my UK tax return is trivial.

How come it's possible in the UK but not the US?

I bought a high efficiency furnace this year. That is eligible for a tax deduction. How could that ever work if I don't file my own taxes? The seller isn't sending that info to the IRS.

You just fix it. Just because they do pretty much all of the return doesn't mean that you can't fix errors or adjust information that needs it.

And even when you do that, it'll still be easier than the paperwork in the US.

You pull up the website where all of the information the IRS knows is already prefilled. You click on the "Efficiency Improvements Exception" box and add the value of your furnace. Click on any other things the IRS missed and add them. Click "submit" to finish the tax return. Done.

They would send you a bill, you'd say, "hey I bought a furnace", they would deduct from the bill and you'd pay the rest.

They said their tax return was trivial, not that they didn't file one.

That's not true: Other countries pull it off without issue. Where I am, the tax agency has a calculator, and it includes most basic stuff. Your employer collects your tax rate from the tax agency (who lets you know that someone is getting your information and stuff).

Taxes are complicated for the average person in the US because the US government makes it that way and so far, has been unwilling to act in your interest.

Your barring certain foreign investments your investment income is reported to the IRS very similar to how your W2 income is. Those 1099s aren't just sent to you, they are sent to the IRS as well.

There could easily be a system for updating your dependents with the IRS that doesn't involve doing the whole thing yourself.

Dependent isn't just children, and if you are separated or unmarried it may not even be your children that count as dependents. It doesn't even require you to be the legal guardian.

https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent

But almost no one claims those kind of dependents. And furthermore, the government could just say, "last year you claimed these people as dependents, and we checked and they're all still alive, so we'll assume they still are".

Or even just have it be a field on your W-4 to keep up to date.

Because the tax code is too complicated.

It works just fine in Japan with all of those complications. The vast majority of people don't touch the tax return automatically filed by their employer.

but no other nation on earth makes its citizens go through this annual horror show...and just as a coinky dink, turbotax gives generous donations to politicians...odd case...

Nope, it works fine here and in maby ither countries in Europe, and apparently Japan. The US is juat way behind the times because od lobbying amd corruption.