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H&R Block and Intuit Lobby Against Free and Simple Tax Filing (2017) (propublica.org)
509 points by aaronbrethorst on Jan 21, 2019 | hide | past | favorite | 190 comments

There's another bad-faith actor in this fight to make you burn your time preparing tedious tax bullshit for your personal taxes.

It's Grover Norquist: https://www.huffingtonpost.com/grover-norquist/grover-norqui...

To give these folks something they don't deserve (an assumption of good faith, non-cynicism, benefit of the doubt, etc): they think "letting" the IRS do folks' taxes will lead to more taxes and poor, defenseless taxpayers simply won't have the courage to challenge a "bill" from the IRS.

Simple fix: let folks contest whatever final "pay this number and you're done" amount they get invoiced for & sear that into federal law. But you probably won't ever hear Grover and all the other looney tunes ever mention that.

They don't want easy, hassle-free IRS filing. It's an opportunity for people to be pissed (who wants to pay money for the government)

There's also talk about your taxes fitting on a postcard and that, as usual from the scumbags nominally in charge of our country, is bullshit too because it just conceals a ton of paperwork (source: https://www.accountingtoday.com/opinion/the-postcard-tax-ret...)

IIRC: In Norway, the government computes your taxes for you and you can approve of their work by text messaging.

In the US, taxes are complexified to hide welfare for the rich[0] and put a burden on the non-rich people that they must fill out complicated tax forms correctly "or else." 0: This isn't idle rhetoric: That's what campaign financing buys: favorable treatment and tax law chicanery. Does anyone think it's right billionaires should pay less taxes than their secretaries?

The Icelandic government also pre-computes taxes. It takes me maybe five minutes to do taxes in Iceland and I don't even speak Icelandic.

Multiply that several times to do my US taxes and add some extra fees on top because I use tax prep software.

The really funny bit is I never owe anything in the US since I solely live and operate in Iceland so all that's covered by my Icelandic taxes, but as a US citizen I'm required to file regardless.

I know it's possible for billionaires to pay a lower effective tax rate (the percentage) than a secretary.

I wish we had raw data showing they paid less in the dollar amount. I believe this happens, I just wish we had a good idea of how common it is.

A billionaire paying a lower dollar amount in taxes than a secretary? Yes, I would also like to see data on that, because I doubt it happens. :P

The scenario does arise when we're talking about percentages, because billionaires make much of their wealth from capital gains and the like. But it's hard for me to imagine how the actual dollar amount paid could be lower.

I should have phrased this another way: I believe fraud happens.

> In Norway, the government computes your taxes for you and you can approve of their work by text messaging.

If you agree with the numbers you don't do anything at all.

In Sweden you have to reply if you agree as well, because otherwise they could never convict someone of tax fraud if the pre-computed data is missing some of your income, for example. (Well, maybe they could convict you, but it would be hard to defend that morally when they didn't even force you to acknowledge the numbers.)

Why would that be true? Law: "Thou shalt inform the government about finances that affect tax, or else be heavily fined or put in prison when we find out." No need to have this information duty tied up to the tax return.

The IRS is working off of incomplete information about your income and eligibility for deductions. There is no way they can fill out a form under the current tax regime.

They can for the majority of Americans. Congress also has the ability to mandate more reporting, and more reporting from more agencies would pretty much have to be part of a 'simple tax return' bill.

The point never was "they do prefect tax returns for everyone." Everyone knows this isn't feasible.

The point is, they'll simply send you (web) forms prefilled with the information they already have, you go in and add information they don't have if something is missing. So even if they have incomplete information, you'll still benefit greatly. If youre feeling really upset about the whole concept, you can tbrow away everything they prefilled out and download a blank form and do it yourself from scratch and that would be perfectly fine too.

If you have a W-2 and no other income/expenses they can get pretty close. The idea of simple taxes almost always includes the ability to still do them in detail if you'd like. The idea is that the government would send you a bill (or a refund) and you can pay it (or accept it) and be done or reject it and do your own taxes like you currently do.

30% of people choose to itemize, mainly people who own real property. And out of those who don’t, many still can claim credits for child care expenses, health care expenses, and education expenses.

If the default bill sent by the IRS wouldn’t include all those things, then the result would be exactly what the Norquists of the world fear: a de facto tax increase.

Note also that the H&R Block/Intuit software are free for 70% households. The remaining households are the higher income ones that would most likely itemize anyway.

If you think you pay to much, file your own return. For majority of people it's just a waste of time, and I think IRS would nail the numbers pretty accurately for at least 60-80% of folks.

I think your assumption just isn’t true. About 20% of filers use the mortgage interest deduction, which the IRS has no idea about. Then there is a ton of other stuff. For example, the IRS doesn’t even automatically know how many dependents you have. If you get divorced and one parent gets custody, the IRS has no idea. There is no federal tracking of who lives with who. The IRS also has no idea whether it should apply married rates or single rates. Again, there is no tracking of marriages at the federal level.

If you only have W-2 income, are single, have no children, and aren’t eligible for any education credits, then the IRS can probably do a good job estimating your taxes. But that probably describes 20% of folks. If the IRS sent a bill to the other 80% without those deductions, it would be an overestimate. And sure, those folks could file their own returns, but many would not. That would result in a de facto tax increase, which is exactly what Norquist doesn’t want.

Doesn't this imply that simplifying/automating the return harms no one (folks can still file individually if they choose), while helping those who would otherwise have to take time or invest money in tax prep? How is this not an un-alloyed good?

It would hurt a lot of people if they end up paying more taxes than they owe because they don't realize they can pay less by filing their own return. It can be scary receiving a "bill" from the government, and many people might not try to contest the IRS's calculation.

For automated tax filing to be workable, it has to at least be accurate for nearly everyone. If it overstates taxes for most people, I think that's a big problem. In the U.S., I don't think you can achieve that level of accuracy without either changing the tax code, or having the federal government track a lot more information about people than it currently does. I owe the IRS money every year because my wife and I are subject to the marriage penalty. You can't calculate our correct taxes without knowing we are married to each other. And the IRS doesn't know that unless I put it on my returns.

Note that many countries track their citizens much more closely than does the U.S. For example, in Germany, you have to register with a Registration Office within one week whenever you move between cities.

Thanks for the dialogue! Just to try to simplify things, it sounds like you are worried about tax filing being regressive - causing under-privileged, low-income, and other disadvantaged people to pay more taxes than they owe. Isn't it true, though, that tax filings typically increase in complexity alongside income?

Things like marriage records and children aren't currently kept private such that the Child Tax Credit and Joint Filing rules couldn't be automatically applied. It's not immediately apparent to me that vulnerable populations would necessarily be at a disadvantage.

(Basically, I figure that if I'm high-income, it's my problem to sort out my taxes to my greatest advantage, but it should be easy for folks who don't have the luxury of time or money.)

We're not talking about "high-income" people. The biggest tax benefit for low-income people is the Earned Income Tax credit, which is calculated based on number of dependent children. Then there are all sorts of middle-class credits and deductions even for people who do not itemize: child credits, child care credits, child care deductions, teaching supply deductions, etc. And large numbers of middle class people use the mortgage interest deduction.

And even relatively high income people ($100,000+, which might just be a household of two teachers) might be hesitant to dispute a "bill" sent by the IRS.

As to applying these deductions automatically: the IRS simply lacks the information. There is simply no database (federal or state) tracking which children live with which adults (the credits are computed based on dependent children, not biological or legal children). There is no federal database of marriages, and while there are marriage certificates at the state level, it's unclear whether there are any easily accessible databases of married couples. There are no databases tracking which daycare you send your children to, what you spend in college tuition, etc.

Currently people seeking the EITC and Mortgage Interest Deduction have to file. This wouldn't change that. Nor is there a prohibition against the IRS sending a nice note encouraging folks to file if they want to take advantage of these benefits. It doesn't have to look like a bill.

We may just disagree on the size of the burden or the ability to ameliorate risks/downsides, but I'm having a hard time imagining that they cannot be addressed with _implementation_ choices on a pre-filed return.

I feel like this is important because it seems like we agree on the fundamentals: that the tax code should advantage the vulnerable, that filing should be as easy as possible, and that taxpayers should be able to discover and utilize all breaks available to them. The status quo does not seem _nearly_ good enough at these things to be worth preserving.

Most of the large deductions the government already knows about. If all taxes were was itemizing the deductions they missed that would be great.

This is going to go way down this year with higher standard deduction.

That would be reason #122132098 to get rid of the mortgage interest deduction.

Not anymore. The primary effect of the Trump tax bill was in fact to massively increase the number of people who will claim the standard deduction, due in part to a large increase in the deduction itself as well as the introduction of the SALT deduction cap.

How would you even know if it is right? This is such an obvious fox guarding the henhouse situation. The government would have a clear incentive to not offer you the deductions you are eligible for, and taxes are complex, so it would be easy to hide the deductions. It would only be a matter of time before the perverse incentives of the government would take over the process.

The main result of this would be the government stealing from poor and middle class people who should've spent less than $100 on a 3rd party tax preparer that is incentivized to act in the interest of the taxee.

The whole idea of the government stealing from people makes no sense to me. You live in a democracy, the people choose their government and it does what it's elected to do. If the government starts actively stealing money from its people, the problem isn't the way in which you file your taxes. The problem is that the government brought by your democracy isn't working as intended.

For what it's worth, in the Netherlands it takes most people 5 to 10 minutes to flip through an app that has all your tax info filled in already. If you need to add anything that isn't already filled in, you get every chance to do so. It doesn't stop you from getting an accountant to do it for you either, if you'd prefer.

> How would you even know if it is right?

Because it's still the same tax system you had before they made it easier by filling it out for you already. It doesn't get automatically filed, you still have to check it yourself and approve it.

It doesn't make any sense to compare the Netherlands to the US on any metric. The Netherlands doesn't have the population or gdp of just Texas or California by themselves.

The sheer magnitude of the difference between the US and the Netherlands is crazy, and it is like comparing a house to a town.

Communism works on a small scale, the bigger the scale, the less you can just trust everyone is doing the right thing. The bureaucracy of the IRS has every incentive to maximize tax revenue, and that is what they will eventually do.

I see this sort of sentiment repeated over and over in different contexts both here and on Quora; but the poster never explains why scale is relevant.

Most people in both the US and the Netherlands work for one employer, own or rent one house, have a few credit cards, and a car. In most cases they have no complicated investments or debts. So how does the simple fact that one population is larger than the other have any effect?

In a larger community you simply need proportionally more computer power to process proportionally more data, but the data types and business rules are the same for all the individuals.

It isn't about the person. It is about the scale of government.

Running a small business is not the same as a large business.

Ok, have you ever played civilization? In civilization corruption goes up as you build more cities and the farther those cities are from the capital. That is to reflect the reality of managing larger and larger groups of people.

Solutions that can work on the state level don't necessarily work on the federal level. The Netherlands are basically the size of a state with an extremely homogeneous population, and a far less cut throat culture than the US.

In small groups of 10-20 people communism works very well. It doesn't work in bigger groups though. The bigger the group the more perverse incentives are acted upon.

Even beyond that though the US is a cut throat competitive culture. Eventually the person in charge of treasury will want to show that the democrats/republicans before them did a bad job of collecting tax revenue. They will realize by not offering deductions a lot of people will just pay and this will end up with them looking like they did a really good job. Or maybe it will be someone lower on the totem pole that wants to move up and can show that they did a better job at collecting tax revenue.

Also, solutions that work in the US probably won't work in China or India because the population is so much larger that US solutions won't scale properly.

Indian tax system largely resembles British and Brazilian systems. Chinese tax system is simpler, but they compensate by tighter population control (which is unfavorable in the US).

True, the size difference would mean the time/effort saved would be tremendous. I detest the hours and hours of my life I've given to the IRS simply because they are stuck in a time warp. My UK tax return took me under 2 hours last night (and only because they keep getting the student loan wrong - but it's simple to correct). But yes, it does require investing in a suitable computer system. I seem to be giving them the benefit of the doubt and attributing it to an infrastructure issue but that's probably not the real problem, is it.

Bizarre to see this type of comment on a technology-focused site. Turbo Tax can figure it out, but the government can’t?

Turbo Tax is incentivized to maximize your savings. The government is incentivized to do the opposite.

It's not that they can't. It's that eventually someone will be in charge that will decide they shouldn't.

This might be true if you view the government as adversarial. If you view the government as a service provider for citizens I don’t think it holds water.

Your statement could easily be flipped. Turbo Tax is incentivized to keep the tax code as complex as possible, the government is incentivized to do the opposite.

Most filers in the US have a single income from a single employer that is reported on a W2, and then take the standard deduction. And a lot after that have maybe a bit of income via 1099 forms and a mortgage deduction. All of those the government already has.

If they filled out a return with all that info, it would take just a couple of minutes to review it if it were already pre-filled out.

And worst case, you have other income and deductions, such that you've saved a bunch of time entering information the government already knows.

If anything, it would be the upper middle class who would lose out because they would just be lazy and click "ok" instead of doing their own taxes.

It works fine in many other countries (UK, Norway, etc.).

I agree with Norquist. You make things too easy, and people will just let it happen.

As someone who owns a business and has to make quarterly tax payments, paying taxes is painful. I know how much it costs me every time I write a check and I am very reticent to vote for any politician that thinks we should raise those taxes.

On the flip side, I have many friends whose taxes are just pulled out every paycheck. And at the end of the year, they get a tax refund. They act like the government is giving them money! Many don't even seem to realize that all they are getting is a repayment for an interest free loan they have been giving to one of the largest and wealthiest organization/government in the world.

I understand and agree that taxes are important, but if we make it too easy, we make people complacent and the next thing you know, we will wake up with a 75% tax rate.

This is the same reason I disagree with adding the tax in on product prices. People in other countries that do this don't realize how much of the price is going towards taxes - and to keep a government in check, information is key.

Many western countries have very simple or near-automatic tax systems and I would argue that the tax you pay is actually much more visible to residents of such countries.

In the UK, for example, most employees do not have to file a tax return. The HMRC files it for them and sends them a letter every tax year with their calculation. It even comes with a nice chart to see how much tax you've paid and where it went to (https://secure.i.telegraph.co.uk/multimedia/archive/02871/ta...).

The tax brackets are also very straightfoward and everyone knows which bracket they are in. The same is true with tax on product prices. Everyone knows the tax rate on items because it's a simple number and there's a lot of public discussion whenever politicians decide on reducing/increasing it. If you ask anyone in the UK (or any other country other than the US with VAT) what the current VAT rate is, they will be able to tell you. Good luck getting an answer to such a question from someone in the US; you just pay what the cashier tells you to as VAT depends on so many factors.

Technically, there is no VAT in the US. There is sales tax, and it can vary from city to city. I guess that is why it is not included in the price by default.

Yep; sales tax, VAT, GST, they are all pretty much the same thing. And the fact that in the US they vary by location was what I was alluding to.

> I guess that is why it is not included in the price by default

I hear that argument a lot but it does not really make sense to me. The place of purchase knowns what their tax rate is in their current location because the cash register has that information (and I assume this sales tax does not change very frequently?). So why not print out or display the prices with that tax included?

No, they are not the same thing. You pay VAT on the value added at each part of the process. So a retailer pays VAT to their wholesaler, unlike American state sales tax systems.

Yeah, but the retailer then deducts that VAT from the amount charged to the customer, so in the end it's the same, only the final customer pays VAT.

No. VAT is across the supply chain, provided they are all VAT registered. So as a business you only pay The net VAT between sales and purchases.

Er, that's what I said/meant? This is unlike US sales tax, which is only applied at the end, and on the entire value of the sale, not the value added.

Edit: Ok I see, the "you" I had in my post was confusing. VAT is charged on the value added at each point of the chain, again unlike sales/use tax.

Which is why I said 'pretty much'. In this discussion they can be regarded as the same thing.

That's fine for a local store, but what about a regional chain? Or even a national chain? What price to they advertise? Or do they need to do different advertising per tax district? (which could be city, county and/or state)

Do as the rest of the world does and include the tax in the price. Margins will obviously change between stores in different tax districts but arguably that phenomenon is already priced in today's profits: A store on the California to Oregon border has to price in the fact that their customer base could buy the same product with zero sales tax across the border.

McDonald's is offering a 99₵ burger as part of a nation wide promotion. Where I live (Florida) it's $1.06 with tax. In Oregon, it would be 99₵ (no sales tax). In North Carolina, it's $1.03 except Ashville, North Carolina has a 7% tax rate so it would be $1.07 there. What price does McDonald's advertise for their promotion?


In Europe they have a 1 euro menu regardless of what country the burger was sold in (countries have different VAT rates). Some advertising is even shared between smaller countries that speak the same languages.

> What price does McDonald's advertise for their promotion?

I really don't care, it's their problem not mine. All I want is for stores, fast food places, etc., to be honest about the price I am to pay.

In Europe, including the UK, it is illegal to advertise only tax-exclusive prices to end customers.

This is a minor annoyance only to foreigners here on vacation. You quickly adjust to not having the tax included and it is something people in the US don't even consider unless they've traveled abroad. The system with the taxes included in the advertised price only really works when you have a national tax with no other taxes involved. No state or city will ever go for that and it really isn't bothering anyone since everyone is used to the system already.

If you want to rail against hidden charges complain about the restaurant welfare system that allows employers to legally under pay and fire employees for not making the majority of their money from tips

Dragging this back towards a HN topic, years back this caused a fight for PC computers stores. They argued that their main customers were businesses and so advertising prices "before tax" was expected by the trade customers. Others argued really most customers were hobbyists and so would pay the VAT price.

Obviously it's beneficial to be able to advertise the lower price, these days assembling your own PC from components must be much less common than it was back then so I imagine even if the decision went in their favour back then that's changed since.

In a world with tax-included prices, obviously they would advertise the local price in local media. In national media, who cares what they do? They could put "$0.99 (prices may vary)" or whatever they choose. The headache of an advertiser should be the least of your concerns when dictating consumer law. (And yes, it is law in many countries. Consumer protection laws say that consumer pricing must include VAT.)

>Many western countries have very simple or near-automatic tax systems and I would argue that the tax you pay is actually much more visible to residents of such countries.

I think if you want to counter the poster, you need to give an example of a western country that has simple/automatic tax systems and have a lower tax rate than the US.

His/her complaint is primarily that if a system is too simple, it's much easier to raise taxes. You're giving exactly the example he/she is looking for - a country where it's easy and the tax is higher.

I believe that the income tax paid in California is higher than in the UK for the median household.

Now correct me if I am wrong, I have only filed tax in the US for a single tax year so I might be missing something. But for the median household income in California of around $66,529, you would be paying an effective tax rate of around 24%. (using this website: https://smartasset.com/taxes/california-tax-calculator#wWyPf...). And yes, I realize this is excluding deductions.

In the UK, the median household income is £27,300 and you would have an effective tax rate of around 19.6% (https://www.uktaxcalculators.co.uk/), also excluding deductions.

Of course higher salaries attract higher taxes in the UK, but if the above is correct, then the average person should be paying less tax in the UK than in California.

not sure what point you are trying to make here. you single out one of the highest income states in the US and say the median household would pay less tax than the median family in the whole UK. sure, but families that made the equivalent of $66,529 in pounds (£51,699 at current exchange rate) would pay about 27% in taxes according to your calculator with the default settings. not sure what conclusion I'm supposed to draw from this.

>And yes, I realize this is excluding deductions.

That's a big disclaimer.

I'm not going to argue for a hypothetical. I actually ran the numbers once. My state's income tax rate is high, but lower than CA's. For my income (above median), one year I actually calculated my tax for CA (as in actually got the forms and filled them out).[0] Despite the lower tax rate, the my state's income tax was higher. The reason? CA has a lot more deductions for people of my income or lower. CA can get you in all kinds of other taxes, but not income tax.

Also, just checked. Other than the deductions, for single people, you hit the second highest bracket at a little over $8K in my state. To get to that same bracket in CA, you have to earn over $50K. CA tax rates are low for lower income people.

[0] It's a long story why I did this - it was not fun at all.

Of course, it's very difficult to directly compare such things for a single individual, never mind the median individual (you'd have to account for the fact that the UK taxes include medical insurance as well as a pension on one side and lower sales tax in California on the other side, and so on...).

My point was that taxes in countries where the tax return is automatically performed by the government aren't necessarily higher than in parts of the US. In other words, OP's comment above was nothing more than FUD.

> I'm not going to argue for a hypothetical.

Huh? But you said:

> [their] complaint is primarily that if a system is too simple, it's much easier to raise taxes.

which sounds pretty hypothetical to me! In fact this whole discussion is hypothetical!

> The reason? CA has a lot more deductions for people of my income or lower. CA can get you in all kinds of other taxes, but not income tax

To me, this sounds like a pretty good justification for a simpler tax system ...

Chile has both lower taxes and automatic taxation.

In 2019 they will even have automatic taxation for small businesses based on the statistical average for the industry and various signals.

So basically taxation based on machine learning.

You can take it or leave it - it's up to you.

And this also shows that simpler taxation and higher taxation has no relation to each other.

> you need to give an example of a western country that has simple/automatic tax systems and have a lower tax rate than the US.

How is a higher tax rate related to the government's ability to provide simple/automated tax returns?

Oh, right, it's not.

According to the Wikipedia page on VAT in the UK[1], while there are two rates and presumably everyone there knows them, there is a long arbitrary list of which item falls into the 20%, 5%, or 0% category. For example, it says "Biscuits (chocolate covered only)" are 20%, but "Smoking cessation products" are 5%.

Sales tax where I am has similar characteristics - I think most people are perfectly well aware (as I am) that it is generally 8%, but I couldn't tell you exactly which items are exempt, or what the modification is for prepared food or whatever.

So I think you are exaggerating (as people like to do) the difference between the US and the UK.


Completely disagree that it's an exaggeration. If I walk into a supermarket in the UK, it doesn't matter if I know that certain goods are exempt or 5%, because the amount im going to pay is already considered on the sticker.

There's no excuse for the sticker price not matching in the US.

Because it is listed separately, you know which rate you're paying. Isn't it good to have more information?

I am not 100% sure I get what you meant so I apologise if I misunderstood. But are you under the impression that the tax is not listed on the receipt in other countries? (it is)

My receipts show the taxes im paying. I don't think I've ever seen the tax listed separately on the sticker in the US, so ive actually got less information. Without knowing the tax rate of the area I'm in for the goods in advance, I don't know how much I'm paying

> Many don't even seem to realize that all they are getting is a repayment for an interest free loan they have been giving to one of the largest and wealthiest organization/government in the world.

Ah, hmm, yes, they just don't realize. Those poor benighted fools.

Or maybe? Maybe they don't care. Take me, for example. I don't care. I've thought about it. I could spend more time screwing with my taxes to optimize my returns, or even go to no withholding whatsoever. Or I could enjoy my finite time on this planet, 'cause the amount of money we're talking about is marginal for me and I do pretty well for myself.

(And to make one thing very clear: the downright fearmongering about a "75% tax rate" are just that and are not worthy of further address. Even were there a salient point in the bottom of this well, this isn't it.)

the downright fearmongering about a "75% tax rate"

If everybody just paid the taxes they were supposed to, then we wouldn't need high taxes.

Oh really, downright fearmongering? Do we need to have a little history lesson?

> I understand and agree that taxes are important, but if we make it too easy, we make people complacent and the next thing you know, we will wake up with a 75% tax rate.

This is simply not true.

Definitely not true. Even people that have no idea what the rate is will notice if you increase it, because their take home pay will suddenly drop.

The scenarios you suggest happening if taxes are easy to file don’t have to be the consequence. It’s a possible consequence but overall I don’t think it would happen the way you suggest. I think it highly unlikely that it would lead to what you fear.

This is a great example of why the way in which politicians raise money and how they are lobbied is corruptive.

This is a case where quite easily 80% of their constituency would applaud the change. But a minor set of companies with an ability to contribute large sums of money (for or against) is able to influence something like this passing.

Citizens United and similar SCOTUS cases have made it even that much more unlikely that the situation will be improved any time soon.

"You sit down, review a prefilled filing from the government. If it’s accurate, you sign it. If it’s not, you fix it or ignore it altogether and prepare your return yourself. It’s your choice. You might not have to pay for an accountant, or fiddle for hours with complex software. It could all be over in minutes."

This is exactly how it works in Chile...since 2005!

Something that is not clear to me - suppose that the government in one of these countries that makes it easy to file your taxes doesn't do it correctly and you sign it and file it. Who is liable?

If the taxpayer can relieve their obligation by filing a government provided return, with the option to correct it, that sounds great. But if the onus is on the taxpayer to correct mistakes by the government, then all that is really happening is free government provided tax prep which may have a value of zero or less.

Ugh. Last year HMRC (the UK's equivalent of the IRS) sent me half a dozen cheques correcting mistakes in taxes. My employer changed some details in their compensation package and messed up somewhere.

It's automatic. Some system or human reviewer goes "Hey, this item is wrong" and then the machine re-calculates that and issues a new statement, but it also queues up any subsequent re-calculates and those may take a few days extra.

If they owe you money you get either a direct credit or cheque, if you owe them a small amount it's added to your next year of taxes, if you somehow owe a large amount you have to arrange how you'll pay.

For me the goal is to minimise paperwork, not minimise amount paid. I have money, I don't want to spend time doing paperwork (and no I don't want to hire somebody else to do it). So the US system would be intolerable.

I still remember receiving a tax refund for my holiday work in first year of uni, the tax code had been wrong. It arrived some 4 years later when I was in full time employment.

I mean, it was a cheer-bringing cheque - but at the same time I found the timing somewhat sub-optimal...

In the UK you don’t have to sign anything unless you are going your own taxes. If you are charged too much you can claim a refund, not sure if there is a time limit but if so I think it’s pretty long. The revenue service is audited and there are independent consumer protection groups that can help people who need it.

Also the online tax forms are actually really good. The government has a web team that has radically simplified and unified all sorts of government web forms and made a huge difference.

Wrong thread, but so far as I’m aware, we don’t pay 75% tax in the UK.

That sounds reasonable. So if you are charged too little, the worst that can happen is they send you another bill?

It would have to be by a lot.

If they realise you owe say £500 they just send you a new calculation saying here's why you owe £500, we wouldn't tax X amount of your income by law, so, Y = X - £500 now we won't tax the first Y next year.

Pay As You Earn means most ordinary workers in the UK have all their income taxes collected by their employer automatically. The employer doesn't know why you pay the taxes you do, they just get told a code signifying how much to charge.

There's a cute trick to let HMRC verify that payroll accounting is legit without snooping personal bank details of people who aren't suspected of tax fraud. Basically there is a field with a blinded cryptographic signature in it in electronic payroll feeds, all the signatures should tie up to tax records without revealing who exactly was paid how much.

> If you are charged too much you can claim a refund

For me, it's always been automatic. But that might be because I've been under PAYE (via an umbrella company) rather than anything more esoteric that requires me to submit a tax return.

The actor most likely to make mistakes is the one reporting the numbers in the first place, i.e. the employer. And yes they would be held accountable for that just as the government, could you show that the numbers your employer reported is not what shows up on your tax report. This is how it’s like in many European countries and it pretty much just works.

In Norway, you these days don't even need to sign if you have nothing to amend (we started with electronic delivery many years ago, then SMS signing if you had nothing to change, up to some years ago when not doing anything is an implicit signing of the prefilled tax return). If you do change anything, what you sign is something akin to "These numbers and information are given to the best of my abilities". AFAIK, you basically have 10 years to correct mistakes, and this goes both ways.

Currently you're responsible for mistakes you make in your tax returns anyway, so not much would really change, except that it would be a lot easier and less stressful for the vast majority of people. Edge cases get treated like edge cases.


They don’t have rich people or corporations in Chile?

Not to be pedantic, but... both the US and Chile are representative democratic republics, not democracies.

Neither is an oligarchy, either. And while corporations and individuals of means have a disproportionate amount of influence in American politics, Chile is not immune from the same phenomenon; it just takes a different form.

But I agree with you in spirit - wealth should not be a factor in how much influence someone has in a democratic system.

This is not what anyone has meant by the term "democracy" for a thousand years.

To back you up, I can confirm that people who spend their time thinking a lot about this stuff (political scientists and those in related fields) spend zero time quibbling over the use of the term "democracy" as it's commonly used, and are likely to eye-roll and attempt to disengage from conversation should someone push their glasses up their nose and "well, actually..." the issue. In most contexts they use democracy as an umbrella term, the same way everyone else does. Doing otherwise marks one as an outsider to the field, or a novice—any in teaching positions get to correct plenty of "clever" freshmen on the issue every year.

I am an outsider to the field. I'll just disengage entirely from political discussion and leave it to the experts.

Yes, this is a failing of Democracy as it currently works in the United States, because the money of large corporations has more say that the will of the people.

Unfortunately, it's true of so many aspects of American society right now that are in desperate need of reform or rebuild - education, health, roads, public transport, safety, just to name a few.

There are so many hundreds of billions of private profits tied up in these things they will never be allowed to improve.

As far as I am aware this is a failing of representational democracy everywhere. It might be less or more pronounced in different countries or different areas, but it is endemic to democracy.

Or really, if you think of it, to any type of government. In every regime financial power translates to the ability to influence laws and government. Even direct democracies such as ancient athens were prone to the rich influencing or outright buying other voters

If your elected officials refuse to accept corporate PAC money, thank them.

If your elected officials accept corporate PAC money, tell them to cut it out because you'll be supporting a primary challenger who refuses all corporate PAC donations...and then support a primary challenger who refuses all corporate PAC donations.

Having elected officials who reject all corporate PAC money isn't a panacea all on its own, but it's a great start.

How would a candidate accept pac money since they're currently bared from doing so or (overtly) coordinating.

Candidates accept PAC money all the time. It has nothing to do with coordinating. These are donations to a campaign. Here's a list: https://www.opensecrets.org/political-action-committees-pacs...

See how Kevin McCarthy, House Minority Leader, raked in almost $8mm in the last election cycle? That's because he'd have been Speaker if Republicans had held the House. Those $8mm in donations would've bought companies like Goldman Sachs, MetLife, Altria, and others plenty of phone calls with McCarthy. https://www.opensecrets.org/members-of-congress/contributors...

It is a great start. It also shouldn’t be a partisan issue. Vote for people who value their constituents over lobbyists.

I have seem this happening in many areas - GMO and ISP squashing well-fare schemes for farmers and internet users.

If only news agencies did proper job highlighting these issues, companies wouldn't date to indulge in acts like these.

There are three different things wrong with your argument.

1) Even if your premises were true, which they are not (see below), your theory of causation is simply unworkable. Intuit and H&R Block spend a combined $5 million a year on lobbying. If that were enough to even significantly influence tax policy, we could crowd fund opposition, not to mention some altruistic millionaire. Or all the tons of companies who would benefit from simplified tax filing? You don’t think there are enough forces opposed to complicated tax filing that they couldn’t muster up a measly $5 million a year to hire some lobbyists? That’s completely not believable.

2) You’re mixing up lobbying and campaign contributions. Intuit and H&R Block are not able to “contribute large sums of money” to any politicians. Lobbying is different—hiring people to tell politicians why they should support one policy over another; arm them with data and arguments to use against their opponents; draft proposed legislation; etc.

3) Citizens United doesn’t have anything to do with lobbying. It’s about companies spending their own money to air political ads. If Intuit and H&R Block were running ads trying to convince people to vote for politicians who support complicated tax filing, then Citizens United would be relevant.

>Citizens United doesn’t have anything to do with lobbying. It’s about companies spending their own money to air political ads. If Intuit and H&R Block were running ads trying to convince people to vote for politicians who support complicated tax filing, then Citizens United would be relevant.

While this is true in the literal sense of what the case was about, I find it disingenuous to claim that this is the only impact it had. The rise of 'Super PACs' is correlated directly with the decision. Here's an extract from Wikipedia for instance:

>Certainly, the holding in Citizens United helped affirm the legal basis for super PACs by deciding that, for purposes of establishing a "compelling government interest" of corruption sufficient to justify government limitations on political speech, "independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption".

SuperPACs can’t make campaign contributions, so that whole part of OP’s post is irrelevant. They can engage in political advertising. But I’ve never seen a political ad funded by Intuit or H&R Block. OP is mixing up two completely different and unrelated things.

> But I’ve never seen a political ad funded by Intuit or H&R Block

Surely you must be aware that Super PACs can agglomerate money from various sources that don't need to announce their participation at the end of every commercial. I do not know if this is the case for Intuit, but it would be supremely naive to believe that it isn't.

Reading your point #1, it looks to me like you are confusing "thing that really ought to happen" with "thing that automatically happens without anyone having to step up and act". Of course we could crowdfund opposition, so get to it already!

Diffuse Rewards, Concentrated Opposition.

Your comment reminded me of this study.

Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens


TLDR version: https://www.youtube.com/watch?v=5tu32CCA_Ig

That study is invoked for arguments that it cannot support. That study makes two main findings:

1) “Elites” and everyone else agree on policy the large majority of the time.

2) When there is disagreement, the policy tends to reflect the elites’ preferences.

However, they define “elite” as the top 10%. Basically, a typical HN reader. The study is often used to asset that the US is oligarchic. But there are numerous reasons why, in a representative democracy, there would be a thumb in the scale in favor of policies supported by the top 10%: professionals, business owners, property owners, etc.

==But there are numerous reasons why, in a representative democracy, there would be a thumb in the scale in favor of policies supported by the top 10%==

Can you share some? Why doesn’t it exist to such extremes in other representative democrcies (France, Canada, Norway, Sweden, Australia, etc.)?

The study makes no conclusions about what happens in other representative democracies, and I don’t think there is a basis to just assume that the phenomenon doesn’t exist elsewhere. Let’s use taxes as an example. France has extremely low corporate tax rates (11%) and pays for its welfare state with a very high VAT (25%) that puts most of the burden of the tax burden on the middle class. Indeed, America has the most progressive tax system out of all those countries. Put differently, the US is overall a much lower tax country than those others, but the elite bear a larger share of the overall tax burden than in those other countries. Is that indicative of the elite in the US having more or less influence compared to those other countries?

As to your first question, we can use VAT as an example. Why would European countries rely so heavily on a sort of tax that falls mainly upon the lower income brackets? There is a lot of economic literature showing that VATs are more efficient than income taxes. So even if the majority might prefer an income tax borne primarily by the rich, the country adopts a VAT instead.

More generally, actual voters skew wealthier than the whole population. The top 10% of people might be the top 15% of voters. Who are these people? Well, me. I’m a married professional with a house and two kids in school. If I’m unhappy, I’m going to make a hell of a lot more noise than, for example, a single college student who might not even vote in the next off-cycle election, and certainly won’t vote in the primary or any of the local elections. The top 15% is a proxy for the most engaged voters with the most skin in the game (children in school, own homes, own businesses, etc.).

You still haven’t provided the reasons that this would be so in representative democracies. You focus only on tax policy and France. The rich can impact plenty of other policies (minimum wage, healthcare, overtime, unionization, parental leave, etc.) which impact how much income people make which directly impacts the taxes the pay.

Put differently, the rich have made sure that they collect so much of the country’s income That there isn’t much else left to tax. This is pretty clear in tables of income distribution.

Tax policy is a major policy choice, and France is similar to all the countries you listed in putting more of the tax burden on the middle class than in the US. Most of the countries on your list have lower corporate taxes than the US combined with a high VAT. That’s an example of elite preferences winning over mainstream preferences.

Incidentally, tax policy (rich should pay higher taxes) is the only category you mention where a clear majority (75%) of Americans supports the view.

As to your other example, the view among voters is in fact mixed. When Obama passed ACA for example, polls found public opposition to single payer to outweigh support. (It flipped only since then.) And that’s polls—actual voters notably skew older, richer, and more conservative than the general public sampled by polling. Even today, with 53% of people supporting single payer, it’s not clear whether that would be a majority of actual voters: https://www.kff.org/health-reform/poll-finding/data-note-mod.... In particular, voters skew heavily older, and older folks are already covered by Medicare.

Also consider labor unions: https://news.gallup.com/poll/241679/labor-union-approval-ste.... Most Americans would prefer labor unions to have less influence than they do now or to maintain the status quo, by a large margin (see the second chart). Only 40% want expanded labor union influence. (See second chart.) And again, actual voters are more conservative than the general population.

As to minimum wage: https://www.google.com/url?sa=i&source=web&cd=&ved=2ahUKEwij....

Most polled support a minimum wage of $15, by a 52-46 margin. But it doesn’t break down along “elites” and “non-elites” but rather at the middle class. Support is very strong among those with household incomes below $30,000, but for those whose household incomes are 30,000-75,000, there is net opposition 52-46. And of course, that’s among people polled. Households with less than $30,000 in income vote at far lower rates than everyone else. So it’s likely that the majority of actual voters oppose a $15 minimum wage.

Finally, addressing paid leave. People support paid leave by a large margin: http://www.pewsocialtrends.org/2017/03/23/americans-widely-s.... But the public is basically split on whether the federal government should force employers to provide paid leave. 48% oppose, 51% favor. (Again, the majority of voters probably oppose.) And if you scroll down to what models of government intervention people support, many more supported a carrot method that gives employers choice (offering tax credits to those who offer leave), than support the model European countries use (payroll taxes to pay for leave).

So in the US there is only narrow public support, or outright public opposition, to many policies adopted in European countries. On top of that is the double whammy the Northwestern study completely ignored. First, as mentioned above, voters skew older, richer, and more conservative than the public. So a 51-48 majority among those polled in support of government-mandated paid parental leave is probably not a majority at all among actual voters. Second, any legislation has to be approved by the House and Senate, where some voters have much more representation than other voters. But if we want to enact government-mandated paid parental leave, we have to get through the Senate, where Wyoming has two Senators just as California or New York. So even if the policy was supported by a majority of voters, that doesn’t mean a majority of Congress supports the policy, even if each Congressman votes exactly according to voter preferences in her district or state. The study completely ignores that factor, even though it’s a dominant force in American politics. If we just went by polls, we’d never have a Republican President or Congress. But even though Americans overwhelmingly disapprove of the Republican President, Republicans just maintained control of the Senate.

==In particular, voters skew heavily older, and older folks are already covered by Medicare.==

Which is single-payer healthcare and has 77% favor-ability [1].

==Most Americans would prefer labor unions to have less influence than they do now or to maintain the status quo==

This is complete editorializing. You could just as easily say that more Americans prefer labor unions to have the same or more influence than they do now. The Chamber of Commerce, the country's largest pro-business lobby, has vowed to fight an single-payer initiatives [2]. This is what people typically mean by "elites", the owners of capital. They are typically the one's influencing policy, not high wage earners.

==But it doesn’t break down along “elites” and “non-elites” but rather at the middle class.==

You are completely missing the point here. Corporations are fighting increased minimum wages across the country [3].

==So it’s likely that the majority of actual voters oppose a $15 minimum wage.==

Here, you rely on the question asking specifically about $15/hr minimum wage. In reality, the minimum wage is $7.25 and there is a lot of daylight between that and $15/hr. If you ask about a different number, like $10/hr, you get a different result.

"the poll found that 71 percent of people surveyed support raising the minimum wage to at least $10 an hour." [4]

==But even though Americans overwhelmingly disapprove of the Republican President, Republicans just maintained control of the Senate.==

Only 35 of the 100 seats were up for election in 2018, so it doesn't stand to reason that the results would match public perception directly.

[1] https://www.cnbc.com/2015/07/16/medicare-medicaid-popularity...

[2] https://www.beckershospitalreview.com/hospital-management-ad...

[3] https://www.arktimes.com/ArkansasBlog/archives/2018/09/04/co...

[4] https://theintercept.com/2018/04/17/the-restaurant-industry-...

> Which is single-payer healthcare and has 77% favor-ability [1].

Medicare has broad public support (and has for decades) and there are no serious proposals for getting rid of it, notwithstanding the elites. That is why, when we talk about "single-payer" as a policy proposal, or as a point of comparison with other countries, we are talking about extending single-payer to everyone. And that does not have the same broad support that Medicare does.

At the time the ACA was enacted, a slight majority of those polled opposed single-payer healthcare for everyone: https://www.kff.org/slideshow/public-opinion-on-single-payer.... That has flipped in the last 10 years, with a significant majority now supporting single-payer (59-39).

Again, let's circle back to the question at hand: why does the U.S. lack single payer healthcare when many other developed countries have it? Is it because of "elites" overriding the public will? Or is it because the public itself only came to support it by a significant margin in the last few years, after the last major change in healthcare law?

> This is complete editorializing. You could just as easily say that more Americans prefer labor unions to have the same or more influence than they do now.

That would be answering the wrong question. We are comparing the U.S. to "other representative democracies" like "France, Canada, Norway, Sweden, [and] Australia" (these are your words). Why does the U.S. have weak labor unions, when many developed countries have stronger ones? Is it because of "elites" overriding the majority? Or is it because a large majority prefer the current, weak labor unions, or would weaken labor unions even further?

> The Chamber of Commerce, the country's largest pro-business lobby, has vowed to fight an single-payer initiatives [2]. This is what people typically mean by "elites", the owners of capital. They are typically the one's influencing policy, not high wage earners.

The Northwestern study we are talking about here--which is what people are citing for the premise that "elites" influence policy--didn't define "elites" as "capital owners." It defined them as the top 10% of income earners.

> Here, you rely on the question asking specifically about $15/hr minimum wage. In reality, the minimum wage is $7.25 and there is a lot of daylight between that and $15/hr. If you ask about a different number, like $10/hr, you get a different result.

Again, what are we trying to prove? Why are U.S. minimum wages lower than in say Canada (scheduled to rise to $15 in the next couple of years) or Australia ($18) or France (about $12, but in a country where wages overall are much less than the U.S.)? Is it "elites" or because public support for a minimum wage that high is borderline?

Yes, there is public support for a $10+ minimum wage, which is why states across the country are in the process of raising their minimum wages to $10+. That is so, notwithstanding the presence of "elites" in New York, California, Maryland, etc.

> Only 35 of the 100 seats were up for election in 2018, so it doesn't stand to reason that the results would match public perception directly.

Various statistics I've seen show that a Republican majority vote in the Senate (51 votes) can represent as little as 42-43% of the total population. That's really a huge margin when you think about it. Say polls show that a policy is supported by 58% of the population, and opposed by 42% of the population. If you adjust for the fact that voters are more conservative than the overall public, that might turn into say 54-46%. And those 46% of voters, in turn, might be represented by 51 Senators, who can kill any bill implementing that policy. You don't need "elites" to explain how that works, and the Northwestern study (astoundingly) doesn't account for that phenomenon at all.

==Why does the U.S. have weak labor unions, when many developed countries have stronger ones? Is it because of "elites" overriding the majority? Or is it because a large majority prefer the current, weak labor unions, or would weaken labor unions even further?==

I think you make important points throughout your posts. However, I believe the entire basis of your opinions stands on top of an assumption that polls reflect the unbiased opinions of people with full information.

Put another way, is it at least possible that "a large majority prefer the current, weak labor unions" exactly because they have been influenced by the elite to think that? If the elite own the media infrastructure and are the ones funding Super PACS, isn't it possible that polls only show the success or failure of their ability to influence?

If a Super PAC (or the media at-large) is able to turn a topic into a partisan issue, then it is much more predictable how the public will view it (generally, split). I think polls might be measuring the results after the fact as opposed to accounting for the very influence we are discussing.

I wish this would get a lot more attention. The world could be rather simple, majority of people would just be happy with a straight forward process. What annoys me is not the money I have to spend on filing taxes nor to pay my fair share, but the actual time I waste every year doing so.

The people who know and care most about the issue are the ones familiar with the tax system and who are able to game it to pay less in taxes than others. To me it looks like another case of concentrated benefits and diffuse costs, though the costs/benefits is remarkably high in this case.

This so much. I’m fine with taxes (I benefited a lot from services provided by them, when I needed). But the whole process is made complex for no good reason. I want to show to government all my money, have them tell me what I owe, and if I don’t agree, have an appeal process.

The problem usually isn't the knowing how much you made bit. It's the knowing how much you can deduct because that's all based on expenses.

In a simple tax system there aren't that many deductions. This is especially true for low-tax jurisdictions.

If you want non-standard deductions, create a company and do normal accounting.

50-100 standard deductions can be handled centrally by the IRS with no issues. It's been done in other countries for decades.

The IRS does not get a feed with the details of our charitable giving. They also don’t get a feed of various ad valorem taxes I pay.

Those are common, non-business cases where the IRS doesn’t have enough info to properly prepare a return. Small business returns (even simple Schedule C “hobby businesses”) definitely can’t be done correctly in an automated fashion.

With current tax code it's not possible. But that's the thing - tax code needs to be updated. It works now because of weird combination of stockholm syndrome and giving people a feeling of getting a deal.

Tax code is messy and complex, with tons of loop holes. And those loop holes mean most of the people pay much less anyway, but they get to feel good that they're getting a great deal. It's brilliant from psychology point of view.

Well, I can’t see any feasible way to automate Schedule C and preserve a tax system that taxes income/profit (rather than revenue).

I’m not sure which part of my reply you think is amenable to tax code changes (and I don’t want to erect a strawman). If it’s just ad valorem taxes, you might be able to compel every jurisdiction seeking to impose one to provide a data feed to the feds. I’m not sure I think that’s Constitutional. You could also block the deductibility of charitable giving and property taxes (and likely hurt charities who are currently struggling; the Gates Foundation will be fine; the local soup kitchen may suffer.) That still leaves Schedule C as unsolvable, Schedule D as only partially (though increasingly) solvable, and Schedule E as likely unsolvable [having many of the same complexities as Schedule C and then some additional ones around basis, depreciation, and some real estate specific taxes/expenses that are not necessarily reported to the IRS today].

For the record, I don’t think I’m getting a great deal at all despite having a quite complicated return.

I usually use intuit and pay them $50 for taxes, their UX is decent.

How does one even file free taxes in the US? I’d love to do that. I used to do my own taxes in Australia.

I tried to do some googling around to no avail.

This is not tax advice.

You just have to fill out and mail the IRS some forms. If you have income just from regular 9-5 wages it's very simple. If you have income from Options or RSUs it's more complicated and if you're an independent contractor or business owner it's very complex.

Here's an okay place to start: https://www.irs.com/articles/how-to-file-your-income-tax-ret...

The counter argument would be that you don't want the government calculating your taxes for you.

In the end that's what the government will do anyway: you file a return, they double check it on their end and they will be rather nasty to you if your numbers disagree substantially from theirs.

The "optional pre-filled forms" scheme forces the governments hand (to show what it has on you) before you have to show your cards. In a way that reduces the IRS' power.

You already have this power. Around August every year, request a “transcript” of your account. It will show you everything the IRS got for that prior tax year. (Your return is not really due until mid-October in practical terms.)

A textbook example of the "Shirky Principle", to wit: Institutions will try to preserve the problem to which they are the solution.

Thanks for pointing this out. I have used Turbo Tax for the last five years or so and won't be using them anymore.

Each year either the state or federal come back to me saying I didnt pay what I fully owed them. Now with a pre-filled return from the fed I'd know.

Hopefully more TurboTax customers hear of this and boycott them as well!

Out of curiosity, did you ever track down the reason of your miscalculation? I agree tax forms have many moving parts, but at the end of the day is math, so you should be able to exactly redo the calculations and see where you or TurboTax screwed up.

Interesting, I am self-employed and use TurboTax self-employed together with QuickBooks Self-Employed. While it does take a lot of time and energy to complete the process, I have not had any problems in terms of underpaying and getting notifications from the IRS.

I had the same problem. never using turbotax again

Same comment I posted above: did you ever track down the cause of the mismatch?

Answering here... I used Snaptax each year it was offered/promoted in the app. That failed me and I had to pay back taxes.

The last year or two I just followed their arduous step by step process in filing. That also failed me and I had to pay back taxes.

Now I see this.. the most efficient and best way US taxes could be filed yet moneybags is holding us back from the most innovative/efficient system for filing.

If the fed and state sent me my return saying I owe X... ok here’s that money and I’m done til next year. No surprise IRS letters saying I owe back taxes.

If I were to receive communication from the IRS saying that I owe extra taxes, I would compare my 1040 line by line until I can exactly track where I forgot to include the amount the IRS is asking.

You are painting it as if they were black box calculations: they are not, especially for "traditional" tax situations it's very feasible to follow the forms (automatically filled by turbotax) and understand where your return differs.

That being said, I agree with you that it would be nice if we were directly "billed" by the IRS, but what I wanted to understand from you, and reason of my question, was __exactly__ where TurboTax failed (e.g. exact line of the form or "Oh, I forgot to include a 1099INT via SnapTax that was reported to the IRS"), to get a better perspective of the specific issue.

I've been using TurboTax for 10 years with a fairly elaborate tax situation (W2, multiple 1099INT, multiple 1099B, AMT tax for startup equity, AMT credits, backdoor Roth IRA, ...) and I've always been able to get the number right to the point that I never received any further bills from IRS (though I might get audited in the future, obviously).

Turbotax is awesome and I have never had the government come back and say I owe more. If that’s happening to you, you clearly aren’t doing your taxes correctly.

In Germany this year a law passed that while a bit vague mandates all banks by the end of this year provide an external API to at least their current accounts (checking accounts). This is PSD2. Imagine if the same could be done in the states and the reaction of banks: I doubt American banks would like to become dumb pipes to allow fintech firms to build value on top of them. I see these tax preparers no different. And I hope one day a truly simple and free tax return process actually takes hold.

Because of PSD2 some banks in Europe are finally investing in their own apps, analytics etc. to create more value for customer, or invest in third-party apps like Tink.

But yeah, in the US it would cause an uproar.

To clarify for those who aren't aware: PSD2 is EU-wide, not just in Germany; all member-states should have such laws by now.

The article doesn't show evidence that the lobbying was effective. The tax prep industry wanted the Free File Act passed to prohibit the IRS from implementing automatic tax filing. Senator Warren introduced a bill to require the IRS to make automatic tax filing available.

"Neither Warren’s bill [the good act] nor the Free File Act [the evil act] made it out of committee."

Sounds more like the do-nothing Congress at work.

I always thought that's the case, because there's absolutely no reason it has to be that complicated, or for them (goverment) not to do what companies like TurboTax do themselves.

The IRS is already doing your taxes in the first place. That is how they know when you didn't include a job etc. They run the numbers to check against. There is no reason that this can't be the default for 95% of citizens. Want to amend the numbers the IRS came up with? Just file your own taxes that year.

There's an argument that: If the IRS does not show all it's cards up front, people might disclose additional income the IRS were not aware of. If you think of filing taxes like a negotiation, there's benefit to "not being the first to name a number".

With that said, I am absolutely "pro" automatic filing.

I doubt that the "pro" argument is worth the lost economic productivity of taxpayers, or the time spent double-checking the average citizen's math. In public policy you should always be aware that you are not optimizing for rule compliance alone. You optimize for the healthiest society, which typically contains a small amount of cheating. Random tax audits of the middle class probably don't make enough income to justify their existence-- but they scare enough people into compliance.

Even if we offered the IRS the choice, though, I doubt they'd would choose the current system. It's easier to check someone else's diffs on your own (systematically generated) work than to check everyone's individually.

The IRS operates at scale.

That's exactly what I have been telling my friends for so long! They already have all of my income and expenditure details. Why don't they just fill it themselves and let me one click approve?

Actually, you'd be surprised how little of your life's information is on-hand compared to the eligibility requirements for certain tax credits and benefits. The biggest example is deduction of gambling losses. IRS knows how much you've won (receipt of Form W-2G) but unless you give it an accounting of how much you've lost it has no clue at all.

Then why do people get tax refunds? Clearly the government and your employer get withholding wrong, so why would we trust them to calculate our bill? They have absolutely no incentive to minimize your taxes and every incentive to maximize them.

You write as if withholding was an error in calculation. Maybe it is, don't know how it works in the US, but here withholding follows a different, very simple formula, since it's impossible to know the real amount ahead of time anyway.

I disagree that the IRS has an incentive to maximize taxes. They have an incentive not to lose time with disputes.

But even if you don't trust them, so what? You can still check the numbers yourself, and file your own if you disagree.

There's a form the employee fills out detailing how much to withhold during the year. Most people use the default, which is to withhold the most, thus those that get a refund are overpaying their taxes over the year.

Prior to WW-II, everybody had to file quarterly income tax payments. It was during WW-II that withholding became a thing (maybe something to do with increasing monetary flow towards the government or something). It remained a thing afterwards.

Because of the withholding, most people are unaware of exactly how much they are actually paying in taxes, especially given the "windfall" every year of refunds. "Woo hoo! Gubment gave me money!" and all that.

Yes, a lot of people get tax refunds, but a lot of them have exactly zero refund or due amount. It will at least help those.

It's right most of the time. Most people do not get refunds. It's when abnormal payroll events occur. Everyone's job here is to absolutely pay the correct amount of tax. If either side get it wrong, they must correct it (with the appropriate interest).

The IRS (really the US Treasury) does not pay interest on (within tax year) over-withholding.

And that is not surprising, another thing they need to fix on their journey to a modern tax collection system. I was describing HMRC.

There is a lot of evidence from other countries too. In Australia, the Government provides a free web app (used to be a Windows/Mac app) where you can file your taxes. 90% of people can just check that the income figures reported by employers are right, maybe throw in some deductions and click 'file'. You get a refund transferred and a receipt (or bill) by email within the next two weeks.

It basically does everything that an individual could need to do, although you can go to an accountant if you want (if you can't be bothered, or have particularly complex things you need advice on).

Are there any good resources for filing your own taxes?

I’ve always relied on family members and want to take a crack at it.

There is an open source project:


Just noting it, not advising or recommending anything -- whether this is wise or not definitely depends on your own particular situation.

That's cool because the author has also updated it for the 2018 tax year. From their YouTube video it looks like it needs polishing from an aesthetic perspective but if it does the job and cuts out the middle man then it's good. I'll have to try it out this year.

A much better job would be an open source modern website that is updated by the community and supports both federal and state taxes, importing tax documents, and highly secure to ensure a strong middle finger to these overbearing companies.

Correction, it has been updated last for the 2017 tax year. His website says that by the end of Jan 2019 it will be updated for the 2018 tax year.

Just read the IRS instructions that come with the forms. I do my taxes by hand and don't find the instructions especially complicated or hard to read.

FYI, Credit Karma is providing free online tax filing regardless of your income.

In general, I think online tools become worth their cost when you are claiming mutliple deductions and have income from various sources across more than one state. Otherwise, the 1040EZ is where you should start.

There is only one form this year. There is no longer a 1040A or 1040EZ.

I don’t believe the 1040EZ exists anymore.

Correct. The 1040 has been redesigned to be as easy to fill out as the prior 1040EZ, IMHO.

just remember that credit karma makes all it's money from selling you credit cards... so by using them to fill out your taxes you give them all the info on your income info to further "personalize" these ads

More personalized ads seem to be a win-win situation. If I'm already seeing credit card ads I'd like to at least see ones that are relevant for me.

Are you certain that Intuit and others aren’t doing the same thing? That is, using your data to gain insights?

After logging in to TurboTax (for the first time in a tax year) it asks you if it can share your data with its parent company (Intuit). Declining works and doesn't have any impact on TurboTax. However, based on how the UI for that looks like it might not be obvious for some people that data-sharing is optional.

Well, it's good that your doing your homework on it first. Because, once you start using one, the cost of switching rises a bit because each year, they have youre last years info which comes in handy quite a bit: they can pre-fill out some of your stuff like addresses, employers, name, ssn, etc. Also, look for one that doesn't raise your rate once you start using it for a few years: some of them do that.

Just fill out form 1040, the IRS provides instruction booklet on how to fill it out. Both the form and the instructions are available on their website. Then use software (I reccomend taxhawk, don't overpay for turbotax) and compare the 1040 they generated with your manual 1040. If they match, great. If not, figure out why.

Have done MA's (now-defunct) free e-file and NY state's paper form.

Don't do it, it's a massive waste of time and energy and the chance for human error is massive. I only did mine because Oracle and ADP issued me a completely incorrect W2 and TurboTax doesn't let you submit it with incorrect wages reported.

Luckily though I got all my money back in like 2 months

Depends where you live.

In Canada there are free options to file your taxes, and ability to pull in last year/ current info if signing into your CRA account.

I used to use studiotax, but last year started using simpletax.

Essentially I sign in, and then sign into my cra account, it has all my info prepoluated.

I don't understand why the govt cant just file my taxes for me when they already have the info

Simply put, the IRS doesn't have the data access Hollywood makes it look like they have. There are timeframes for the Combined Annual Wage Reporting joint task force to have the data trickle downstream from SSA to IRS. It isn't immediately available to them which is why there is the so-called "PATH Act hold" that stops any returns claiming EITC or Additional Child Tax Credit from refunding out before February 15th each year now so at least some data is on-hand. As long as some payers & employers can still file income reporting forms on paper, they have an awfully long time after April 15th to get those documents in to IRS too.

Is there any other country that makes taxation so painful for ordinary employees?

Her, Norway, and in the UK, most people never have to fill in anything.

Intuit is really corrupt. Use someone else if for tax filing. There are better alternatives.

What are the better alternatives?

Last year I tried out all the major offerings, and TurboTax was the only one that worked without any issues. TaxAct didn't even manage to fix their broken electronic import of broker data until some point in March or April.

I've used TaxAct, and didn't have any issues with import.

They fixed the import in March or April. I tried importing earlier and just got the error message that the import functionality is not available yet. Here's a thread about that issue: https://www.bogleheads.org/forum/viewtopic.php?t=210511

I understand that I could have waited a little bit longer with filing my taxes. But the fact that key functionality is missing from a product doesn't give a lot of confidence in that they have enough resources to handle their job.

The only feature from TaxAct that I'm missing from the online version of TurboTax is attaching PDF files for transactions. With TaxAct I can report aggregated transaction data and just attach the PDF from my broker which is then automatically included with the efiled return. With TurboTax that's not possible yet and I'd need either list transactions individually (which is easy due to electronic import) or send the itemized broker statement by mail.

Making taxes easier is something both sides of the aisle politically should agree on. Doing taxes, especially being a small business owner is way too complicated. While the Tax Cuts and Jobs Act of 2017 did make improvements, especially for standard W2 employees, my taxes for 2018 are still going to take me days to aggregate, complete, and file.

Like most engineers I'm in favor of automation. Besides the already mentioned open source software for tax filing, are there any tax filing companies that do not lobby the government or contribute money against prefilling our forms? If so I'd love to give them my business.

> Intuit spent more than $2 million lobbying last year, much of it spent on legislation that would permanently bar the government from offering taxpayers prefilled returns. H&R Block spent $3 million, also directing some of their efforts towards the bill.

Not only this is an example of a broken system but also shows how fragile it is. You only need $5m to sabotage the advancement of the system and waste millions of productive man hours.

There is nothing stopping any private organization from making free tax filing software.

Other than the fact that it costs time and money to write this software? And as other commenters have mentioned, people have tried to do this in the spirit of “open source”. It’s just that the problem it’s solving is something that can be viewed as an artificial one.

This I think is the core of the argument. Saying that the government should compute your taxes for you is essentially arguing that the cost of tax prep should be paid by the IRS/your taxes. Unless you believe that the IRS can do it better/more efficiently than the current group of companies providing the service then we might not really gain anything.

That's a good point!

Most of the data already known to the IRS is available in an electronic format anyway. I fire up TurboTax, electronically import my W-2, the tax statements from my bank, etc. and I'm 90% done.

And the remaining items (various deductions, reporting my foreign bank accounts, etc.) are things that the IRS itself probably also wouldn't know right at the beginning of the year.

The IRS already computes your taxes. They use it to check your filings.

Posts like this come around every year. There is a belief held by some that we should avoid making taxes easier to file. We shouldn't just take the number given to us by our government. Some believe filing a tax return should be an explicit process so we are conscious of government burden.

Also, a more practical reason. The government can't tell you all of the deductions you are entitled to.

The whole reasoning behind not prefilling makes no sense. The government tells you what it knows and you can then amned the return in whatever way you wish, e.g. deductions. There really is nothing negative for the tax payer as far as I can tell.

>There really is nothing negative for the tax payer as far as I can tell.

Right, but its not the taxpayer making the laws, its the government. Right now, if you miss out on a few deductions and overpay, well too bad chump. If you miss some income and underpay, then you're getting audited. Making tax filing easier will make the government lose money from filers making mistakes, which is why they're resistant to change it.

My experience is that the IRS doesn’t have all of your data ready by April 15th. My tax guy requests a transcript of my account every year and the data is woefully incomplete in mid-April. Tends to be complete by mid-August. I have no idea what the delay is.

As I just posted elsewhere, having a form prefilled would be a negative if the taxpayer is liable for mistakes, as is the current US system. I would like to know if, in countries where taxes are simpler, the government takes responsibility for its own mistakes.

I mean, if the pre-filled return were grossly wrong, and the IRS changed its mind later and wanted more money, that would be tolerable. But it would not be tolerable to treat it as evasion or negligence to file what they provide me. I am wondering how it works in other countries now.

>The whole reasoning behind not prefilling makes no sense.

While I don't support the reasoning in the GP, it does make sense, and in my experience, is largely true. Many people I interact with (coworkers, etc) have very little understanding of the tax system - precisely because they don't do their own taxes (they either pay a very expensive person, or use something like TurboTax). If the government gave them a prefilled form, I fully expect that most people will not understand taxes.

The reason I don't put much weight in the argument is that their feared scenario is already the current reality. Right now there is a burden to do taxes, and yet most people still have almost no understanding of it. They just pay someone to do it for them.

I live in Sweden now, and I understand my taxes way better now precisely because I'm given a pre-filled form I can correct if I wish to.

Because I clearly see: ah, this is my income, it goes here, and I pay this much; ah, this is my additional income, it goes here; ah, these are the deductions I'm eligible for and pre-filled etc.

I needed to correct the form only once to account for some stocks that were not reported for some reason. And I was warned about that by the bank handling my stocks. All I needed to do was to log in to the tax agency, go to my tax form, click on the "stocks and funds" tab and fill in the missing info.

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