Norquist himself, and his organization Americans for Tax Reform, believe that making tax payers go through the process of preparing their tax return forces us to audit our comfortability with paying taxes[0],[1]. If, on the other hand, we just signed off on numbers that the IRS provided us every April, we'd be less aware of, and therefore less likely to protest, increases in taxes.
This isn't a subtle, arguably-the-cruelty-is-the-point sort of situation, this is a I'm-not-using-anesthetic-because-I'm-concerned-you-aren't-sufficiently-afraid-of-the-thresher-that-just-cut-your-foot-off-when-I-ran-you-over-with-it. I'm not a big fan of paying taxes, and I don't like it when my taxes go up. But I already feel that when I look at my paystub, or pay property taxes. The whole effort to make tax returns harder so people hate taxes hinges on the idea that most people are completely unaware of taxes until April 15th rolls around. It's cynical in the extreme, and that's really off-putting to me.
0. https://en.wikipedia.org/wiki/Americans_for_Tax_Reform#Oppos...
1. https://govinfo.library.unt.edu/taxreformpanel/meetings/meet...
Unless you’re cutting a check in person you’re arguably not feeling it as much as you should.
It’s like how replacing cash toll booths with electronic debit hides the true price you’re paying on the highway.
Having to at least see the numbers rather than blindly clicking “Yes” on a government run website is not quite there but it’s better than nothing.
If we ever reach a point where the IRS just tells you what they think you owe, they could include the same summary to placate the Norquist types (who undoubtedly will then start complaining about something else).
Literally all Norquist is doing is making it so for about 2 weeks a year, what little free time I have after the kids are down for the night is spent in tense almost-argument with my wife as we seek out all the places our employers have secreted the tax documents they already provided to the IRS. Its such a colossal, pointless waste of time for people who have a simple tax situation.
I have never, not once, looked at the numbers produced by performing my tax return (which, again, the IRS already performs so they can double check my numbers) and thought "Thank you Grover Norquist for keeping me aware of how much my government is costing me!". Because I am already made aware of that when I get my very first paycheck from a new job.
Speaking of toll booths vs electronic debit, when I lived in the Bay Area, I had to commute from east bay to west bay every day. For the first 4-5 months, I was paying cash, because in my scant spare time, I hadn't had time to get transponder and direct debit set up. I was paying $35/week. I didn't become less aware of that cost when I switched to the transponder, because the actual cost was time. Time is something I have very little of, so adding friction just wastes my most limited resource.
Using my most limited resource to make sure I'm aware of how the government might be using slightly too much of my like 10th most limited resource is a waste of my fucking time. Thus, I'm angry not at the government for potentially wasting my money, but at Grover Norquist for wasting my time because he thinks I'm too fucking stupid to realize what's happening.
Taxes don't reduce your purchasing power insofar as everyone else also has to pay them, so your relative amount of post-tax money is the same, and the tax system is progressive, meaning your relative position is actually a little better.
Remember, money isn't real.
You just proved my point without even realizing it.
When you were forced to pay cash, they were forced to show you the price. You even remember the amount now, presumably years later. If they could have you pay cash without seeing the price I’m sure they would. If the price had changed from week to week, you’d immediately realize it because the amounts you’d interact with would change.
But that’s only possible with a purely digital system. As all the numbers happen behind the scenes.
Ask yourself this, why don’t any of those automated toll booths show the amount you “auto paid” rather than just “Ok!” Or “Paid!”? It’s because they explicitly do not want people to know what they are paying so they can raise the rates with minimal flak.
Or maybe it's simpler to just say paid and they did that. I'd wager that they're well aware of push-back over fee increases but still do it anyway, because monopoly. And the roads need the money.
On that note, the real fun is going to be about how do we pay for the roads once the majority of traffic is not pay fuel tax...
If the intent was to get us paying without realizing, they'd add additional incentives (like discounts) to getting the transponder than the fact that its simply (and obviously) faster.
You're constructing this straw man where the price at the register is murky and ill-defined, and if only we could remove the smoke screen, people would see how much money they're losing to taxes. But the reality is that anti-tax folks are the ones making it difficult to understand the price at the register, as it pertains to income taxes. There's quite the conversation to be had about the murkiness of appropriations, certainly. But adding friction to the tax return process doesn't make me want to call my congressman about where my taxes are going, but instead to ask why a senator in Wyoming or Texas is so excited to bend over backwards to protect the business interests of a company based in Mountain View, California, at the expense of all of their constituents?!
Basically new tax rules are put into place with little regard on making them simple or including data collection as a part of the tax change.
https://www.policygenius.com/taxes/who-benefited-most-from-t...
I mean, yeah? 42% of Americans pay no federal income tax, how could tax reform benefit them unless it's handing out cash? Which we already do with EITC.
And the complexities and burden of the tax system go way, way back before Trump's tax reform. Think more like anything passed since the 1950's.
You went out of your way to make this about partisan finger-pointing and I merely countered that there's plenty of blame to share. Way to deflect and spin!
Partisan politics is why the subject is so rancorous. I have no party affiliation and am happy to acknowledge and criticize the one that I am most sympathetic too. This is why we can't have nice things -- because we can't talk about policy and and government reform without it becoming a pissing match.
You said "The last time we were given "tax reform"", which implies this is a recent issue. I countered with "look at some of the tax bills Democrats have sponsored", clearly showing it's NOT a partisan issue, both parties are doing it, and have been doing it for decades.
The original comment blamed Grover, so in fact you're replying to a chain of comments that were already partisan, so I reply with a comment about politics and you somehow blame me for making it partisan. Fun!
https://www.congress.gov/bill/116th-congress/house-bill/3151
Unreported gambling winnings or a low revenue side gig aren't tracked by the IRS.
How this all changed with cryptocurrency, I don't know.
I think taxes are all about what's written down and what logically makes sense. If you pay someone $1000 to do a job, they have to pay taxes on that. If you invite your friends over and spend $1000 on food that they eat, they don't have to pay taxes on that. I don't know why.
The general issue with gambling wins is not that the IRS doesn't know (casinos report winnings) its that they don't have to report losses.
It's generally $600 for winnings, and $5000 for withholding.
https://www.irs.gov/pub/irs-news/at-01-17.pdf
https://www.irs.gov/pub/irs-tege/gaming_withholding_reportin...
Why can’t the IRS just tell me what they think I own by April 15th, and then i can add things to it.
My taxes are really simple. I still don’t understand why I have to spend at least 40 minutes every year giving the IRS the information that they already have.
https://www.pbs.org/newshour/show/dreading-taxes-countries-s...
A government has a monopoly on taxation by definition or else it can’t be a government so calling it a public monopoly doesn’t make a lot of sense.
Right now, the IRS is forced to establish some sort of data interchange format and adjudicate incoming tax filings equally, because they're required to work with TurboTax et al. (even if only required from a practical standpoint).
If they also provided the only filing solution, that pressure would be gone.
IMHO, the best possible outcome is definitely IRS-supplied free file + private options, if users would like. Keeps everyone honest and on their toes.
It’s literally data entry.
Tax prep/accounting (what to put where for cases where there is ambiguity) can always be different.
That doesn’t apply to W2 earners though (in 99% of cases)
Ergo, imagine there's a checkbox option that would apply to 25% of free filers to save them money. How would the IRS free file handle that from a UX perspective? What are their incentives?
Alternatively, suppose a feature used by 10% of filers is broken for the current tax year. How long does it take to get fixed?
Current private solutions are incentivized to optimize those ("We save you the most money!") and fix them ("Our software isn't broken").
And because only the data transfers over to the IRS, all the prep optimization can be done independent of the IRS.
Some of the incentive concerns would be alleviated by (as this did) building this from a different branch of government (e.g. US-DS).
But at the end of the day, it's still the government telling you how much to pay the government. Or as the joke went about the 1040-EZ: "How much money did you make? Good. Give it to us."
Dozens of companies sell online products to file, and thousands of individual providers are available too.
It's a competitive market on a stupid game. The market solutions (maybe mostly just intuit) fight to keep the game near impossible for the lay person to play. They generate "GDP" by making it more grievous than it need be.
At least part of this is a symptom of a broken political system (the current process of voting encourages 2 party system which are incentivized to not experiment)
The federal gov’t has enough power to make either of these groups miserable; and so each is using it to fight out who gets to do so.
Picking one to win isn’t going to stop the conflict, but it could turn it into a shooting war.
Apparently TurboTax has ~70% market share for tax preparation software, and TurboTax + H&R Block have ~95% market share. [0]
But even that's still a heck of a lot more competitive and responsive than if the IRS shipped the only tax prep solution.
[0] https://secondmeasure.com/datapoints/tax-prep-2021-turbotax-...
They all suck, and in a better society, that number for normal people would be close to 'zero', because the IRS could just send me a bill to attest to and sign.
The spherical cow of the accounting world
A lot of things are ‘legal’ as long as you don’t get audited.
But of course, the dynamics of our current system are such that the people least likely to be able to defend themselves legally are the ones which are frequently targeted for tax dodges. How many years do the extremely wealthy have to dodge taxes before the IRS finally comes down on them? Meanwhile, a friend of mine got dinged for a $500 deduction for unreimbursed work travel and not having receipts (a $2000 fine which she had to borrow money to pay).
I worked in a country that automatically fills out your tax return. Sure, it was nice that the form was pre-populated, but you know what I did? I doubled checked all the numbers to make sure they were right.
Were they? No, my employer had miscalculated retirement contributions resulting in a higher tax bill for me.
So I ended up doing all the math anyways, just like I do in the US.
Assuming the problem is actually ideological opposition from Republicans, and not campaign funding, because then it would be bipartisan:
https://www.opensecrets.org/orgs/intuit-inc/summary?id=D0000...
That page shows who employees of the companies have donated to.
(And the politicians aren't actually "bought" by it. It's more like they already agreed, and maybe they're being paid to stay politicians instead of getting a better paying less annoying private sector job.)
And corporations can't donate to "campaigns" but they can perfectly well donate to PACs aligned with campaigns.
> And the politicians aren't actually "bought" by it. It's more like they already agreed, and maybe they're being paid to stay politicians instead of getting a better paying less annoying private sector job.
But nobody said they were bought. It's not corruption if it's legal, right?
The problem is the systemic bias it introduces. Politicians need to raise money to stay in office, so they have to appease whoever has money. So politicians who appease special interests have an electoral advantage, win more elections and constitute a majority of the legislature.
How about a simple form which shows those numbers in large typeface and nothing else?
Are we doing something wrong? It seriously does not seem hard to file taxes.
What would be better is if the IRS just sent you the stuff they know and you affirm that it's true. This prevents people from accidentally committing tax fraud and eliminates the need for middle income Americans to pay a yearly fee in order to be law abiding.
Yes if your tax situation is simple, the IRS already knows everything. In many other cases (even something pretty common like self-employment income) they do not know, and you have to tell them.
Yearly fee? I had to pay for turbotax but I was under the impression that it was because my income is very high.
I don't know, it makes sense to me the way the IRS does it. If I get a massive windfall and the IRS didn't send me information about it, then I would be able to just not file it because I would know they don't know about it. Not so if I don't know what they know.
Even with the "free" standard offering, it's been lucrative enough for them to lobby heavily to prevent taxes from being easier, just to funnel the majority of the country through their slow filing flow and try to upsell to all of them.
Ideally the IRS would tell you what they think is accurate and you'd submit amendments for anything that's not accurate. That's no different than the current arrangement since you already need to report all income, it just eliminates the extra cost and effort for the majority of Americans that don't receive windfalls.
In my experience, the IRS won't get mad about that. They'll ask you to correct it, of course. What makes the IRS mad is if it looks like you're actively trying to illegally avoid taxes.
Also, in my experience, the IRS are generally decent to work with. My state revenue department, however, is the opposite of the IRS in every way. They're just mean and vindictive.
The majority of the population doesn't know anything about their taxes that the IRS doesn't. Why force everybody through a song and dance that only is of service to the exceptions (and a couple very large tax filing corporations who lobby hard against automatic taxes)?
My biggest time sink this year was sorting out how to file crypto gains/losses. After two hours of struggle, I found that I had to pay income tax on about 15 dollars of capital gains.
Investments: Yes, I have to file a 1099. Business: no.
Crypto: I think your holdings have to be significant for it to matter whether you file this or not, maybe I broke a law here.
I think most people don't report interest that is below the reporting threshold for the bank either. Doesn't change what the tax code says you are supposed to do.
If the answer is yes, but you put no so that you didnt need to file any additional details, thats definitely illegal.
There's a lot in this thread about standard vs. itemized deduction, but since Trump's tax reforms, the standard deduction has always vastly outweighed itemization for me, and I believe, most Americans.
The part that causes me the most grief nowadays is the 1099-B; there's a few of required tax inputs related to investments that just aren't captured on that form. (Although in recent years, I've started taking better notes, and now I can just refer to past years' resolutions for repeat scenarios.)
But even just punching in the requisite numbers I think takes me longer than 30 minutes…
Then there just seems to be an annual surprise per year. ESPP sales complicated one year; they're a weird mix of income and gains. I had a stock split occur one year, resulting in a fractional share that was liquidated for some really odd capital gains. Moving has complicated state taxes numerous times due to states with poor definition of what constitutes a "resident". I've been plagued by a number of errors on various forms (including twice on the W-2!).
But the upthread remark — that the IRS knows the answers — should apply to my situation. Basically everything tax-related about me, the IRS already knows. They can just send a bill; if I don't trust it, I can look it over for correctness & perhaps trigger some sort of correction process. (Presumably today, they'd just audit me if I was too far off their number.) About the only thing I think that might cause a discrepancy is charitable donations.
Your comment seems like a prime case of perfect being the enemy of good.
Unless they are a homeowner, probably.
Part of the issue is that the US tax code is a lot more complex than most countries. (And the homeowner-targetted deductions are kind of insane and bad policy too).
Still, I don't disagree with the basic premise. They probably know enough to know if itemizing your homeowner-related things would be better for you, and do it that way. You can ask for adjustments, or you could always ignore what they calculate for you and do it all yourself from scratch if you wanted to, a thing I believe you _can_ do in European countries that generally calculate your income taxes for you?
Also, I wish our tax code werent' so insane.
In practice, about half as many people itemize today than they did back in 2016.
Isn't that a relatively recent thing? IIRC, the standard deduction was massively increased a few years ago.
Yes, it is. What difference do you think that makes in the present day?
Something we can do differently that seems obvious today could have been a disastrous policy just a few years ago.
The optics of the IRS sending out bills for thousands of dollars more than people rightfully owe are bad, to say the least.
"Here is what we think you owe/don't owe. If this isn't what you expect, then click this button to add or subtract deductions. Oh and BTW, we know you owned a home last year so we included that too!" Or, "Hey we noticed you took the standard deduction last year so we assumed based on what info we have that this year might be the same so here is the standard answer!"
Of course it depends on where you live - in San Francisco if you can afford a house at all you have enough interest to deduct it (especially at today's rates), but other areas have more sane housing prices and lower incomes.
I think you can still easily reach if you, say, tithe 5 or 10% of your (post-tax even!) income (to a church or other 501-c-3) and have a mortgage and pay property taxes in a major metropolitan area. (Also if you're single the standard deduction is half married filing jointly.) (I didn't realize the personal exemption is gone now too!!)
But a quick google says... according to the IRS in 2022, 139.2 out of 154.3 million tax returns took the standard deduction, which is indeed around 90%. (Looks like up from 87% in 2020 maybe). So, true, defintiely most people, but still 10% not.
It looks like maybe pre recent Trump standard deduction changes (which were phased in), as many as 30% of filers itemized. (Still a minority to be sure).
I wonder if charities have seen a big hit in donations, if the itemized deductions people are no longer taking were an incentive.
I guess there was a $300 provision for charitable deductions enacted in 2020 that they are trying to make permanent and larger. Web site wasn't working for me but Google's cache did: https://webcache.googleusercontent.com/search?q=cache:WdabFa...
https://www.nerdwallet.com/article/taxes/tax-deductible-dona...
> Your comment seems like a prime case of perfect being the enemy of good.
And the comments advocating for automatic tax filing seem to be ignoring Chesterton's fence. They seem to be viewing it solely through the lens of revenue collection. However, IIRC, for better or worse, one of the big levers the US government uses to influence individual behavior is incentives implemented via tax policy. It stands to reason that mechanism would stop working if individuals could avoid interacting with the tax rules.
Removing manual filing won't stop people from voting on tax policy.
FWIW, we are in the "on the cusp" boat. Another year or two and our mortgage interest vs principle equation will put us in the standard deduction range. And short of massive changes to either tax law or our income, we'll remain there.
Maybe these are “drastic” changes but they aren’t unusual across the population. Not planning on kids, so that means I’ll have fewer changes than most. But the person I plan to marry has significant changes to income based on commission so I’ll probably be doing taxes this way for a long time!
Which makes sense in a lot of spheres where's there's obligations on both sides. Unfortunately, if myself and the IRS come a disagreement about my filings, I can end up in jail or at the very least deal with an expensive criminal prosecution. If the IRS is wrong, then there's effectively no penalty for them.
The government wants it both ways. People understandably have some apprehension about this.
I think there's a huge gap between facing an audit in most circumstances and those two outcomes...
Of course, you might still want to amend that, but as the first pass it can be quite accurate.
Why wouldn't such a system work here?
It's not like the act of doing your taxes is what makes your realize you're over the standard deduction. Most people will know if they've done standard or itemized in the past and act off that.
That is exactly how I figured out I should itemize my taxes this year.
That's pretty much the extent most Americans think about itemization as it stands, and whether it comes from a tax software or the government, the result is going to be the same.
It has to be supported, and you should be able to change it. But there's really no reason today for why IRS doesn't send you "this is what we think you owe, based on this data that we have. Click to accept or add more data". That process would hugely simplify taxes for majority of Americans and wouldn't impact people who have more complex cases.
> In 2017, 47.1 million taxpayers itemized deductions, relative to 15.3 million in 2018. This dramatic shift maps to a more than 19 percentage point drop in itemizers as a percentage of all taxpayers, from 30.90% to 11.47%.
The majority of this was people's mortgage deduction went from being more than the standard deduction (so itemization is worthwhile) to being less (so it's not worthwhile).
You can roughly estimate what your itemized deduction might be.
Which you can use free app to download, file and send the filed one.
weirdly enough official site also have instruction on how to use PlayOnLinux to run it under Linux
It's interesting that anything other than MacOS and windows is even considered at all, even just in the instructions.
Are they going to be aware of all deductions in all cases? You are absolutely correct, there's no way that's correct.
Imagine a landscaper doing doughnuts on your lawn and then telling you to pay him to fix it, and that's roughly how I view Intuit.
People wealthy enough to even think that their deductions might exceed the standard deduction are not only in the vast minority, they're also wealthy enough that paying for TurboTax isn't an issue because they have their accountant do the taxes.
IOW, you're optimizing for the exception, not the majority case.
For those who itemize, the government usually knows about most the things you're itemizing. I'm itemizing this year because of 3 things: taxes paid, mortgage interest, and charitable donations. The government already knows about 2 of those, so they could send me prefilled forms that are 95% complete (W-2, investment 1099, mortgage 1098, mortgage 1099 and other bank account 1099-ints, my form 5498 for my IRA, property taxes, etc). I'd much prefer only having to fill in my charitable donations. It would change a job that takes a couple hours into one that takes maybe 15 minutes.
Seems like getting to a point where ~75% of the population didn't need to file would be doable if there was enough motivation for it. If your only income is on a W-2, and your only mortgage / banking / trading is with U.S. companies like Chase or Morgan Stanley, no reason that couldn't all be done for you.
Most brokers send all the info to the IRS, but there are some that get wrong cost basis for ESPP (Fidelity looking at you) and so you’ll have to rectify that too. But those things should spit out a number that gets adjusted from the IRS number.
I had a friend in college who hated doing taxes so he spent 5 min putting whatever numbers into the forms.
A few months later the IRS sent a "your filed incorrectly, here is the corrected return" and he'd be like "cool".
That said, I'd be more than happy to see HR Block go bankrupt.
IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated and what IRS really knows is a guessing game. IRS is posturing and bluffing that they know everything and put pressure on a tax-payer to voluntary disclose as much as possible about their income out of fear of criminal persecution. Also they will rarely tell you that you "overpaid" your taxes unless it is a simple math mistake.
If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.
“Our estimate of your income may be too high in certain situations, for example if you are a business owner, independent contractor, or receive income from RSU or ESPP sales where the tax basis reported to the IRS is missing or inaccurate. In those cases, you are encouraged to fill out your tax return using the tool of your choice” (Hopefully with links to some options).
Otherwise, there’s going to be a lot of tech workers who don’t understand RSU taxation paying thousands/10s of thousands of dollars extra in taxes for no reason. (And yes, I realize some may think this is a feature, not a bug.)
Practically though, our tX system and economy is much too complicated to be able to accurately say whether incentives through deductions and credits are a net positive. We can say how expensive they are, but how do we measure the value added by pushing consumers in one direction or another? And if we can't measure its value should the government have that authority?
But also, there's still the risk of getting audited either way. Just because they apparently don't know about some income _now_ doesn't mean they'll never figure it out later.
Gun control, ISP prices & availability, public transportation and in particular long range trains are the top of the list of those subjects.
At first it’s fun, then it’s anoying, then it’s sad.
Thougt & prayers ! It will get better, or at least you will know intrinsically that you exhausted all of the 1 solutions.
Sometimes the US truly is exceptional -- name another country that has more guns than people and, critically, enshrines private ownership of guns in its constitution.
Czechia, Guatemala, Mexico, Phillipines, Ukraine, Yemen.
1) The tax software industry 2) Libertarian/far right groups want to make it hard for you to pay your taxes.
Here's a Planet Money episode talking about this: https://www.npr.org/sections/money/2019/04/03/709656642/epis...
And even if you did have some side income to report, the HMRC website had most things in a pretty easy wizard-like form, similar to turbotax or the like, with the things they already knew about pre-filled.
But for the great majority of people whose income comes from working for a living, you don't need to do anything to be 100% legally compliant.
It’s been like this for more than 10 years
In the last 5 the government made everything electronic
Every invoice or receipt any business or individual issues, is digitally signed by the government
If you are a single wage earner, you don’t even need to file your return, your prepaid taxes exactly match your overall tax burden
You can always choose to file if you want to or need to in case your situation is more nuanced
But most people don’t really need to do anything
These "simple" cases still cover the vast majority of American taxpayers.
The hilarious thing is that if we remove the context from this statement it applies so broadly that you could mean just about of our systems.
Having absurd systems is pretty much our defining characteristic.
Of course, it's good to celebrate specific absurdities being overturned, as is (slowly) being done in this instance.
We're just not aware of foreign dirty laundry, and as a tourist you'll not notice.
It's like when people say: Europe is so much better at xyz. When what they mean is: Finland is amazing, you know, tiny little 5m person Finland, with very little diversity and a strongly exclusionary (just try immigrating into it as a low-skill poor person) homogeneous culture, it's amazing. The same goes for much of affluent Europe: it's hyper exclusionary, elitist, and often extraordinarily racist against outsiders.
Meanwhile the US is the world's largest economy, has welcomed tens of millions of poor people from the third world over the past 40 years (and that door is still very much open), has the third largest population and is hyper diverse compared to nearly all peers in Europe. Even Canada is drastically less diverse than the US. It's far easier to manage a nation that consists of an overwhelmingly dominant single culture, there are far fewer competing interests or complexities.
A country as large and complex as the US, with that much diversity, and that many layers of government to manage it all (federal, state, local; the US state government system is gigantic in its own right), is going to be a very messy machine. There's no scenario where that isn't going to be the case, no matter where it exists.
The only reasonable comparison regardless, due to the scale, is the US to Europe broadly. The US does just fine on that comparison. Shall we talk about how nice Western Russia is? How about the last 20-30 years of Greek and Italian history? Or is the premise to only refer to the good outcomes of Europe?
What I'm saying here is: Until you've lived in a country, you probably don't know the absurdities of their own system.
-- Winston Churchill (probably not[1])
1 - more likely a generic version of this was posited by Israeli diplomat Abba Eban in the 1960s and mis-attributed to Churchill sometime in the 1980s
And most of the common items are known to the IRS... mortgage and mortgage interest, property taxes, state taxes, education credits, retirement savings.
Common items that could be known to the IRS (but aren't necessarily today)... charitable giving, medical expenses, self-employed healthcare premiums.
The IRS could, relatively easily, email/SMS/snail-mail you a pre-filled tax return with the info they do have. If nothing needs updated, you just (e-)sign and provide payment info.
That not everyone agrees that it is a waste, or that society would find a better use for it is of course going to be a matter of opinion. Which some folks are heavily incentivized to weigh in on (to the point it may be a large percentage or all of their net worth), and to others it’s $50/yr.
Sure, but that's a tiny fraction of the population. Nobody is saying the IRS should send you a fixed return. Only that they should send what they have, and if nothing needs changed, great, society is better off.
In any case, most Americans do not care about this. I'm getting tired of the "10% of taxpayers couldn't fully use this system, so let's not bother" type arguments.
Certainly stock grants end up as W-2 income, but unless you automatically sell all of them, your choice of accounting methods matters. Many people I know have at least 2, one for employment-related stock and the other for their own trading. You don't even need options to get an accounting problem.
Also, I think you have a very narrow view of who actually cares about special tax circumstances. Teachers have several special credits. So do students. So do people who save for retirement. Not to mention people who run a small business or a side hustle. This isn't a 10% situation, this is more like 30-50% in any given year, and almost nobody files a bog-standard return every year for their entire life.
It would be nice, however, if the IRS told you about all of the W-2s and 1099s they got before you had to file your taxes. The good news is that you can do this if you file for an extension on your taxes and check an obscure section of the IRS website - many accountants do it.
I'm in the UK and there's reporting systems for- employers, pension schemes, savings accounts, charities and student loans- all to avoid most people having to fill in a tax return. Something like deducting sales tax would never be passed as a law because it wouldn't be accessible to most people.
As an analogy, we can say that laundry will never be automated because the washing machine can't separate whites from colours, doesn't apply stain remover, doesn't remove the delicates when it transfers to the dryer, etc. All technically correct, but people stopped caring. People have a financial and emotional attachment to their tax loopholes though.
I’ve also underpaid and my experience was basically the same (except I had to send a check instead obviously). Edit: and the “penalty” was just modest interest on the underpayment.
- pay >=100% of your previous year's earnings
If you're underpaying by more than that, there's a high chance you're doing so on purpose. Or made a fairly egregious error (in which case, the penalty was probably assessed later upon audit).
And if you overpay, you get a refund, not nothing.
It's absolutely insane that it doesn't work that way. Precompute the taxes owed, and send that to the taxpayer. The taxpayer can then accept the IRS's computations or reject them and file their taxes like they always have.
- Lowers the burden on those who have very simple income (W-2).
- Offers enough boilerplate to start a custom return with.
- Never miss filing your return, no matter what happens to you between early February and April 15th. At worst you'll not receive as much back as you otherwise would.
Everyone thinks that they can come up with a much better tax system, and they always start with something super simple that meets their tax needs. But a simple system that meets one person's tax needs is usually not so simple, fair, or efficient for other people. And when you take all their needs into account when you redesign the system...you end up with something pretty close to what we have right now.
For example, try designing a tax system that is both fair and efficient with respect to agricultural income and tech income (this is a fairly common assignment in university tax programs). It won't be simple. And that doesn't even get into how to reconcile the tax treatment of business income with the tax treatment of individuals, or the many ways they earn and spend income, or the complexities of other types of businesses (like manufacturing, retailing, resource extraction, in-person services, etc.).
I love these armchair opportunities for college-level challenges without the admission fees, I'll bite. Step 1: disallow corporation as a legal taxable entity, private ownership only. Step 2: Subtract expenses from income. Step 3: Divide by 10. Step 4: If more than zero, send a check.
"Fair and efficient" in terms of opportunity is easy. In terms of outcome is a fool's game IMO
But what about investments and assets? A car that you bought for the company has a limited lifetime. So its value is slowly decreasing, should that be considered an expense?
What about R&D? We want to incentivize it, so that companies do more of it. Etc., etc.
As far as I can tell, all businesses would like to be able to deduct all cash outflows whenever they occur, regardless of whether it's capex or opex. Businesses depreciate across long time cycles because that's what they're forced to do.
As long as they can carry forward losses, don't all businesses want accelerated depreciation?
You can generalize this to the funding of the US government. The system obfuscates the stark reality: the US government spends resources faster than it collects them. It makes up the difference it two ways: deficit spending and off-the-books liabilities (SSA and Medicare being the biggest). Inflation is a solution to these problems.
... inflation in combination with hegemony.
My understanding is that if the US wasn't calling so many shots on the world stage, other countries would be less willing to tolerate us inflating away the US dollars they hold. But as "the global reserve" currency (for now), they have no choice but to grin and bear it, desperately try not to inflate their own money supplies to deal with the loss in value.
This is basically the truth behind MMT. Inflation actually can get you "free" money, but only because you're basically forcing it out of other economies by virtue of holding all the guns and oil.
This statement is mostly true and your point remains but there is a small percentage of Americans who have complex stuff like a Business, multiple non-W sources, investments, Itemized deductions etc. For those, IRS cannot just figure out everything themselves.
A good solution is for IRS to automate those 90% of cases and for the rest, let them file with CPAs and tools as they do now.
Source: I run a business (well 2 now with a much smaller one) and my taxes are never simple. I wouldn't be one of those Americans with straight calculated stuff. I like my deductions and options but also pay a lot to CPA to handle this shit.
Imagine building a tax collection product that attains a 99% satisfaction rating from the people that pay those taxes and then having it get killed by legalized highwaymen. Even today the top google results return dubious totally-not-funded-by-intuit sources such as "the tax foundation".
How does the government know my non-compensated travel and moving cost, wfh expenses, cash charity donations,etc...?
If people like you get the option to file directly with the IRS, fine by me so long as you don't make the rest of us pay more by losing the ability to play the game and save money.
Was that ever deductible? You don't get the home office deductions unless you're self employed.
> cash charity donations
That basically isn't deductible for anyone anymore since nobody itemizes.
Why can my bank and credit card vendors tell me "up to the second" the status of my account. I use a credit card and get an alert on my Apple Watch. The IRS could have an app that shows it in real time (say up to the day) how much tax you've paid and if they think you'll owe more or get a refund based upon what they know at that point and time and what they know from last year.
Second, why do I need to give my employer my SSN and several forms of ID? Couldn't I share some sort of token that the IRS could give them with my name and maybe a picture and all the instructions embedded on how to withhold, how much to withhold, etc. Maybe it could be a unique identifier per job. I get a picture id but they shouldn't need my SSN. It can't quite be just an opaque QR code but it could be something pretty similar.
Why is it that we can have highly advanced AI, phones, and monitoring systems but so much of what we do is as if we're living before the internet?
Obviously politics (not just a left/right divide, but even at local and budget levels) plays a role. But let's be real, street lights (and cross walk) should be algorithmic and sensor driven, stores should have trivially developed web interfaces (AI can help this just from SAM), SSN being used for identification but also not (and being terrible at it), and so much more. This is literally every industry and ESPECIALLY anything that the government does. I don't want to hear voting online, but please talk to me about DMV online (not literally to me). These things aren't flashy, and maybe that's the problem, but I hate living in both the 22nd century and the 17th at the same time (exaggeration).
This is almost certainly an immigration thing, not a tax thing. From I-9 is required to be completed by all employers. See: https://www.uscis.gov/sites/default/files/document/forms/i-9...
That particular idea might be a little bit more subversive but why does an employer need to care? Immigrant or natural born citizen, they should have some sort of tax paying relationship with the US federal government.
The southern boarder is being used mostly just for politics right now, but if we wanted to curb illegal immigration I think a big part of it would be some sort of "you're here now" stamp, some sort of criminal penalties for hiring undocumented non-residents, maybe mandatory tax withholding for everybody and then some sort of "you're allowed to work here" token from the feds.
The IRS certainly doesn't care whether you're working legally or illegally, as long as they get their share. The employer is mandated to care by immigration law, since it's against the law to hire someone who is not authorized to work in the US.
> we wanted to curb illegal immigration ... some sort of criminal penalties for hiring undocumented non-residents
This would certainly make a big impact.
> then some sort of "you're allowed to work here" token from the feds
It's called an Employement Authorization Document or EAD, issued by USCIS.
Thanks for pointing this out - looking at the responses, folks blaming congress might have a point but I'm also surprised that this thread isn't directing more of the frustration to intuit and others involved in the deliberately confusingly named "free file alliance" - an industry coalition that's nominally providing a free filing option that's hidden / limited / difficult enough to use that very few people actually do despite it being free.
The answer to your question is that initially yes, it was banned as part of a mutual MOU, but it is not anymore. The rest is in here: https://www.propublica.org/article/irs-reforms-free-file-pro...
Here's more on the subject: - This one has internal slides from intuit https://www.propublica.org/article/inside-turbotax-20-year-f... - This is a report prepared by a left think tank (pointing this out as a disclaimer) that has a lot of details from earnings calls and such: https://big.assets.huffingtonpost.com/athena/files/2023/05/1... - This one details on the influence of the "revolving door" of lobbyists taking governemnt positions on the IRS' policymaking https://www.opensecrets.org/news/2023/05/turbotax-owner-intu...
The problem is the rules are complicated. Except this is only a problem because people dont want to pay more in taxes. Virtually all the complexity comes from opportunities not to pay taxes. Its difficult because you need to figure out how much you DO owe and be sure you qualify. In order to simplify taxes you’re going to raise taxes in an uneven and non deliberate way.
And then there's the disgusting shell game that IS the entire U.S. tax system, which is the root of the whole problem.
But... didn't Congress pass some corrupt legislation years ago that made it illegal for the government to set up a tax-filing Web site? What happened to this: https://www.propublica.org/article/congress-is-about-to-ban-...