I think a change in language would go a long way. The average American spends 13 hours and $200 per year to fill and file their taxes. This expense is itself a tax, albeit an indirect one. "This tax season, we want to save you money, and pre-filled tax forms will do just that." "The tax industry and their lobbyists fight tooth and nail to keep our tax code complex, and every year this costs you money. We want to fix that."

Not just industry lobbyists. Another big part is Grover Norquist's "Americans for Tax Reform" and similar groups. They have a lot of influence with about half of Congress.

Here's a PowerPoint presentation [1] Norquist presented to the President's Advisory Panel on Federal Tax Reform in 2005 explaining their opposition to free filing.

It's short so I'll paste the text from each slide here, with the slide titles marked with dashes, so people don't have to find a copy of PowerPoint (or LibreOffice or Keynote, which also can open it fine).

---- Implementing a “Return-Free” Tax Filing Scheme

Presentation to the President’s Advisory Panel on Federal Tax Reform

Grover Norquist

President

Americans for Tax Reform

May 17, 2005

---- The Current System

Tax filing is citizen-based – taxpayers tell the government what they earned and owe

---- Under Return-Free

Tax filing would be government-based – the burden would be on the taxpayer to challenge the government’s findings -- essentially an audit of every single American taxpayer

---- The Fox Would Guard the Henhouse

The same agency that collects taxes would be the tax preparer – the motivation to maximize revenue would dominate both ends of the process

---- Return-Free is a Tax Increase

The true goal is to increase revenue. The government knows few taxpayers will challenge its findings

---- Taxes Should be Visible

Doing taxes keeps citizens aware of the tax burden imposed upon them by the government. A Return-Free scheme would allow the government to raise revenues invisibly

---- The California Example

The State would not guarantee the accuracy of the returns it prepared – the taxpayer was removed from the process, but left with the responsibility

The pilot program achieved 50% less uptake than planned

Comments by CA officials tell us that the true aim was increased revenue

[1] http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/...

The IRS can say "this is not a valid business expense." You can say "it clearly is a valid business expense and should be deducted!"

The IRS can say "this is contractor income." You can say "it clearly is an down payment for subcontractors, you can see the money leaving here!"

These are two obvious problems you could have, and it doesn't even require dishonesty on the IRS' part. Maybe one of your subcontractors is trying to cheat the system and is jamming you up?

Further.. it feels like the goalposts have moved on this since it last came up. I don't need the IRS to do my taxes for me, I just need to be able to login to the IRS, pick a form, fill it, and submit it.

E-filing should be free and available to everyone. If you have that, I'm not sure what the value of having it prefilled for me is. In particular, if you just have a single W2 to work from, there could be a 1040-SUPER-EZ where you just enter a serial number from your W2, have it fill from that, and then submit.

You can make this easy without putting everyone under the thumb of the IRS.

How are they at a disadvantage? Before, they had to do all their filing themselves, after, they have to also do all the filing themselves.

That sounds like a big difference to me. The former would require government knowledge of every single transaction you make/receive, while the latter does not.

You and I don't do that, but rich people and companies do, if a tax increase is going to impact you and I by $100 it's barely worth the email that will be ignored. If a company is going to be hit by $100m, then it's well worth spending $1m to carve out an exception.

> All these are just giant waste of time to majority of the population in the country.

It works too. Tax return day is ingrained in the American Psyche through cultural output (TV), there is a constant undertone in the US that taxes are bad and the government is stealing your money.

Get rid of tax day and make 70% of the country not have to worry about it other than a line on their payslip and as well as making things far more efficient for both the taxpayer and the government (thus reducing government spending), it changes that cultural balance. Few will care about taxes, and that means the pressure to introduce a 0.1 cent drop in tax (which is structured to benefit someone on $150k by say $2 a week, but benefits people like the Koch Brothers by $200k a week) goes away.

Each month I get a payslip saying I've earned £xxxx and £yyyy has been taken in various taxes and other deductions (from pension to [optional] healthcare, some of which comes off pre tax, some post tax), and the balance is transferred into my nominated bank account each month.

At the end of the year I get a summary from my employer called a P60, which shows how much tax I've paid.

If I have complex needs I then have 9 months to go to a gov.uk website, fill in that data, and either get a rebate or a bill. If it's a bill then they adjust my tax code (which defines the deductions) the next year it takes about 10 minutes (or I can just pay straight away), if it's a rebate they pay it direct to my account (or they can adjust next years deductions)

For self employed people then, but you likely have an accountant who handles everything, and pay yourself via dividends, making large enough tax savings to easily pay accountant fees (which for a small business is pretty low)

I don't consider tax a burden, I consider it the cost of living in a western society. I don't have to pay them - I could move to Svalbard or a country that would take me and pay taxes in that country. Even Americans can do this (and get rid of their US citizenship - saying "no I don't want the benefits of American society")

All my problems with taxes over the years have amounted to similar mistakes - forgetting to transfer one amount from one form to another, or transposing numbers, etc.

1. People who really should file with pencil and paper (or excel, at most)

2. People who need an accountant

Very few people fall in between these categories. The tax code is so complicated and annoying that even things like employer RSUs, mortgages, side hustles, and doing more than 20 stock trades in a year can be risky and weird.

Turbo tax has spent 44 million dollars on lobbying.

The American Medical Association(Physicians) have spent 500 million dollars on lobbying. (All of medical spent about 2 billion)

Its good that people are angry that lobbyists control the nation, but for some reason we give the biggest lobbyists a pass. I don't see the outrage against the top 20 lobbyists, I do (rightly) see it against turbotax.

The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.

I’d love for us to just say “let the market sort it out”, but that generally requires presumptions that aren’t universally true for all goods or services.

GP you should definitely throw in a /s or something because it's not real clear whether you're serious or not

Who are these unicorns which are not paid by this system?

Are they friends with Yeti, Bigfoot, and the mythical hot single living in my area?

“Taught my kids about democracy tonight by letting them vote on which movie to rent and what pizza to takeaway.

I then picked the movie and pizza cos I’m the one with the money.”

The solution to the tax prep industry isn't to have the IRS do your taxes for you, it's to reduce the size of the tax code.

The US government is obsessed with giving narrowly-targeted groups of people money through the most obtuse mechanism possible, and it is ridiculous. If you were just sent a check when you bought an EV (for example), a lot of the tax stuff would be much simpler.

Effectively, Yes.

> Who passes bills?

Technically the elected officials, but the bills themselves are usually written by lobbyists.

Pressure from campaign donors, either directly or through lobbyists, or through "party" channels influence votes.

https://www.armstrongeconomics.com/international-news/north_...

I know there were issues that precipitated the direct election of Senators but I think we would be better if we went back to State Senate control of the Senate, that would force people to focus more on their state and local politics where they have more power rather than ignoring them and shouting how the US Senate is doing nothing.

https://posey.house.gov/news/documentsingle.aspx?DocumentID=...

Yes, lobbyists and intelligence agencies.

Two things:

1. A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS.

2. Okay yes, it's reasonable for me to put in my living status changes or tax deductions I want to claim, but they don't ask just for that, they ask for all the other shit too, all the stuff they already know the answer to. Why?

Your financial institution doesn't necessarily know your capital gains. It reports stock sales to the IRS, but often doesn't report the cost basis because it doesn't know. Consider:

You buy 50 shares of ABC on Jan 1 2020. Then you buy 50 more shares on Jan 1 2022. Now you sell 50 shares of ABC on Jul 1 2022. Which bunch of shares did you sell? Was it a short term gain or a long term gain? Was it a loss? It depends. Neither your broker or IRS knows the answer, but you do.

EDIT: The above information is evidently out of date by about 10 years. TIL

Your broker does know because you need to tell them which ones to sell when you sold.

The IRS also knows because that's included in the cost basis reported to them by the broker. (This changed some number of years ago, brokers used to only report the income from the sale but not the cost.)

https://www.spencerlawfirm.com/2011/01/new-cost-basis-report...

For reasons I can't comprehend, ETrade reports the costs basis wrong every single year on all my RSU and ESPP sold shares. They do issue a supplemental report which has all the correct info, but the 1099-B has it wrong. It is maddening. I need to send both the 1099 and the supplemental doc to my CPA so things are accounted correctly, otherwise I'd pay a lot more taxes due to ETrade errors.

All other brokers I deal with do it correctly.

Employment compensation related shares get weird, but they will at least track the purchase date or the date it entered their system anyway.

Things get more complicated when you are trading the same security across different brokers because they can’t detect wash sales. The IRS has the information to detect was sales.

Edit: To pre-empt some replies: yes, centralized exchanges will report sales but they won't always know your cost basis, and a lot of the trades will happen on-chain, which definitely isn't automatically reported.

To be clear, I support the IRS doing as much as the filing as possible, and I agree these issues aren't dealbreakers, but please don't make the situation look different than it really is.

Besides, as others have pointed out, there are ways to specify at the time of the sale. That's what Schwab does when I sell stock there.

This part annoys me; when I would have RSU's vest, my broker would send me a 1095B(?) which plainly lists stock price at time of acquire and time of sale, and the gains, which for RSU's sold at time of vesting is 0

but for some reason I don't understand, they don't report the cost basis to the IRS, just the sale and price at time of acquire, so if you don't file your taxes to fill in that cost basis information, the IRS will cite you as having earned the entire sell cost of the stock!

This fucks up a lot of people new to tech/taxes, and I still haven't been able to find documentation on why they don't file the cost basis for you if they're reporting the sale anyway.

> ... commenters asked that there be no change to the Form 1099-B to reflect compensation status or, alternatively, that using the indicator be permitted, but not required. These commenters indicated that compensation information is not accessible to most brokers, and extensive reprogramming for both the underlying database and the reporting process would be required. The commenters also expressed concerns that, in many situations, a broker would have to accept customer-provided information in order to track the compensation-related status.

> The lack of a mechanism to communicate whether the basis of stock has been adjusted for the exercise of a compensatory option coupled with a system involving discretionary broker adjustments for compensatory options would, however, be unworkable.

> A broker may not increase initial basis for income recognized upon the exercise of a compensatory option or the vesting or exercise of other equity-based compensation arrangements, granted or acquired on or after January 1, 2014.

https://www.federalregister.gov/documents/2013/04/18/2013-09...

[1] https://www.irs.gov/instructions/i1099b#idm139900428766768

What is crazy about the system is that every one of those years, I have been asked to pay the same amount of money (roughly $2000 extra), but the mistakes change each time. Each time, I have sent a very kind letter to the IRS telling them, "no, I did this correctly," and the IRS agreed. It failed to account for cost basis on RSUs from an employer. It failed to account for long-dated options expiring worthless. It failed to account for long term capital gains being long term.

It's hard to avoid drawing the cynical conclusion here, that the IRS each time attempts to extract a payment that is slightly less than the cost of having a lawyer or accountant deal with them. I don't want this kind of system sending out a tax bill to me that I have to contest, because:

1. It will almost certainly not do the accounting that minimizes each person's burden. The US tax code is long and full of terrors.

2. Most people will just accept the result, regardless of the fact that it will cost them thousands in extra taxation.

3. People that don't accept the result will likely be flagged for future audits, and will likely face a lot more scrutiny. In the previous system where everyone has to file, there are a lot more targets.

This is an utterly self-serving rationale, but I don't want this system.

On the other hand, with our present adversarial system there are a variety of private businesses that do get money when the IRS makes mistakes.

The adversarial process that exists today (between you and the IRS's automated systems and processes, mediated by the humans at the IRS) allows you to generally get the benefit of being on the side that minimizes your tax burden. Usually, the more complicated your tax filing is, the more gray there is, and the more advantage you can take of it.

And as far as I see it, everything the Fed needs to file my taxes is information that the Fed already has. I'm pretty sure this is an extremely common circumstance.

I also don't understand why states don't push for return free filing. They can demonstrate it working without the need for the Fed to take action, which in turn would put pressure on the Fed.

Honestly I wouldn't be surprised if the IRS could already have a 90+% success rate for 80+% of people. It seems like the real issues would be in the very rich who can take advantage of many loopholes or the average person when big life events happen (things like death, marriage, and birth, though most of this could be automatically reported as well but easier to fall through the gaps).

Maybe I misunderstand, but it doesn't seem like the IRS needs any additional information than I have presumed it already has. This information is at least all known by the fed, so it doesn't seem like a data leakage. And I'm someone that highly cares about privacy.

I suspect that the real pushback for return free filing is from 1) tax filers like Turbo Tax who would lose a lot of business and 2) the ultra wealthy as RTF would put pressure to simplify the tax code and reduce the number of loopholes.

Let's say you sold your car and deposited the money in your account. The IRS won't have details about the sale and neither will your bank. They will know the amount, but it is incumbent on you to report information if this sale represented a capital gain. In all likelihood it wasn't, but the government doesn't have a way of knowing this. If you get audited, someone will probably ask where the money came from and it would be up to you to furnish receipts in order to prove it.

Capital gains from real estate sales are not automatically reported.

Public securities (stocks, ETFs, crypto, etc) are a small fraction of overall capital gains by $.

What percent of Americans buy and sell a property within a year? I bet it is pretty low.

> stocks

All the major players report this information.

> ETFs, crypto

The vast majority of people use exchanges like Coinbase and Binance. These already report.

So I'm not sure what your point really is. That there are edge cases? No shit. No one is even arguing against that. The argument for return free filing is that the vast majority of people will benefit from the system. Even if there are mistakes it is easier to look over something and correct it than do everything from scratch. The people that won't majorly benefit from this likely already have more than enough wealth to pay someone to do their taxes already and honestly I'm not concerned about them.

Don't let perfection get in the way of massive improvement.

> You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. (once every 2 years)

> You can add your cost basis and costs of any improvements that you made to the home to the $250,000 if single or $500,000 if married filing jointly.

So I'll change my question:

What percentage of home owners are profiting >$250k (single)/ >$500k (married)? What percent of them do that more frequently than a 2 year period?

I'm willing to bet that these numbers are still very low. That's the entire point. I'm sure there's nuance I've missed as I'm not an expert. But my entire point isn't about specifics, it is that your argument against this system is about edge cases. If you can prove that these aren't edge cases, I'll actually side with you. If not, I still see return free filing as an extremely beneficiary policy to the vast majority of Americans, and especially to those with the least income. I already know that 90% of households take the standard deduction, so you're going to have to make some substantial claims.

https://www.investopedia.com/ask/answers/06/capitalgainhomes...

> The Tax Reform Act of 1986 required anyone responsible for closing a real estate transaction, which may include the escrow agent, title company, or attorney, to report a real estate sale or exchange to the IRS on Form 1099-S. In addition, they were required to furnish a statement to the seller of the gross proceeds of the sale. In 1998, with the passage of the Tax Payer Relief Act of 1997, an exception to this reporting requirement was allowed.

> If the sale price of your residence is $250,000 or less ($500,000 or less for married sellers) and you have lived in the property, as your principal residence, for the last two out of the last five years, your closing agent will not be required to file Form 1099-S with the IRS. The gross proceeds of the sale need not be reported to the IRS if these conditions are met.

> Be sure that your closing agent has your written confirmation that your sale is exempt from the IRS reporting rule. Most closing agents have a form, called a “Certification for No Information Reporting on the Sale or Exchange of a Principal Residence” which you will you be asked to sign at closing. The form will ask for your seller information, social security number, address, and certification that you have met the exemption requirements.

https://sandygadow.com/will-my-escrow-agent-have-to-report-m...

And the tax companies can offer to do that "click further" for you, and you then would see how much they saved you (if any at all). Heck, make it so the IRS always charges a "I dun wanna read anything" fee of $50 that you can get out of by clicking "uh no" like the presidential one. That would satisfy most people, heh.

Complex scenarios can still be handled by hand if the taxpayer wants.

I will corroborate, as I've posted elsewhere in this thread. I've had to interact with IRS employees, and they basically have all the information in their computer system. For simple returns, they could tell you the entire contents of it!

It shouldn't have to be a game. There shouldn't be fear and antagonism. The current system favors the IRS. It favors other third-parties. And it's devoid of any favor for the taxpayers.

But that's exactly what the parent comment was saying: you'd get a notice from the IRS that says they think you owe $X based on their records. You have until the filing deadline to file any additional income/exemptions/deductions/challenges/etc.

As you say, for the vast majority of people this would make taxes a million times easier. For people with more complex situations, they can then engage in the more complex process of additional filings.

They know what you purchased your asset for + when and what + when you sold it for, don't they?

These seem trivial to find out from other government agencies.

One could argue that a basic principle of liberalism ought to be that if the government wants to tax you they should be responsible for calculating how much you owe according to the law. Or in other words, for every dollar the government doesn't demonstrate that you legally owe, you should not owe that dollar. Kinda like presumption of innocence, but for taxes.