The problem isn't a lack of FOSS tax prep software. The issue is the need for it, and the cause is Intuit bribing politicians to keep it that way.
FreeFileUSA lets you e-file your federal taxes for free even.
The problem is that most people don't know about such things and don't feel comfortable filling in the needed data anyway.
Plus most states have the same requirements and make filing even harder.
In reality there are many smaller variables but I think the single biggest factor is how regulation works. You hardly ever see all the rules thrown out in favor of a new system. It takes more buy in than you will ever get. Instead you can just add or remove a few things at a time. Over time cruft accumulates.
The cost basis thing used to be a nightmare. At one point with some old stock that got converted to another company's stock with an acquisition, I just threw up my hands and put in a plausible number. (It wasn't a huge amount of money in the scheme of things.) But these days, the only time I've had to manually provide a cost basis to my accountant was when I was donating some stock.
Well, people using the tax code to encourage certain moral and political views. Whether that's good or not depends on your political stance, and probably even various between particular deductions/credits.
But I don't think it's relevant. The tax code is however complicated it is. The point is that the government already knows, more or less, all the right answers. Put that information, in bill form, down, and bill the taxpayer; the commenter above you is also attempting allow for adjustments (such as for things the government might not know about, perhaps like a donation) to permit for the cases the government already know about. The question still stands: why can that not be done, thus freeing most people (whose tax situations are simple) from the burden of needing to file using today's system?
To your points about the rules, I think even in a scheme where the government sends a bill, the rules can quite easily change. Most of the rules today fall into either deductions or credits, or how we account for various sources of income. (E.g., normal income vs. capital gains.) That much could stay the same, and then the government can adjust its own accounting.
No, they instead lobby to make it illegal for the IRS to offer the tools that would mitigate the complexity.
Intuit didn't invent tax code complexity, but they sure fight like hell to own the results of that complexity.
https://www.documentcloud.org/documents/6483065-Intuit-board...
Or requirements to pay more.
> Taxes are just controversial by nature
Yes, but that doesn't mean that anything tax related automatically has no solution, you have to look at the specifics. And in this specific case things could be a bit better for many people.
There's also state-level taxes, where I took a number of deductions such as from renting, which is also a minority, again about a third, and again from investing², so that same third again. I think those two minorities won't share that much overlap, perhaps even enough to get to a majority.
(I should note too that these are criticisms of the complexity of the tax code itself; none of this invalidates the point that the original commenter above this thread started with: that the IRS knows all this and can simply compute a bill, on top of which — if required — alterations can be made. That seems to stand. But while, yes, many people — myself included — take the standard deduction, there's just enough other junk in the taxes that I feel like you can fairly easily wind up hitting one or two complications.)
[1]: https://www.sec.gov/spotlight/fixed-income-advisory-committe... though a bit dated.
²Some states, mine included, do not tax income from US government obligations; this is pretty easy to get into accidentally if you're just doing something like a robo-account (which is how I have this situation). But this information is a PITA to get, because it is not captured in any box on a standardized form.
Did you know that around August/September you can log into your IRS account and download all the forms the government has on you for that year?
They would just have to expose that earlier. Or just make the tax deadline October.
Yes, I'm aware. (That's even the argument you're responding to…)
The point is that there are several credits and deductions; some with with P(it applies to me) of ~30%. The point is not P(a given deduction applies to me), but P(any deduction applies to me), and that that probability, I think, is fairly high. To say "yeah but most people can take the standard deduction" is a true statement, but it ignores where the complexity of taxes is. (Heck, I took the standard deduction, and again, there is information required for taxes that is known to all the relevant authorities — just not me, at least not via any official means. If it's input to the tax code, it should be given a Box on a tax form, a the very least.)
But that's a simpler procedure than forcing them to compute most of what the IRS knows from scratch.
¹But if you want to, that's fine too, it's just not what this thread is about.
However, the callouts for tax return preparation companies lobbying against simplification are still valid. It's also fair to advocate for changing the allocation of energy by the US's IRS from auditing underprivileged folks and slapping them with fines to assisting them in validating that they've met their tax obligations.
Hello nonethewiser,
We have filled proposed tax returns for you. You may either
[Review and pay proposed return]
[Submit your own return]
No, Intuit's hands are not clean in this, and while corporate taxes might be intrinsically complicated (the information does have to enter the system somewhere), personal taxes are largely not.
At one time the rich in theory paid 90% tax rate, but via deductions that needed an accountant could get their real rate down to the mid 30%. Now most deductions are gone and their real rates are still in the mid 30% range. The rich needing accountants spread the idea that taxes were hard for most people when in fact with basic 4th grade math they were easy for most people.
I do use software. while taxes by hand are not hard, the computer doesn't forget to copy line 13b from form 1234 to line 36d of form 9876 - as I did one time. The IRS caught that mistake, but then I had to redo my state taxes, and the whole thing was a pain - all caused by forgetting something a computer does automatically.
Tax software makes it seem hard by adding a lot of waits while they calculate. In truth any 8 bit computer could do your taxes in less than a second once the numbers are entered - the rest is just artificial waits to make it seem like it is more complex than it is. That less than a second includes calculating all scenarios to see if you can save money with some deduction or not.
The above applies to 90%. There are situations where you need help - but if you don't already have an accountant to help you with your books that isn't you, and taxes are easy.
The minority of tax payers who have more complicated taxes would still have to file returns like they do now. But the overwhelming majority of those people are probably already going through professionals or using commercial software (like Intuit's) - not looking for FOSS tax software to do it themselves.
https://www.propublica.org/article/inside-turbotax-20-year-f...
Probably for the same reason that it's rare to see entire codebases scrapped and rebuilt from scratch (and that when you do, it's often the case that you end up with something that isn't an improvement). The judgment behind it has a lot in common with "look at all this terrible complicated code, this could be way simpler, let's just rewrite it." Which also sometimes is hard to get buy-in on, and thank goodness the industry has learned some Chesteron's Fence lessons.
The tax code (like other forms of regulation) does stuff, it's a tool for policy as well as revenue, it creates and reshapes incentives. Criticisms of specific things it does or how it does them make sense. Vague criticisms like "cruft" or "complicated" should be for people who don't have a technical or systems mindset.
And that's before we get to other points. Like the facts that for most people with some W2 income and a few investments, taxes aren't complicated, the system for filing them is, and the reasons for this are some specialized interests combined with partisans who suppose an advantage to making filing aggravating. And where taxes do require professional involvement, that has as much to do with the complexity inherent in situational judgments as proliferation of rules.
I can see and empathise with their concerns, but... eh. Just let me have my form thank you.
I really miss the UK's PAYE system.
Most of the rest take some pretty standard deductions so with a simple form would be able to input those and have their bill updated.
The reality is America is incredibly difficulty to change. There are just too many people and groups with interest.
And I don't even mean this in the conspiratorial way--it's just that simple taxes are in opposition to some of our other goals.
For instance, we want simple taxes. But we also want to use the tax structure to incentive certain actions (having kids, buying an electric car, or whatever). Every exception is another check everyone else has to do. This is why every year you need to select whether you were a member of the railroad workers union, or invested in tribal lands, etc.
I just am very pessimistic about America's ability to adjust. America is legacy software.
By analogy, there's no way we could have reformed the taxi system. It was only by flanking the issue that anything changed.
I may have missed that vote.
Shifting to a higher consumption tax would put the onus on businesses that sell things, not the average person.
It would also greatly reduce the need for governments to surveil citizens to make sure they're not evading taxes.
I could imagine a scenario where everyone from your average taxpayer to a large corporation uses the same desktop application to pay taxes. For most taxpayers, they'd fire it up and it downloads all the relevant data from the IRS and asks you if it's correct -- done in five minutes. If people need to add more information they can enter it.
You could accomplish the same thing with an IRS website, but I think it's a little better if there's a desktop app that talks to the IRS over a standardized API, as it means users aren't locked into using the app if they don't want to, and if the source code is available then if someone wants to add features or improve the interface, they can. It's also good to have the business logic be out in the open in a way that users can inspect and change.
(Best case might be an app that can run either as a stand-alone desktop application, or as a web app. The IRS could run their own instance for users who just want a website with the default experience and don't want to install software. States could also run their own instances with whatever extensions they need so you can figure out state taxes at the same time.)
It seems like it should be possible to do so up front and pre-fill the form online on freefilefillableforms. Then you could either accept it as-is or make changes as needed.
Can't these people already file their simple tax returns for free using a number of tools (including Intuit/TurboTax)?
The US should do what other civilized countries do and send you a tax bill. They can give you a simple form to tell them a few things that a lot of people have (donations, change in marital status, new dependent, other income like rent, etc) and then you can either pay the bill or file the regular return because your situation is complicated.
90% of taxpayers only have income the government already knows about, and with some simple data about donations and dependents, most people's tax bills can be calculated and billed.
The only people who would need to prep forms would have such complicated situations that they need a professional.