I have deductions to offset paid interest. If I hire a person to do some renovation in my home, the tax office pays half of the fee directly to them and I get a deduction as well. I sold my flat this year and will need to pay tax from the winnings, deducting costs. Almost all of this will be pre-filled.
In Iceland I had a slightly more complex tax situation. I filed jointly with my ex wife. Mortages, minimum wage deduction (i.e. you don't pay tax of the amount that is the legal minimum wage), property tax (house, cars), stocks and bonds, bank deposits and earned interest, deductions for rent compensation, was all prefilled.
Compared to this, filing my dead-simple US taxes with one deduction, filling in a two page calculation worksheet, feels like the middle ages.
No matter the complexity of the tax code, there are systems in place for all of them to evaluate and error-check tax declarations. The information is most likely all there already. All you need to have is a way to authenticate tax payers, and a front end.
And if I have a reason to think the tax authorities will not include items that lower my dues, I can always hire an accountant to file for me. I simply give them my "third-party filer access code" and sign the final return.
I get W2s, 1099s, 1099-Rs, 1099-INTs, THX-1178s, ABC-123s, etc. I have to manually copy the stuff from boxes 1-30 on each of those onto my returns. I'd file my taxes in January expect it takes weeks for all the various organizations I deal with to make those and send them through the mail.
I shouldn't have to enter any of that. The government already knows it, they'll check my return against it. When I start my return, it should be pre-filled.
It's sad that Intuit and H&R Block fight this; though I'm not surprised. I'd say the government should provide a direct copy of the 1040 form online with this boxes pre-filled. Intuit and H&R Block should make their money by making easier forms and providing guidance.
Note that "keeping the government forms complex" doesn't count as "making easier forms".
I'm not sure this is the case. IRS funding is not a static percentage of tax revenue. Sure, the tax money goes into one big pot, but IRS funding is not dependent upon the money they bring in.
Total operation cost: six thousand credits under budget. Congratulations. Be efficient, be happy.
Many Americans have a (one-sided) adversarial relationship with the IRS, thinking it is some kind of evil entity that only exists to financially destroy everyone in America.
But the IRS only exists to implement the tax code enacted by the "representatives of the people" (ha), the US Congress. When the IRS saves someone $5,000 because of a deduction that Congress specifically created as a tax expenditure, the IRS doesn't "lose" $5,000, they are simply performing the function that they are required by law to do.
To expand on your thought that people view the IRS as the evil entity. They are just misguided, the true enemy is the overly complicated tax code that is rife with abuse by many people within the IRS, Congress, and the private sector to the detriment of the majority.
I really think you misunderstand the intent and mentality of the IRS. You seem to be projecting a capitalist objective to their actions with the motive of obtaining the maximum amount of money. The IRS does not have any direct incentives for bringing in more money.
If you are audited and the auditor finds you missed deductions, they will tell you. I would hope that information should be enough force a change in your perspective.
For capital gains vs losses, when you trade with stock, you however have to do it "manually" (not pre-filled). (For Swedes: K4 I think is mandatory but can easily be computed by your portfolia broker such as Avanza).
I think today the website that the Swedish tax office provides for you to actually fill in and confirm your tax statements is like a free, online version of what previous generations commercial tax software was about. Every year it includes yet another bit of functionality that simplifies it or handles a new corner case. For the majority it has been very simple for quite some years - send an SMS to confirm the pre-printed statement for example. But if you trade with shares, or if you have a business, or for example own forest (which automatically makes you a business), it is not as simple yet.
The swedish tax authority also incentivizes people to e-file: if you e-file, you'll get your tax return before midsummer, which in Sweden is a BIG holiday, when most people kick off their summer vacation. Even if you accept the defaults, but file on paper, you'll get your money in August instead of June.
I think lots of people will see your point and still believe that a system where the IRS tells you what it thinks is true would be an improvement over the current system (somehow, pre-filled forms, whatever).
Source: http://taxfoundation.org/article/most-americans-dont-itemize...
To give a sense of how big a problem this is, here in the UK a report came out last year that pointed to £12.6B wasted. In Portugal, waste is around €2B if our math is right.
(Shameless plug): At http://gosimpletax.com we're actually helping taxpayers save as much as possible with as little friction as possible. We're currently operating in the UK & Portugal and would be great to have your feedback if you're in any of these countries.
Regarding your site: The "Learn more" isn't a link. Why not? I don't want to go to your blog, I want a clear statement of what you provide without registering first. I'm not going to register without a very clear idea of what you offer. That I can register for free makes no difference to me when there's no clear statement to explain what I get if I sign up for free, given that the service costs money to use.
Looking at your "pricing" page, I see fear-mongering. "Hours wasted"? Only if your tax affairs are terribly complicated. "Painful and confusing forms"? Only if you failed basic English and arithmetic. I find the UK self assessment (having dealt with the Norwegian one before Norway went "pre-filled"/online) very well designed. "No guidance or help"? The HMRC guides and website are actually very good.
You seem to be positioning yourself for people with lots of money (to be able to save on average 2000,-, given that the average British taxpayer pays somewhere below 4k in income tax and 2.5k NI, and very few pays more than 10k-15k...), who are confused and clueless about the tax system, yet willing to sign up to an online service rather than get face to face time with an accountant...
If that's your intended market, and that actually brings the revenues for you, then your site is well targeted...
Sold!
Go pre-filling!
http://www.vero.fi/download/noname/{302EA05D-2530-4021-8931-...
And instructions here:
http://www.vero.fi/en-US/Precise_information/Forms/Tax_retur...
As a tiny nitpick, I think that, in this case, it is the absolute difference `deduction - price`, not the relative difference, that matters: given that I have the money available, I'm happier to spend $2000 to get back $2100 than I am to spend $10 to get back $11.
In the US, you have two sides of this: (1) the IRS, and (2) CPAs, CPA firms, and software firms like Intuit who profit from helping customers file taxes. The question always is, "Why would I pay someone to file my taxes?" The answer is, "If they can save you more than their fee, it's worth it." In other words, if they charge $100 but save you $101 in "tax due", you have a net "win" of $1 thus you should hire a professional. Why does this work?
For the CPAs, CPA firms, and software firms like Intuit, you have a professional who is taking your money and offers a reasonable expectation that, as a result of using their software, you will save more money than you pay in fees because they will help you find deductions and tax credits that you would've been hard pressed to find yourself. These companies compete in a free market for your money, both with other software companies and with CPAs/CPA firms. The "winner" (for a particular user/client) is the one who (a) has the best reputation of not getting you audited, and (b) who gets you the best price:deduction ratio.
On the other hand, you have a government entity whose sole charge is to collect revenue. Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses (just to pick one example)? Maybe, maybe not. The question is legit though and thus causes us all to say, "Wait a minute... maybe, since there is a financial incentive for them not to show me deductions, that they will hide some of that (or make finding it as complex as the tax code)."
If Intuit/et al help you save $5000 in taxes this year by helping you deduct all that you can, Intuit/et al do not make one penny more - that money simply stays in your pocket. And you probably smile, buy a new car/vacation/etc. And you certainly tell your friends, "You should use Intuit!" If the IRS helps you save $5000 that you would have otherwise paid (b/c you did not fully deduct all that you could have), then the IRS loses $5000. That in and of itself highlights the problem. Do you trust the IRS to say, "It's okay if we lose $5000 - you're happy, right? That's what matters!"? Of course not. Having the separation works in the US for this clear conflict of interest.
Again - I don't know the tax code of the Euro countries but I'd be interested to hear if they have a similar setup and how they work around this. It's logical to think that the IRS could invest $500 million building such a system and then no one uses it because paying $30 to Intuit/etc results in a higher refund for the above reasons...