IRS tests free e-filing system that could compete with tax prep giants

Re:IRS tests free e-filing system that could compete with ta... by sgerenser on Monday May 15, 2023 @04:39PM (#35954171)

I’d be happy with a system like this, as long as they made it very clear WHEN you should do it the old way. For example:

“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.)

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Re:IRS tests free e-filing system that could compete with ta... by jjnoakes on Monday May 15, 2023 @07:28PM (#35955927)

I don't understand why the RSU basis adjustment isn't reported automatically. All of the information is available without my involvement...

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Re:IRS tests free e-filing system that could compete with ta... by patrick451 on Monday May 15, 2023 @07:51PM (#35956128)

I worry about be one of those. what is it about RSU compensation that is commonly misunderstood?

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Re:IRS tests free e-filing system that could compete with ta... by sgerenser on Monday May 15, 2023 @08:21PM (#35956337)

It’s often the case that you sell a block of RSU stock, and the broker reports the entire sale as a capital gain (e.g. if you sell $50K, then it shows up as a $50K capital gain on your broker’s 1099). But in reality, the gain should only be the difference between the price it was when it showed up in your account and when you sold it (which can actually be a loss), because the basis is already included in your W-2 as earned income.

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Re:IRS tests free e-filing system that could compete with ta... by unmole on Tuesday May 16, 2023 @04:08AM (#35958913)

E-Trade and Fidelity report gains correctly. Which broker doesn't?

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Re:IRS tests free e-filing system that could compete with ta... by sgerenser on Tuesday May 16, 2023 @06:50AM (#35959997)

My recollection is they report it on a “supplemental information” form, not directly on the 1099. If you just do a naive import in TurboTax or similar, you’ll overpay your taxes by thousands.

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Re:IRS tests free e-filing system that could compete with ta... by firstlink on Monday May 15, 2023 @08:22PM (#35956349)

The IRS requires your broker to report a different cost basis to you than you are entitled to use. It is government-mandated disinformation, not a misunderstanding.

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Re:IRS tests free e-filing system that could compete with ta... by flagrant_taco on Monday May 15, 2023 @09:38PM (#35956824)

Simplifying the tax code would go a long way. We don't need to go all the way towards some flat consumption tax, simply eliminating tax deductions, credits, and write-offs would make calculating a person's tax burden much easier.

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Re:IRS tests free e-filing system that could compete with ta... by pfannkuchen on Tuesday May 16, 2023 @02:04AM (#35958210)

Don’t deductions, credits, etc allow the government to incentivize citizens to behave in certain ways? Are you implying that it shouldn’t be in the business of incentivizing behavior?

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Re:IRS tests free e-filing system that could compete with ta... by flagrant_taco on Tuesday May 16, 2023 @09:39AM (#35961742)

Well yes, I would absolutely say the federal government shouldn't be in the business of manipulating markets and consumer behavior. That was never part of our government design in the first place, unless you consider dealing with interstate commerce disputes to fall under that umbrella.

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?

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