>Now companies are barred from hiding their free products from search engines such as Google, and a years-old prohibition on the IRS creating its own online filing system has been scrapped.
>Under the new rules, participating companies also have to standardize the naming convention of their Free File version as “IRS Free File program delivered by [product name].”
Respect to ProPublica for their commitment to this issue. I first learned of the Free File deal from their reporting and enjoyed the HN comments on their articles.
ProPublica reported that after they published this story, people eligible for free filing contacted TurboTax to get refunds. At first, they were able to get refunds of the fees that they paid but once word got out the customer service reps stonewalled them. So ProPublica invited readers to submit stories of their experiences with TurboTax customer service.
This USA tax thing has always baffled me... it is the exact definition of why we pay taxes: for the government to provide services that are common to the country´s citizens.
There´s nothing more common than tax collection: rich, middle class or poor. Why wouldn't citizens demand a public tax filing process? Even in Mexico we have an automagical tax filing process that makes:
a) The great majority of the population who perceives a salary not needing to file taxes.
b) For the rest of the people, those who don't do anything fancy, just click one button in a portal to do the filing, and everything is calculated by the tax authority.
c) For the small percentage that do more complex things (I'll say it is between 5% and 10% of the population) still can do it in the portal for free, or hire an accountant.
Most countries have this "automagical tax filing process". And what kills me the most is that America actually secretly has this same system too. Yet every year we have to go through the charade of filing taxes ourselves, when the governemnt already knows what we owe without us needing to round up paperwork, W2 forms, 1099 forms, and so forth. Yet they make us do it anyway.
Don't believe me? Simply don't file your taxes next year. You will get a letter from the IRS sent to you that literally tells you what you owe. They know all of your income down to the cent, they know what you owe. This automagical system exists. Yet the only way to "use" it is to either not pay your taxes, or to pay them wrong.
Yet every year, the IRS makes us go through the charade of putting our taxes together and all the work (and money) that it entails, when the whole time they know what we owe already and expects us to pay that unless we can prove them otherwise.
If it was automatic, income would be missed. The government would be revealing what it doesn't know about, and people would not supply the missing information.
Under the current system, people aren't sure what the government is aware of. Because we get in trouble for leaving things off, we are more likely to report everything.
Make people file a tax return, but auto-populate it with the data the government already knows. And at the end include a tick box clause that essentially says "I have included everything and reviewed the autofill info, and if I have omitted anything later discovered I will be prosecuted".
20 seconds to file your taxes if there's nothing unknown. Very easy to add extra info. Covers the tax departments back of you intentionally mislead them.
Same here in Europe, my tax form is auto-filled I only have to check the numbers and confirm, with same warning and laws to back it up in case you decide to hide income.
We know what the IRS knows because the majority of people get the same forms as the IRS as far as income goes: W2, 1099, 1098, ... Unless you’re self-employed, the IRS only misses some deductions or foreign income.
Ever performed a lot of stock trades in a single year and had the IRS believe that you owe them $5 million in income taxes because they assume every sale you made was all profit? That's always fun, especially when they think they're right and they're entirely wrong.
The IRS information is at times comically incorrect in fact.
If you're trading more than $20 million a year in stocks, you are in the vast minority that everyone here acknowledges would need to adjust and file your taxes manually.
99.999% of the US population is not trading $20 million a year in stocks, and everyone else here is merely talking about the 95% of the population that has straightforward tax returns.
Which is why most countries have a system that shows you what they think, and you can accept or not. It’s not like the majority of people are in such a situation, and likely over time that will become less common as its often a byproduct of legacy systems / mergers that lose the original transaction.
If you have a W-2 job and all your investments are in a bank or brokerage, but they still don't know your filing situation, dependents, other income, or deductions.
Not that I'm justifying the current system. It's just that the IRS only knows the big picture for most people. The rest is complicated.
Or if you work overseas and send regular payments to your bank account in the States, you need to make sure you file your Foreign Exclusion Tax form. Which is even more complicated. -.-
I'm not sure if it does or not, but you can have one W-4 per paycheck, so I thought it was just used to figure out your withholding. The amount withheld shows up on your W-2.
There's no reason why they couldn't go to the IRS though. They could quite easily maintain this information and make it easy for you to update it come tax time if it's changed.
Completely agree. Tax preparation is actually work the government should pre-fill. Australia does this. You can do your taxes online free and/or get an accountant or an army of accountants if your affairs are that complex. Frankly, the government should do the initial assessment for you generated automatically from the many, many existing surveillance systems already in place. They are watching all financial transactions and you might as well assume they are.
To even imply otherwise, and I've seen other comments say they shouldn't / don't have this already in place... even when social media companies are slurping data every way they can... seems absurd.
All that said, you should go through each item and correct their mistakes. Those matching systems aren't perfect.
Everyone who replied to this with "But what if...?": we are not talking to you. To a first approximation, literally everybody else does not have your problem -- they have W2 income and their filing status is very probably the same as it was last year. If you got married you filed a marriage license; if you had a kid your name was likely on the birth certificate. The IRS could guess everybody's taxes and be right at least 80% of the time, quite probably more like 95%. It really would be an existential threat to H&R Block, and good riddance.
The IRS will intentionally not give you any deductions and the cost basis for any capital gains will be $0 regardless of what you paid. The intent of the "return" they file for you is to get you to file a real once since their version will say you owe a lot of money.
This is all explained in the letter they send you should you fail to file.
What they don't know is my charitable deductions. My charitable deductions greatly reduce my taxes. If I went with their automagical tax filing process I'd lose out on those deductions.
That could be automated too largely. In Austria charities submit this information to the government and it automatically gets added to your prefilled tax filings.
Things don’t really work that way in the USA. I can take a bunch of stuff to a place like Goodwill. They will give me a little slip of paper that is “proof” that I donated, but they don’t keep records of my donation. The only way the government could know about it is if I tell them at tax time.
Americans on the whole don't trust their government quite a lot. If the government just said "you owe X in tax this year", nearly everyone's knee jerk reaction would be that the government is overestimating and cheating them.
On the other hand, you can pay a flat fee to let a third party fight the government on your behalf. That's something that many Americans like the sound of.
I think the real problem is that the tax system is complicated, and turbo tax does a good job of making it feel even more complicated than it is. You can fill out your own 1040EZ, if you even know what that is, but people have this sense that the tax system is full of loopholes and they want to exploit that.
> Americans on the whole don't trust their government quite a lot. If the government just said "you owe X in tax this year", nearly everyone's knee jerk reaction would be that the government is overestimating and cheating them.
That's why most governments that do self-declaration services make it so you can review what tax rules they based amounts off of. It's not like tax law is super easy elsewhere and without complications. I should never have to pay a fee just to declare taxes to reconcile things for the IRS. That is a basic governmental responsibility to give me that service for free.
> That's why most governments that do self-declaration services make it so you can review what tax rules they based amounts off of.
Right, but since no regular person understands the rules, they can't really double-check. Especially since sometimes you can file stuff under different rules that produce different results, despite both being valid (I say this based on experience from another country, but I suspect the same is true in the US).
> "sometimes you can file stuff under different rules that produce different results, despite both being valid (I say this based on experience from another country, but I suspect the same is true in the US)."
Yes, such circumstances exist in the US too. For instance married couples usually file jointly, but they could chose to file separately which results in a different effect.
It's the same problem as with auto repair and medicine. It's nice that we have competing providers, except we don't have the expertise to judge their performance.
> except we don't have the expertise to judge their performance.
Well, this is a bit different in that regard. Last time I tried it, it was free to put all my info into turbo tax and see what my amount owed would be, and then it would be a fee to actually file. I assume most tax software works that way.
So it's actually very easy and objective to see the performance of these systems. It would obviously be a big hassle though to spend a whole afternoon playing with all the different tax softwares.
I can assure you the secret sauce in "exploiting" tax law is almost never in choosing one thing or another during filing (there should only be one optimal answer once the facts are already created), but in tax planning. The tax software even hints at that. Paying for tax filing itself is basically a low-level scam.
I think you buried the lead here. American public schools, part of the American government charged with teaching children and funded by taxes, don't teach kids how to pay taxes to the American government (maybe it sometimes happens, but it's certainly not standard.) It's ludicrous.
I'm not disagreeing with you, but how are schools supposed to teach kids how to pay taxes when it's such a convoluted specialty that requires college level education to learn?
Eh, I think you could teach 90% of how taxes on wages, investments, and property work in a simple class for teenagers. It's the other 10% that takes years of study and legal expertise--but the vast majority of people don't need that 10% more than a few times in their lives (e.g. if they get very rich, retire, have to handle a complex family financial situation, or are otherwise massive outliers), and hiring a tax attorney at those times is probably a good idea regardless of whether or not you learned the basics in school.
For most people it isn't that complicated, but public schools don't teach kids even the bare basics like "you can get the paperwork at public libraries and post offices."
An actual argument I've heard from TurboTax shills is that tons of people underpay taxes now with the self report system, and having the government pre-fill forms for you to rubber stamp would effectively increase taxes on the working class.
That's such a nonsense argument, though. Having the IRS pre-fill basic forms for you would not obligate you to accept them. People could still compute their taxes themselves (or pay someone else to do it).
Ok, I disagree with the TurboTax reasoning, but I think your argument doesn't make sense... if most people have their pre-filled tax forms making them pay more than they should, then everyone is going to compute their taxes themselves anyway to avoid paying too much... at that point, why is it better than the current system?
About 20% of people (particularly low income people) have simple tax returns and file using 1040EZ. If the IRS computed that form, then what they send out would be ideal for the majority of taxpayers. So it would benefit those by eliminating the expense of tax preparation without actually costing them more in taxes.
Then there are those like myself who fall into an in-between area. I have more complex taxes, although not as complex as a lot of people, but would gladly pay more than is strictly necessary in order to not have to bother with figuring them out. In fact, I already do, in the form of paying a tax preparer (I fully consider the expense of tax preparation as a tax itself.)
Those whose taxes are more complex are very likely aware of that fact, and would continue to do their own tax preparation.
Also, if the IRS provided a prefilled 1040EZ, that would make computing your own taxes easier because you could use the figures supplied as a reference.
To nuance this - they've been refactoring/shuffling the forms around.
2017 Form 1040EZ goes up to box no. 14
2017 Form 1040 goes up to box no. 79
2018 Form 1040 has no boxes for $ amounts!
2018 Form 1040 Schedules 1-3 is where they all went, if you needed them.
2019 Form 1040 added boxes back up to 11b
2019 Form 1040 Schedules 1-3 also exist
Basically, Form 1040 is now "EZ" by default. For those with more complicated tax filings, you've had your work scattered to the four winds - I mean, three schedules.
Great, sounds like TurboTax will still be able to compete if the IRS gives people tax filings precalculated, as TurboTax can say "We can save you $XXX!"
I’m sure for a large percentage of Americans like myself the “$XXX” that they saved you is just the standard deduction. Maybe at some point in my life an itemized deduction will actually save me more money, but every time I have filed taxes TurboTax looks at my info and decides that the standard deduction is the best I’m going to get. So for some percentage of Americans TurboTax won’t be able to compete because they can’t save you more than the IRS already did with its deductions.
I would expect that to be common for the first couple years but after a couple years of realizing that they aren’t saving any additional money or are saving less than they are paying for TurboTax I’d expect that to drop off.
Unless using TurboTax actually saves people money. I wouldn't expect the IRS to have enough information to be able to predict in advance the deductions people might be able to take -- stuff like business expenses, mortgage interest, charitable donations, state taxes, etc.
Tax evasion and overstating deductions are common partly because the IRS doesn't have access to the information necessary to verify everything -- that's the same information the IRS would need in order to pre-fill tax forms accurately for the 1/3 of taxpayers who itemize their deductions. 1/3 of American taxpayers a pretty big market for TurboTax and similar services to thrive in.
It's by design. The GOP wants you to rub your face in the fact that the government runs on tax revenue, in the hope that you'll develop an allergy to taxes.
The US hasn't had a real balanced budget in much longer than that. During the Clinton era the balance was achieved in part by stealing from Social Security by keeping the surplus inflows and pretending there's a magic locked Social Security box with trillions of dollars in it (which are really IOUs backed by the Fed's ability to debase the future for past over-spending). We similarly treated as 'surplus' tax revenue that should have been set aside for future higher Medicare costs (which back then we knew full well were coming) and is now burning a massive hole in the present budget.
The Clinton years were the twilight of the fantasy of abusing inbound entitlement tax flows for spending in the present and ignoring the future. That government spending party trick - kicking the can down the road - is now exhausted on a normalized basis, so we're rapidly heading toward perma QE as the only solution remaining other than very high taxation across all major income groups.
Can someone explain to me the negative consequences of running a deficit? Countries aren’t people. They don’t die. As long as countries are willing to lend us money and the US can service the debt, what does it really matter if the national debt is multiples of the GDP?
There are no real negative consequences. Fiscally conservative people want people to think there are because it's a way to counter government spending with an argument that makes sense on the surface, despite the fact that the argument is completely wrong if you spend a few minutes thinking about it.
We will spend $479 Billion in interest on the national debt in 2020.
That's >22 NASAs-worth of money, if you care about space exploration. It could be roads or high speed trains or education or healthcare or whatever you care most about.
Instead it's going towards paying interest on debt incurred for cheap political wins in the past...
a) The great majority of the population who perceives a salary not needing to file taxes.
In the United States, and many other nations, the vast majority of taxes aren't collected from payroll. If that was the case, things would be easy. But there are hundreds of other ways that taxes are collected, and they vary from person to person.
More importantly, taxes aren't exclusively about revenue generation. They're used to encourage people to do or not do things: Save money, invest money, buy houses, have babies, buy cars, add solar panels, and thousands of other things.
There are plenty of people who shout "flat tax!" whenever this topic comes up. But they're mostly people who have only led simple lives where the IRS only touches them on their paycheck, or who don't understand the full range of how taxes are used.
Or people do understand how taxes are used and fundementaly disagree that taxes should be used for those purposes
Taxes sole purpose should be to collect money to provide services, Nothing else
they should not be used to socially engineer the society the way the government sees fit, that is not a free society or a functioning democracy/republic at that point
But this argument can be trivially extended to all other "social engineering" taxes. Vice taxes make you drink or smoke less? You're reducing state's expenses on healthcare, law enforcement and social services. Tax benefits for installing photovoltaics or buying electric cars? You're helping to improve the quality of life, again saving state on healthcare, and in the future, on various forms of crisis management once the climate issues start taking their toll in full.
(FWIW, I'm generally in favor of this kind of "social engineering" when done by democracies.)
A democracy doesn't stop being democratic because you don't like the outcome. If a democratic government performs social engineering, the people socially engineers itself.
Corporations are people, money is free speech, and our politicians are bought and paid for. They have every incentive not to make things work better if corporations are profiting from the broken status quo.
Even a lot of the more complex things could be automated.
For example, the only slightly complex thing about my taxes are capital gains and interest. It would not be hard to have my brokerages/banks coordinate with the IRS to autopay my taxes on that as well, just like my income taxes are auto paid.
Does the government automatically know what you spent in business expenses? Or what charitable donations you made? Or what property you may have lost during the year?
I’m not saying those are easy to automate, or that everything can be automated, I’m saying a lot of things are able to be automated. Not only capital gains and interests, I suppose mortgage interest deduction would also be easy.
"it is the exact definition of why we pay taxes: for the government to provide services that are common to the country´s citizens"
I disagree with that definition. In a limited government, taxes are only for specific purposes, not any service that might be commonly (or even universally) needed/wanted.
You can agree or disagree about whether a limited government is good, or whether tax filing services should fall within those limits. But it's certainly not the definition of taxes to be for any and all "common services".
It's mostly because so many special interests have gotten loopholes put in for their particular pet project, simplicity be damned. That's just the way politics works in America.
> Why wouldn't citizens demand a public tax filing process?
Because they don’t want to make it easy for the government to impose lots of taxes. Americans have the lowest taxes in the developed world. Not especially for rich people, but for everyone else: https://www.heritage.org/sites/default/files/inline-images/I....
This isn’t the work of some secretive cabal of billionaires. Rich people hire accountants to do their taxes anyway. The absence or existence of free tax filing doesn’t affect them at all. But a platform of “we’re going to make taxes painful so the government is afraid to raise taxes” gets a lot of votes. (In my view, is nothing bad about people being confronted once a year with the cost of the government to themselves. I just looked at my taxes for 2018 and concluded I’m taxed too little and would rather pay more for a government that offers more services. But people should be making that decision with eyes wide open.)
1. This doesn't make any sense. The easiest way for the government to impose more taxes is to raise the percentages on the taxes they already collect. Private filing has nothing to do with it.
2. Americans don't have the lowest tax rates in the developed world. Mexico, Ireland, Chile, Turkey, and South Korea all have lower tax rates[1]. And in some cases the governments provide more services with less money because they're not spending half their budget on occupying other countries.
"And in some cases the governments provide more services with less money because they're not spending half their budget on occupying other countries."
This. The American military is perhaps the largest and most wasteful social program on the planet. Americans spend way too much time trying to find their way around this elephant in the room.
> 1. This doesn't make any sense. The easiest way for the government to impose more taxes is to raise the percentages on the taxes they already collect. Private filing has nothing to do with it.
To raise the percentage rates, politicians have to vote to raise those rates. Private filing means that everyone is very aware of how much they’re paying in taxes. It’s not just an invoice they receive listing how much was withheld. They have to recalculate it. That makes them much more sensitive about voting for politicians who vote for higher taxes.
> 2. Americans don't have the lowest tax rates in the developed world. Mexico, Ireland, Chile, Turkey, and South Korea all have lower tax rates[1].
I don’t think people would consider Chile and Mexico to be developed countries. You’re right that Ireland and South Korea are lower (depending on the year, Ireland cut taxes significantly recently). But they’re together with the US in the bottom band.
> And in some cases the governments provide more services with less money because they're not spending half their budget on occupying other countries.
I think it’s true that other countries do more with less. But it has little to do with the military budget. US government spending as a percentage of GDP is 38%, meaning all levels of US government spend $7.3 trillion annually. The military budget is just 10% of that, or 3.2% of GDP. That’s high compared to Europe, but not a big difference compared to overall government spending. The US military budget is proportionally where the U.K. and France’s was in the late 1980s, back when those countries had robust welfare states: https://worthwhile.typepad.com/.a/6a00d83451688169e2022ad3a0...
If the United States cut its military budget to the same proportional level as France, we’d have an extra $175 billion for other things. That’s not nothing, but to put that into perspective, we spend $970 billion a year on education (5% of GDP). We spend $1.1 trillion on healthcare and welfare for poor people. Cutting our military budget to European levels wouldn’t revolutionize our budget.
> To raise the percentage rates, politicians have to vote to raise those rates. Private filing means that everyone is very aware of how much they’re paying in taxes. It’s not just an invoice they receive listing how much was withheld. They have to recalculate it. That makes them much more sensitive about voting for politicians who vote for higher taxes.
I'm not sure how you think private filing is related to manually filing your taxes. Yes, if taxes were just paying an invoice at the end of the year, that would make them less noticeable, but that's not a necessary component of private taxation. Adding up all your income and just calculating a simple percentage would create just as much awareness--probably more, because there's some clarity/transparency that is easier to understand.
In fact, I'd argue that a complex filing process puts a focus on where money is coming from, rather than where it is going, which is arguably much more important to make transparent to people.
> I don’t think people would consider Chile and Mexico to be developed countries.
Any basis you could have for not considering Chile and Mexico to be developed countries applies to large sections of the US (incidentally, they tend to be the parts of the US with the lowest taxes). There's more poverty in the parts of Alabama and West Virginia that I've visited than the parts of Ecuador I've visited.
> You’re right that Ireland and South Korea are lower (depending on the year, Ireland cut taxes significantly recently). But they’re together with the US in the bottom band.
So the rest of your argument doesn't work, since it was based on your claim that we have the lowest taxes.
how would that affect ease of tax generation? You would still need to have the proper congressional authorities vote on the matter, no? And sure, when I am in sweden I get taxed more because of VAT and such, but having a national standard where I can just declare my taxes for the year by pushing a single button for free through the government tax app is a benefit to outweigh any worry that you will get shafted by new taxes. In the US it just seems backwards and no excuse can justify this. Horrible system.
> how would that affect ease of tax generation? You would still need to have the proper congressional authorities vote on the matter, no?
People aren’t paying attention to tax bills that are getting voted on. But when they do their taxes, they’re forced to actually work out how much they’re paying the government. A bill or invoice they get in the mail wouldn’t have the same effect.
As to the US system being unjustifiable, I think Europeans don’t really understand America. In an ideal world, I’d prefer a Swedish system with high taxes, lots of social services, etc. But Americans aren’t Swedes. They don’t trust their government, and they don’t really trust each other. A quarter of Americans polled favor their state seceding from the country (ranging from 20-34% depending on region). By comparison, only 15% of people in the Basque region of Spain want independence.
I live in Maryland, which is about the same population as Denmark and only moderately smaller than Sweden. It’s a “blue state.” Our capital is Baltimore. Schools in Baltimore spend 40% more per student than schools in Sweden, in a city where you can get a beautiful townhouse for maybe 1/4 of what it would cost in Stockholm. The schools should be amazing, right? No. They’re awful, with terrible test score and enormous gang violence. The city government is corrupt. Not in the way you probably think the US as a whole is corrupt (controlled by wealthy elite), but the sort of reciprocity that typifies developing countries. The former mayor has been convinced of felonies, and in February will probably receive a sentence of 5-10 years in prison.
So despite being a strongly blue state, we elected a Republican Governor by an overwhelming majority that promised to control spending, cancel public projects like transit lines, etc. Because we don’t trust (can’t trust) our government to use our tax dollars effectively.
So yes, there is support in America for things that make people think hard about how much they pay the government: https://www.youtube.com/watch?v=BcEhl5HfGMM. And it’s not irrational or crazy. Our situation is very different than what you face in Sweden.
> People aren’t paying attention to tax bills that are getting voted on. But when they do their taxes, they’re forced to actually work out how much they’re paying the government. A bill or invoice they get in the mail wouldn’t have the same effect.
Except they’re not working it out. They just have TurboTax do it then see they get a few thousand dollars for $35+ and a few minutes of work. Most people don’t understand that a tax return is money that was already theirs; They just see it as an extra paycheck.
> But a platform of “we’re going to make taxes painful so the government is afraid to raise taxes” gets a lot of votes.
I've never heard anyone promoting the idea of keeping taxes complicated to avoid higher taxes.
There's nothing inherent in complicated taxes that stops the government from raising rates.
Conservatives have long wanted the flat tax (file taxes on the back of a postcard) and lower taxes, so simpler lower taxes.
I think the reason it became so complicated was because businesses lobbied for special rules and tax breaks that made things complicated in the first place. Businesses are now setup to take advantage of these loopholes (Amazon passing $0 in taxes, etc.).
TurboTax was built as a result of complicated taxes and they lobby heavily against a simplified tax code.
It's not some cabal of citizens wanting to keep taxes complicated, it's the industries that benefit from the current tax code that wants to keep it this way.
Essentially:
* IRS wanted to open tax software business to private companies.
* Intuit has a variety of products with similar names and each has a free offering for a specific set of tax payers (e.g. income below some number). IRS + US Gov bought the story.
* Intuit caught doing a variety of false advertising, misleading documentation, adversarial website editing, etc. They make it impossibly hard to find which is the free version of whatever you need.
So this is a big first step away from the draconian Intuit monopoly. It would be interesting to know what precipitated this change.
The recent movement seems to be heavily precipitated by the discovery that Intuit was hiding its Free File pages (apparently first found by this Redditor [0]), with the stories sparking investigations at the federal and state level.
Excellent news, and congrats to Propublica for in no small part making it happen.
This wasn't just a shady operation -- Turbotax openly lied to customers about its free file program, it deliberately suppressed the program from search results, it lied to veterans. It was 100% acting in bad faith during negotiations with the IRS.
Sometimes topics like this end up becoming kind of ideological or partisan; but in this case I feel like Intuit is just very objectively in the wrong, and that the IRS agreement for the free file program very objectively just was not working. I myself contacted Turbotax about their free edition and got personally lied to about the differences between the programs.[0]
> In this call, I was told that the form availability between the Free File and Free edition were the same, and I wouldn't be eligible for either. To check this, I created a second account and added the same forms to the Free File program. I was never charged or told that I was ineligible. All of the forms were added successfully.
There's a good Planet Money episode that explains how surprisingly it is still a partisan issue. The Republican argument, at least from certain prominent people in the party, is that if paying taxes gets too easy the average American will be less likely to push their representatives to lower taxes or to oppose new taxes that get proposed.
> is that if paying taxes gets too easy the average American will be less likely to push their representatives to lower taxes or to oppose new taxes that get proposed.
This is problematic here (small EU country). People have no idea how much taxes they pay, and believe free (healthcare, schooling,...) is actually free, and that government can pay for anything. If average Joe (Janez here) would know how much taxes he pays for (eg.) health, and what kind of a shitty service he gets for that, he'd be protesting already,... but since it's 'free', it's ok, just so he doesn't have to pay for it (out of pocket directly).
I do get that angle of it, but that partisanship shouldn't extend so far as to excuse lying to people.
I guess what I meant by partisanship is, we could have a higher-level argument about whether or not the IRS should in theory have its own filing program, and that's the way that Turbotax wants to phrase this -- that it's just that Democrats want a government program. But Turbotax was blatantly involved in false advertising, lying to customers, rigging search results to get around their obligations.
Intuit is putting out videos that say, "Probublica just has an agenda", they want to make it a partisan issue. But it's like a gun company selling guns that randomly explode in your hands, and trying to say that it's an attack on the 2nd Amendment when they're forced to issue a safety recall.
When I describe the issue to people, I try not to let them have a partisan debate about taxes in general. When that debate starts to come up, I push back on the simpler issue, which is just that false advertising shouldn't be OK.
Honestly, knowing how much taxes you pay is important (and as i said in a comment above, problematic, if people don't know).
But this can be solved by autofiling taxes, and then sending a yearly report: you earned X, paid Y taxes, out of those, Z goes to this, Q to that, W to that other thing, you've used these government services this year, that cost that much money, etc.
No doubt, the thing for most people, including anyone who hates paying taxes is the bottom line. I don't see any connection though between the bottom line paid and how forgiving people will be when they discover how easy it is to file. I suspect the word prominent is a misnomer at best, it just makes no sense to me.
Now let's have the IRS start building out their free e-file program and IDEALLY put some pressure or at least summarize what parts of the tax code are the most complex so they can be simplified.
A lot of the tax code complexity comes from congress messing with the logic of taxing folks on their income.
And yes, simplifying the tax code would get rid of loopholes like deduction that can exceed the cost of the item placed into service (!) which make zero sense AND create tax vs gaap difference that have to be tracked over long periods of time.
Another one to get rid of - phantom LIFO inventory unless the inventory is real.
Do you have a reference for the deduction greater than basis loophole? I spent a few minutes looking for it on google and couldn’t find a reference. It does seem non-sensical on the face, but I’d like to read more.
One idea I though of in the past: if you have a very high income, your income tax rate can approach 50% (state+federal). If you donate appreciated assets to a DAF, and break the effects down by basis+gains, the numbers look like
- 50ish% back after deducting the given unappreciated basis,
- Selling the short-term gains would cost you half the profit, so the charitable deduction gets you roughly 100% of the after-tax profit from the trade back in your pocket.
(Plus the upside of sending money to charity.)
The math doesn't work out for long-term gains though, and obviously works best when the asset has appreciated strongly. Not sure about the legal treatment of partially-donated options spreads or other complex hedging tricks to manufacture these gains and offset them against a loss.
Sure - look into something like a depletion deduction using the percentage method rather than cost method.
This creates a complexity nightmare - as you end up with basis changes for s corp pass-thru's etc that are not tied to anything "real" - ie, no additional contribution of assets or payment of tax on accumulated gains. This all makes things very complicated from recordkeeping, reconciliation and auditing perspectives.
> ...put some pressure or at least summarize what parts of the tax code are the most complex so they can be simplified.
Trump's tax plan did simplify things for the majority of W-2 workers on salary that used to itemize because they owned a mortgage. Now, most of them can file using the standard deduction.
I don't have a mortgage but have sometimes itemized depending on moving and work expenses, various deductions, etc. Those are now gone, and my taxes are easier as I don't even bother keeping receipts and saving charitable gifts throughout the year. I come out a head, too, since the standard deduction was almost doubled.
Even if the IRS has their own filing program, Intuit and H&R Block wouldn’t go out of business; People who want to make sure their getting the best would still use them, along with people just distrustful of the government.
The IRS is perhaps the one government agency that just does not fuck around. It's always sensible to make sure that filing for taxes is as smooth as possible, at least for those who wish to abide by the rules. Follow the money.
I think they get it mostly right for tax filing. But I find them to usually be pretty blinded by ideology when it comes to some topics and severely lacking in objectivity.
Yeah, they range from very accurate to downright dangerous (the one about late pregnancies stands out as terrible). It's not a consistently good source.
+1 to Adam Ruins Everything! Other commenters might scare you away, but it brings attention to a lot of things that go unnoticed by the general public. Of course, always check sources yourself, but there are some genuinely interesting things brought to your attention that you might have never thought about.
If you mess up your taxes, the IRS actually has a very reasonable process for making amends, with penalties that aren't egregious at all. It's mostly a small interest (like a couple percent above prime or something), which caps at 25% of the unpaid amount.
In fact it's the same interest they pay you if you were due refund and they were slow giving it back.
My main complaint is that it's a super, super slow process. They'll follow up years later, and each back and forth takes like three months.
Yep, I've heard that too. However, the states are much worse. Someone was telling me about how he made an error, and New York was much more aggressive. He decided to take his family and company to Texas instead, so in the long term, New York lost a lot more money. Plus his kids when they grow up will probably stay in Texas too, so they might as well lost an entire generation they could have taxed. Plus New York isn't a business friendly state in the first place along with New Jersey and California.
Then California is the same way too it sounds even going after former residents as they went after the inventor of the microprocessor who moved to Nevada, and even broke Nevada law while doing so since they sent state officials across state lines to stalk him and dig through his trash. He sued California in Nevada and was granted millions of dollars, but due to a loophole, California didn't even have to pay as much as the judge in Nevada ordered. California says living in an apartment isn't a permanent home, you must get a mortgage and buy a house to no longer be a California resident... Well, of course, that isn't the actual law, so the state of California abused their power.
I wonder how California would view someone getting into YC, doing the program for the 3 months and then going back to where they were originally living or moving to a totally different state after such as Austin, TX since they had no intent of living in California? I wish YC would expand to Austin. San Francisco looks nice to visit, but due to it being expensive, and politics it's a turn off for some people. However it seems like Austin is starting to have some of the same problems with cost of living rising since it's growing, Apple is expanding there to be the largest employer in Austin.
In Australia you do your taxes and then a few weeks later you either get a refund or a bill. If there's anything that doesn't add up in your filing they may ask you about it. Nothing to regret unless you knowingly filed incorrect information.
Edit: a lot of it is pre-filled (payroll, bank interest, investment distributions in my case), you just need to check against your own records.
Exactly. This made sense decades ago when it would have been extremely costly to keep track of all the data necessary to calculate taxes.
I don't want the government to make a free solution to help me file taxes. I want the government to make a solution that prevents me from having to file taxes in the first place!
From the article: The addendum also expressly bars the companies from “engaging in any practice” that would exclude their Free File offerings “from an organic internet search.”
Note the term "organic" which suggests the page "naturally" ranks in the first few hits. The agreement doesn't seem to prevent Intuit and others from both buying ads to populate the top of search results and SEO'ing the crap out of it to make their stuff rank at the top "organically."
I see this as a good example of how policy makers write policy with good intentions but without a fundamental understanding of how gamed Internet search is in order to make it profitable.
> I see this as a good example of how policy makers write policy with good intentions but without a fundamental understanding [...]
I agree with your argument in the general case, but in this case that seems like what they would want: not to exclude the possibility of advertising or SEO for the other products, but to rule out doing reverse SEO (or just robots.txt to exclude it from search engines) on the Free File pages.
If the government can pre-fill my tax form, why should I even have to file taxes to begin with? Just send me the pre-filled information each year and tell me I need to correct it if it's wrong. Otherwise, I shouldn't have to do anything.
Basically how we do it in Norway, and probably lots of other countries that does it automagically.
1st of April every year we get our pre-filled tax form (digitally), which we have to look over. If we find it to be alright, we don't have to do anything (deadline the 30th of April) and the taxes have been filed.
All financial institutions sends data to our tax office, so it's all there.
We need a simpler tax code with fewer deductions before a simple tax form will make sense. Otherwise people will just get their simple tax form and pay TurboTax or someone else to squeeze every penny out of the deductions.
> a years-old prohibition on the IRS creating its own online filing system has been scrapped
What kind of insanity leads to this? The government is prohibited from creating software that helps its citizens?
There's a lot wrong with Brazil but here I just download the government-provided software (that runs on Windows/Linux/Mac) and fill my taxes in 10-15 minutes. Every year they release a new version that is easier to use than the previous one.
> Those efforts have been fueled by hefty lobbying spending and campaign contributions by the industry. Intuit and H&R Block last year poured a combined $6.6 million into lobbying related to the IRS filing deal and other issues. Neal, who became Ways and Means chair this year after Democrats took control of the House, received $16,000 in contributions from Intuit and H&R Block in the last two election cycles.
While I agree there is a money problem, it's not quite so simple as just "paying people off". The money goes to their campaign funds which I'm sure get abused sometimes, but they also get called out and prosecuted for it. Additionally, money donated directly to the politician's fund is limited. Money paid to a PAC is very much separated from the politician. They can't so much as coordinate with the PAC.
So it's more about having money to get reelected than a simple personal bribe.
> While I agree there is a money problem, it's not quite so simple as just "paying people off".
Sure, it's paying people off with more steps, and keeping them when they are so they keep providing the services you paid them for.
> Money paid to a PAC is very much separated from the politician. They can't so much as coordinate with the PAC.
They can't so much as explicitly and officially coordinate with PACs. I'm sure a second of thinking will reveal the flaw.
> So it's more about having money to get reelected than a simple personal bribe.
You're the one talking about personal bribes. And I still fail to see how the fig leaf of "campaign donations" is anything more than a bribe with more steps. “Oh they’re not getting money they’re getting the means to make money”.
There were whole weeks of "The Colbert Report" where Colbert and Jon Stewart legally set up a super PAC for colbert to run for "president of South Carolina" where they exploited every bit of the super PAC legislation just to show how easy it is and what kind of legal things people can do with the money. The "you cannot coordinate" part was hilariously easy to get around.
The idea was lots of people could file for free using a private online service. Not many people at all ended up using it, since it wasn't in the company's interest to have people not pay them.
More accurate: Intuit told the federal government they would absolutely offer a free e-file tax service next to their pay service, and then they used several lies and manipulative techniques so that folks could not find it or even discover its existence.
Or if you do find it, you get intermodals with dark patterns upselling the paid service, and once you upgrade you can't downgrade back to the free-file version.
Of course they did not use it. Tax software companies went out of their way to make sure this would be the case. After all their shenanigans, they might as well have put Free File option in the bottom of a locked filing cabinet stuck in a disused lavatory with a sign on the door saying Beware of the Leopard.
Related: TurboTax Deliberately Hid Its Free File Page From Search Engines
We have systems in place to push back against the slow but incessant march (back) to plutocracy, but we don't always use them in a timely fashion. After almost 250 years there's been some... entropy.
Except it's not entropy, it's order (which helps with the sales pitch). Just not the kind of order everybody needs.
We have a huge constituency that believes that government taxes are the very worst thing to happen in human history, so anything that makes filing taxes easier gets heavy push back in order to support their “taxes are so hard and burdensome” narrative.
In Australia you can do it all online. Took me about 60 seconds this year and $0. Admittedly I had nothing to claim or declare beyond PAYE and the auto-filled dividends.
There is no reason the IRS shouldn't have a simple, online fillable 1099EZ that makes the calculations and validations for you. And while their at it, match the SSN to the w2 info that they have on file. This would take care of 80% of the population.
Just don't outsource it. I'm sure USDS could have it ready in less than a year.
100% agree. To me they seem to be playing this perverse game of knowing how much you owe based on your W-2s then not telling you, waiting for you to file and guess how much you owe just right. If you guess wrong tough luck, you get penalties years later.
As an average Joe it seems like it can be pretty much impossible to figure out the rules in any number of corner cases.
For example. I'm considering installing Solar Panels on my house. The entirety of the official IRS guidance (in the manuals) is this:
"Qualified solar electric property costs are costs for property that uses solar energy to generate electricity for use in your home located in the United States. No costs relating to a solar panel or other property installed as a roof (or portion thereof) will fail to qualify solely because the property constitutes a structural component of the structure on which it is installed. The home doesn't have to be your main home."
So of course the first question you ask is "Ok, I have to fix my roof to install solar, and that appears to be covered. But does it only cover the part of the roof covered by the panels or does it cover the entire roof job? Does it cover the costs of only a basic roof job or a premium job? If it only covers the portion under the panels what is the procedure to prorate the costs?"
It wasn't clear to me so I called the IRS help line, figuring that this is their job. They are the ones that ultimately decide one way or the other if my deduction is valid or felony tax fraud. The official guidance from the help line is "We do not offer guidance on that issue." The money we are talking about isn't trivial either. It can amount to thousands of dollars, guessing wrong could theoretically mean actual jail time or massive fines if someone at the IRS decides to make an example of you.
Like WTF IRS. I'm trying to do right here and you're literally making it impossible.
(Which even has a contact phone number for the author; call it! Worse that can happen is they point you somewhere else.)
If you google "IRC §25D" you'll find a wide variety of resources. In reality, what you'd likely do is a read a bit, and try to come to reasonable conclusion. If the tax amount at issue is substantial, try to find someone with expertise in the topic. Also try to take ideas to their logical conclusion. If 25% of your roof is solar panels, do you think the credit should apply to the cost of an entire new roof as well? It's a credit to encourage energy efficiency, not regular upkeep.
I updated my answer above. I googled the tax code section. Pretty much everything you need will appear in the first page of results, or linked to/referenced from those results.
CPA's know what to look for, so it's a bit easier for them.
It may be worthwhile to consult a tax attorney. The IRS help line is just a help line, they aren't tax attorneys and they can't give legal advice, which I think this qualifies as.
I'm not a tax attorney, or an attorney at all, and so this isn't legal advice, but IME if you make an honest mistake, the IRS will usually send you a letter informing you of this and you'll get a chance to make it right.
When I've guessed wrong, I've also been rewarded with unexpected large dollar figure checks in the mail. I did once make an error that cost me, and someone at the IRS was excellent in working together over the phone to get things square.
> I've also been rewarded with unexpected large dollar figure checks in the mail.
But did they also send any interest? Notice if you owe them, you also owe interest, unless you negotiate. If they owe you, you don't usually get the interest sent do you.
For people who aren't good at budgeting/saving, it can be a decent way of putting away money for a large purchase or two every year. It's a lot easier to raid a savings/retirement account than to get your IRS refund six months early.
I'm not sure if this is the exact situation you're referring to, but you do get interest sent to you if you later amend a tax return in your favor.
Source: I've filed a 1040X twice, both times in my favor (due to my own mistake I noticed on my own later). The IRS issued me a 1099-INT the next year for the interest they paid me. The rate was substantially above market!
Yes, they pay you interest. That's from personal experience, when they returned money that I did in fact owe, because it was outside the statutory limits of how far back they can collect. It was literally a few dollars and a few days, and they paid interest.
The "penalties" are just what you owed plus interest. I think the IRS will only charge an actual penalty if they think you were deliberately trying to avoid taxes.
I haven't run afoul of the IRS, but my state tax collection agency didn't even bother notifying me of underpayment, they just sent my account straight to collections to have me hounded by debt collectors. After contracting with a lawyer we determined that not only had I paid my taxes that year, I had OVERPAYED and the state actually owed me $500. When I resubmitted a corrected form for the state tax assessor, they sent me a letter saying the time-limit for requesting a refund for that year had passed and I could go kick rocks.
Experiences like that aren't unique and are enough to put lots of people off trusting the government to be on their side for resolving disputes like this. Most people don't separate out their state or local authorities from the feds. It's all just "government" to them. And even the IRS can make life extremely stressful by auditing people who aren't all THAT rich to begin with (because people with real money have lawyers who make it expensive to go after them).
I, personally, think the solution is to make the federal (and state) bureaucracy more service oriented rather than treating everything like a punitive law enforcement role. But apparently not many people agree.
> The "penalties" are just what you owed plus interest
Sure, interest after 6 years can accumulate into a nice penalty sum on top of what is owed. If IRS ends up owing you, and they discover it 6 years later, would they send you the refund with an interest as well? I am guessing they won't.
Not true. They don’t give you interest on your payroll withholdings. If you overpaid taxes by $5000, you get exactly $5000 back as refund, despite them having that money for a part of the year.
They do pay interest that accumulates some time after the filing deadline.
This is probably just a practical matter, because accounting for interest during the tax year would be complex/impossible because you would need to know when the various amounts of withholding exceeded the amount owed. I'm not even sure there is a single consistent way of doing this.
I'm not an American but I've been doing US taxes for 10+ years. There's never been any guessing involved. What were you trying to guess?
I've underpaid precisely once, when I didn't know about qurterly reporting, and the so-called "penalty" was nothing unfair -- just the interest the money earned in my account instead of the IRS's.
I don't know what the OP's "guessing" comment was about, but the whole process is asinine.
The IRS already knows the numbers on W-2 forms because they get the same data from employers. Financial institutions also send them 1099s and other forms.
So the IRS already knows all the numbers. There's little point in making people manually re-enter the data.
The IRS should automatically fill in everything it knows about, and then let people add deductions and unreported income if they need to. It would make filing taxes almost a no-op for a lot of people.
I believe that Americans in the past and maybe even today have preferred the freedom of doing things independently of the government. While it is true the government receives all reported income, it is not true that they know about all your deductions/expenses. While many Americans are oblivious to such things in general the government gives you control over your own taxes. In reality, it's a small amount of responsibility and lets a person take ownership of the process. It is NOT difficult at all, especially for W-2 with the standard deduction. The whining in this thread is ridiculous imho.
The one time I underpayed I promptly received official letters from the federal and state governments giving me time to pay them with a very minor penalty (it was well under 1% due to the short time frame). It was simple and easy.
Ironically the Trump tax cuts made this even easier as the standard deduction was doubled making it much less attractive to itemize.
> In reality, it's a small amount of responsibility and lets a person take ownership of the process. It is NOT difficult at all, especially for W-2 with the standard deduction. The whining in this thread is ridiculous imho.
The ask is for the government to declare what it knows about a resident's taxes upfront, and then letting the tax-payer decide how much they want to invest in contesting the government's calculation. The conjecture is that for most people the need for contesting the government's math will not be needed. Currently, the part you call "responsibility" results in tax payers paying a third party millions of dollars every year. The expectation is that this waste of money can be largely avoided. How is that whining?
Doesn't matter. The pain and anguish is the goal. I have heard multiple commentators/politicians ( mostly GOP ) state that they want taxpayers to have a negative experience when it comes to paying taxes.
But then the documents they send are poorly documented, and very difficult to extract the required information from. The documents you want might also arrive after the annual filing deadline, or never.
And what they calculate for what you owe never includes optional means of reducing tax owed. So in some cases, the number you calculate for yourself can be both lower than theirs and yet still correct.
If you are in a business that includes a lot of cash transactions, or have to report additional income from sources that do not automatically report on a 1099 or w2, a FOIA request should be able to tell you what the IRS already knows about, and can prove that you earned. That will allow you to calculate how many patriotic brownie points you will earn for reporting those sources that aren't already noted in your file. As with many things related to government administration, be warned that if you choose to play stupid games, you might win stupid prizes.
Have you actually gotten a penalty? The IRS is just interested in gathering its taxes, it has no interest in punishing you. You have to mess up pretty hard and/or deliberately to get the IRS on your case.
I have gotten IRS penalties/interest due to my incorrectly reporting. I was confused about how to report RSU and Stock Option income, and then I was doubly confused about how to do quarterly filings.
I am REALLY trying to do this on my own without an accountant. I think I got it right with 2019, but I will find in a few week how far off I am when I try to file.
I'd say my interaction feels like the IRS is just painting by numbers - they are just running the numbers and checking if you filed correctly or not. If you did not and the number is significant, they send you a letter.
A trick for when you're trying a strategy you aren't sure of:
you can overpay the IRS by the amount you would pay if the exceptions you are pretty sure apply actually didn't.
They will return the extra to you, and you lose the interest that money could have earned but gain the knowledge for next year of whether you can or can't do what you wanted to try. Depending on your specifics might be cheaper than a tax adviser.
Disclaimer: YMMV, I'm not a tax advisor, I pulled this out of my * * *, etc.
6 years later you don't just get to pay what you owed. There is interest to be paid as well. You can negotiate sure, but they could have just sent a pre-filled form saying "based on W-2 and what we already took out, here is how much you owe us, if you agree, sign, send the check and return it" or even better do it online.
In my experience the IRS will get back to you within a few months if there are errors at most with exactly the information you described. Where is this 6 years coming from?
I had an examination a few years ago. It was about 5 years after the fact. My wife and I were taking turns doing taxes and for some reason I forgot to give her the paperwork for an investment account one year.
It was not a pleasant experience. So they knew about this account, all the years before and then all the years after. We got a letter that said I under-reported my income for some year 5 years prior. I mentions the account and the amount. Explains that since I didn't report that account, it's treated like normal income for that year I owe them $80k plus penalties.... I forget the exact wording but prison time was mentioned for tax evasion in the initial letter. Hired a lawyer, hired an account, refiled that year and then the subsequent years since the account found some more deductions. Then it took about 2 years to get it closed out. We'd write a letter,
3 weeks later we'd get a letter back the said they'd respond to our
letter within 90 days. After like 9 months the accepted our new tax
submission but insisted we pay the penalties. It took another 15
months for those to get waived. It is infuriating fighting over
penalties that no longer apply.
They pretty much have what you want through the free fillable online forms. Everything is digital, you simply enter the numbers from your documents and calculations are made for you. It does not do any SSN verification though.
They kind of do. I've been using 'Free File Fillable Forms' linked from the irs.gov free file website[0] for the past 10 years to do my taxes. These forms don't calculate _everything_ for you, but substantial portions are calculated.
One caveat is that you can't attach forms you've been sent from your bank or employer or whatever; you have to transcribe your W-2, any 1099s, 8949s, etc. This can be tedious. I don't know if e.g. TurboTax somehow makes this better.
I am sure that there are people for whom free file fillable forms is not enough, but IMO these people should probably be working with a CPA.
Of course, there's a long list of items that help rig the system including outdated electoral votes, accepting unlimited funding from big business, the removal of term limits in 1995, and now the rampant gaslighting and spread of false news where the louder voice wins instead of facts coming out on top.
I prefer this Milton Friedman quote, because we cannot make better people:
> I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or it they try, they will shortly be out of office.
To complement the sibling, here is another Friedman quote which hangs at the top of [0]:
> We do not influence the course of events by persuading people that we are right when we make what they regard as radical proposals. Rather, we exert influence by keeping options available when something has to be done at a time of crisis.
> or at least not any gerrymandering that happened in the past 100 years.
This is the /very/ important distinction. Our entire country was gerrymandered when they gave every state 2 votes in the senate. It's truly crazy how few Americans can sway the makeup of the senate/house/EC.
Edit: removed "(and 3 base in the house)" because that's not correct, I was mixing it up with the EC in my head.
> Our entire country was gerrymandered when they gave every state 2 votes in the senate.
That's not gerrymandering. That's the result of a federal system of government where every state is represented equally in the senate, and on the basis of population in the house.
It's fine if you don't like it, but it's not gerrymandering. Gerrymandering is manipulation of district boundaries. Senate representation of entire states is something else.
You are correct and I misused that term. I thought it was any form of changing/manipulating the system in order to allow minority rule but it’s specific about changing boarders which doesn’t apply to what I was referencing.
The senate is gerrymandered. The reason we have north and South Dakota instead of just one Dakota is that the Republicans (same name, but long long long ago) wanted for senators, not two.
I don't disagree with the first line but the second line is a huge problem IMHO. Things will only continue to degrade when we paint these people as "morons", it will only push them further into the arms of the party that espouses to be fighting for them all while working against their best interests.
Or they die off. Which (having grown up there) is infinitely more likely.
Their smart kids leave. The one thing they do that's smart is put all their resources into their 'smart' kids (which may not actually be the smartest ones) and then push them into an environment that encourages them to make something of themselves. The main side effect being that they're no longer satisfied by nothing and leave.
Is it? What do you think they think of urbanites? Do you think city dwellers being more polite is going to sway their minds? Make them realize the error of their ways?
I do not agree with the language in the OP's comment since this isn't Reddit. However, the argument that Trumpism is a result of City Dwellers holding Rural folks in low esteem does not hold much water.
I assume you responded to some dumb comment where some rural no one took a cheap shot at city dwellers.
In Pittsburgh it's hilariously easy to tell who from the area hasn't actually been in the city for 10 - 15 years. Mention East Liberty or Lawrenceville and they get all scared about drugs and black people. These areas are now some of the most expensive in the city.
> It is largely due to Republicans that we don't have such a program. Voting matters.
Except I don't get to vote on single issues like this. The US is a republic and I get to vote for leaders who supposedly represent the voting population to which I belong.
Problem is, there is never a viable representative who even somewhat closely matches my views on all issues - especially since the parties have so much influence in elections.
So it's not very helpful to just imply that I should simply vote for someone else.
Voter education is important for issues like this. If an idea becomes popular among a party's voters, the party will start to support that idea, which in turn influences their candidates.
Maybe when republicans stop raising straw man arguments and misrepresenting democratic positions we can have a reasonable conversation about actual issues. Maybe.
Both parties have been very much in charge of this tax situation in America. Both parties have had many, MANY, majority rule situations over the past decades they could have done anything else about it. Nobody would have been stopping either of them at different points in time if they ever wanted to cash in on their party rhetoric.
The problem generally comes down to the fact that no Republican is for improving tax filing. So all it takes is for a handful of Democrats to be lobbied to oppose it and even a Democratic majority can't push changes through.
Paul Ryan also proposed something similar. However, Democrats opposed it. Basically if it’s simpler and cheaper taxes, Democrats cry foul. Auto filled forms with the current tax system is just lipstick on a pig.
No, better filing with the same tax system is empirically a better position. Holding auto-filling hostage to push contentious unrelated systemic changes is dirty, and why we have such gridlock. "I'm willing to allow a wide-consensus change but only if you concede me my very contention change" is not good-faith.
Maybe Intuit's donations and lobbying were not caused by that, but doesn't it seem really strange that a popular initiative suddenly changed direction after a big pile of money was given to Republicans?
Politicians shouldn't be willing to change their stance for money. It's as much Intuit's fault as it is the people that took the money.
>> That morning, Frommer polled his colleagues in the Assembly and found they were a vote short. No Republicans would vote for the bill, and some Democrats would vote ‘no’ too.
>> Once again, Intuit had blocked ReadyReturn.
It's definitely an Intuit thing, but being bought by Intuit seems to be a majority Republican thing.
> but being bought by Intuit seems to be a majority Republican thing.
That's not what the article says though. It says Intuit bought Grover Norquist, who then caused Republicans to vote against it (but not because of money they got).
And it says: "In 2007, Eric Cantor (a Republican leader) and Zoe Lofgren (a Democrat from Silicon Valley) had introduced a bill to ban return-free filing. Both received contributions from Inuit."
The article clearly states that Intuit deliberately used Republicans to lobby against ReadyReturn.
Intuit had just given $1 million to a Republican running to unseat John Chiang, an FTB member who supported ReadyReturn. The chair of the FTB, Steve Westly, says the support drummed up by Bankman gave them more political space to vote for a program they felt strongly about.
Let's not ignore the fact that the Republican platform fundamentally lines up closer to Intuit's business interests.
When Ronald Reagan was governor of California, he opposed a reform that would make paying taxes more seamless on the grounds that “paying taxes should hurt.”
...
That morning, Frommer polled his colleagues in the Assembly and found they were a vote short. No Republicans would vote for the bill, and some Democrats would vote ‘no’ too.
The vote for the CA bill was effectively along partisan lines and national opposition to tax filing reform receives significant financial/political support from Grover Norquist.
"In 2007, Eric Cantor (a Republican leader) and Zoe Lofgren (a Democrat from Silicon Valley) had introduced a bill to ban return-free filing. Both received contributions from Inuit."
And Intuit did not lobby Republicans, it lobbied Grover Norquist.
Add in 1099s, and it would probably cover 99% of the population.
I'm happy to pay my taxes. I'm very much NOT happy to collect all of my information and carry it to my accountant. And then be afraid that I forgot something.
In fact, if its the accountant's lobbying against this, I'd be happy to pay $400 (what I pay for tax prep) into an accountant retirement fund or something, just don't make me collect all the information that the IRS already has.
Accountants make errors too. Literally had the accountant forget to take the 5500x2 ($11000) ira contribution earned income deduction on my parents taxes, until we double checked.
Is this what you're talking about? It doesn't have the intelligence for the W2 reference, but it is fillable. This how I've done taxes. Fill it out, print it off and mail it to the right address.
https://www.irs.gov/pub/irs-pdf/f1040.pdf
The IRS already does the calculations and knows what you owe. They have to so that when people file, they can verify that filing. The problem is that is requires citizens to even have to think about doing it and that is a major pain point Intuit et all are feeding off of.
The IRS has a start at that. States can opt into the "Combined Federal/State Filing Program", which centralizes 1099 reporting, and lets states basically copy the IRS's data for those forms instead of collecting it themselves. I believe this program doesn't currently handle W-2s though for some reason.
I assume you mean 1040EZ, as most people aren't in the habit of issuing 1099's. But you're absolutely right; hopefully this news is a precursor to further undoing of the tax prep lobby's efforts.
> I'm sure USDS could have it ready in less than a year.
The federal government provides a lot of valuable services that private companies can’t or won’t do, but building something like that in a year isn’t one of them.
But how else would you charge millions for half broken and otherwise still shitty software and UIs? Sorry I'm super bitter because all the government sites are absolutely garbage and so many links for more information, explanations, other forms, etc, don't even work and makes dealing with anything related to the government the most frustrating experience.
It's so insane to me that Grover Norquist somehow lobbied against free tax filing provided by the IRS. It escapes all logic that he didn't pay attention to what other countries do. It escapes all logic that he didn't think for a moment about what the cost would be to citizens in (more or less direct payments to Intuit) and that's not considering the incalculable cost of just gathering up all this documentation and put it into TurboTax.
Billions of dollars in lost man power? Billions of dollars in wealth transfers from middle and lower class people? Probably more like Trillions.
Norquist didn't succeed in drowning the government in the bathtub. He DID successfully manage to keep the entire US citizenry drowning in billions of hours of wasted effort and billions of dollars of unnecessary expenditures. Good work, Norquist!
It is not insane, just not obvious what Grover’s aim is. He is anti-tax for a large number of reasons. By making paying tax painful for the majority of people he is trying to increase the percentage of the population that hate the IRS and taxes. All very sane if your aim is to lower taxes.
Now we are getting to the question if his aim is ethical or not. I think his obsession with reducing taxation at all costs is misguided and often counterproductive, but it is not insane.
Ok, this makes me feel like maybe he had intention and thought behind this. I can honestly align with that thinking if he was doing it for this reason. It seems like the world only works with subterfuge, sadly. Is it impossible to be honest about what you want to do and move people in that direction, or is it only possible to motivate change by lying to people.
I don't love Grover Norquist, but I thought it was interesting/open-minded of him to see Burning Man for himself. And, I align with the idea of reducing taxes. So, this makes me feel like he was not just a useful idiot if he actually did it for this reason.
But, still, what a cost to bear. And, does the long term goal of reducing taxation by causing people to hate the IRS get him any closer to actually reducing taxes and/or getting rid of the IRS? Obviously, that did not happen.
Whatever Grover Norquist is, stupid is not one. He appears to be quite a complex (if obsessed) person and his views outside of taxation don’t fall easily on the normal left/right axis [1].
He just has so many strange positions that may be "smart" but, at least at first glance, seem to have awful side effects.
From that page: "In 1985, he went to a conference in South Africa sponsored by South African businesses called the "Youth for Freedom Conference", which sought to bring American and South African conservatives together to end the anti-apartheid movement."
Why would anyone work to end the anti-apartheid movement? Did Norquist think that divestment and free-trade would be more effective in ending apartheid?
Didn't know that Jeff Flake, the sole anti-Trump Republican US senator, was also active in that movement. I have often felt down on my luck about my employment opportunities, but never have I considered working as a lobbyist for a South African mining company during Apartheid. The book "My Traitor's Heart" has some riveting stories about the horrors of being a mine worker in South Africa before apartheid ended.
Wow I would love to hear the inside story on this one.
I think we're all motivated by both survival and doing good, and I see an overall trend towards more doing good, as survival gets easier. Is this a case of that? Who drove it? What internal processes allowed public service to overcome corrupt lobbying pressure?
Yeah there's no reason that in 2019 we should even have to file. Everything should be automated for 85% of the population and they just receive the bill. Only a small percent would actually need to file due to certain circumstances mostly by people that are using special business structures to minimize taxes.
Assuming you're a traditional W2 worker, yes. But many people have other income sources such that the IRS doesn't know how much you owe until you report it.
They should implement something for the simple cases first. Like the standard deductions, no investment income, no business income scenario. That will probably handle 40% of the filers with one page of input.
My pet peeve: I've used freefillableforms or whatever it is called for several years. It's the only (free, online) option (I think) for someone in my income bracket. It's not a bad system, but it is deliberately hobbled: it will do about 90% of the math for you, and about 90% of the "put this computed value on line N of some other form".
But ... not the remaining 10%. And there will be no errors if you fail to do them (other than your return being incorrect).
I don't know if it is better or worse to offer a deliberately crippled system.
I really hope the IRS creates it's own site, they would need to advertise it heavily though, way way too many people think eFile = TurboTax. There's already vastly better options out there but very few people use them or know about them.
Edit: I think the real killer feature would be to pre-populate the "IRS e-file" with the information the IRS already knows about you. That would get people paying attention.
TaxHawk ( https://www.taxhawk.com ) is what I've been using for like almost a decade. Federal filing is free, state filing is only is $15. You're free to use the free federal option without having to pay for the state option. No tiers, no dark patterns, no upsells. The UI is fantastic (and the UI is the entire point of using software, otherwise I'd just fill out my 1040 by hand like I did for many years). You can pull up the 1040 for any of your previous returns.
I've mentioned it on HN before and one reply said they used it to file because of my recommendation and it was both better than TurboTax and saved them like $100.
The mantra for Intuit, indeed for every for-profit company in the Valley, is to grow or die. Even a rockstar exec like Bill Campbell couldn't escape that imperative. Intuit decided they had to keep growing their market to survive and they chose to go after the huge majority of taxpayers who really didn't need their services. Once that decision was made, the logic of eliminating your competition followed as a matter of course, and the IRS itself was and still is their biggest potential competitor.
The vexing question: Why does there seem to be no space in the market for an honest, quality vendor? As in Fastmail, Costco, or the pre-Amazon Whole Foods?
Are there so few customers willing to pay a truthful, higher sticker price that such a business cannot be sustained?
So in Canada I pay about $15 CAD to file for my household. It takes 20 mins and is submitted digitally.
Is this the equivalent of the issue in the USA or is it more expensive or something? I get that free filing is kind of obvious as a right, but the online service really does give me $15 of value so I've never thought to be upset by it.
It's quite a bit more expensive here in the U.S. The issue is that many of the people they are steering away from the free filing (i.e. low income) would benefit from it the most: they have very little money already and their taxes are often a very straightforward tax table lookup. So most would receive no value from a premium tax prep service.
Yeah. TubroTax is around $40 to file. CreditKarma offers their own version which is free. The controversy is that the IRS bound its own hands in saying it couldn't make its own filing software.
I see no problems with private companies charging a Fee to provide a better service.
But -- the hard bits are state-specific support, and the supplementals K-1, 6250, et al. Anyone have first-hand experience with CreditKarma tax filing?
I've used credit karma for the last 2 or 3 years - it's very easy if your taxes are simple (e.g. a job change mid-year, a spouse, itemized deductible, all very easy). It was even ok when my taxes included some weird forms last year because a previous employer was sold and my options were worth a few k - had to figure out where to enter things, but i paid roughly the amount of taxes i expected to so i assumed i filled out karma credit's app correctly.
Overall i think CreditKarma is fine if you don't mind that you're sharing data with a company that would love to middleman you into signing up for a new credit card or something. I find their emails pretty easy to ignore and it's felt like a fair trade thus far, though I may look into the IRS offerings this spring and see what else is available.
> Anyone have first-hand experience with CreditKarma tax filing?
I've used it for the last 3 years in California. Quite simple, free, supports backdoor Roths. Tax returns were quickly accepted and paid out into my bank account.
Dunno about more complex use-cases (I don't own a home or a business, and I work in one state year-round), but definitely worth a look.
I used TaxAct in the past but they're now almost as expensive as TurboTax.
I now use https://www.freetaxusa.com - a little less hand holding than TurboTax, but if you know what you're doing it handles almost every situation and is, as advertised, free.
This is at number two on the front page, I'm wondering how much this is driven by a specific interest in this story, or whether other people are having the same, probably childish emotional reaction that I am, an almost dumbfounded disbelief that a major institution is not charging headlong towards death cult dystopia. A public institution has acted seemingly for public good. Regardless of whether its driven as much by shame as by duty and altruism, - I'm deeply confused about how to think about this.
Is this a trick? Sleight of hand to distract, to funnel the non wealthy towards a presentation of the tax code that obscures the existence of incantations to the elder gods known only to operating thetan level VIII accountants?
Is this a bellwether of positive change, or a an eddy current in the river Styx?
Is this just normal institutional behavior?
Is Ragnarök 2020 just a delusional end-of-days narrative I've bought into?
I can't believe we've made it this far - Y2k didn't kick off, I was sure at least Agile would be dead by now, am I 'dude you\'re overthinking this'?
Politicians aren't evil, just self-interested like most people. It just so happens that the nature of their job sometimes means serving others' interests is in their own best interest. Sometimes.
The IRS already have all the information it needs to automatically file returns for many Americans... does that mean that some of us will just be able to confirm that our automatically generated return is correct?
And, don't forget, there's always CalFile. I've heard it's provided by the Gov for Free!! One of the posters here had mentioned it earlier in the year and I don't want to forget
Now if only I could file my expat taxes via some public service. The filing requirement in the Obama/Trump era for expats is literally insane, and I'd say even Kafkaesque in the truest sense. The way the government treats its expats w.r.t. tax is inhumane and makes me really dislike being an American.
How did filing requirements change since 2008? I didn’t notice any differences. Also, you can use online tax preparations now as they seem to support 2555 and 1116 forms now, which wasn’t an option in 2008.
I believe 2008 saw the start of mass enforcement of FBAR/FACTA, stricter requirements on foreign banks to report American accounts, etc. Things got much worse with Trump and the Republican congress - with sections 962/965 (transition tax/GILTI tax), and 5471 complexity going through the roof. Anyone with a small business, or any sort of ownership stake, was hit hard by these terribly written laws and their onerous filing requirements. Being an American expat is a giant liability these days, which is sad, because I enjoy being American. Expats will unfortunately never have much of a voice, and I don't expect things to ever improve, only get worse.
Only if working with individuals. If I, as a consultant, work with a company, that company requires a W9 from me, and they have to report what they paid me. And I also report what I paid myself in salary and pay federal taxes from every paycheck I make out to myself. So at least for me, they know everything there is to know.
I sell stuff (software, so not really stuff). I certainly file my quarterly estimated taxes (state and federal), but until I file my annual return, the government has no idea how much I've actually earned, nor what my expenses were. Consequently, they're in no position to tell me what I owe them until I've filed my entire return.
Perhaps what the commenter meant was "we should fill out forms detailing income + expenses (where applicable) and the government should compute our taxes for us". I'm mostly good with that idea.
Yes, this won't be 100%. But I'd say easily 99% of people could get all this tax bullshit automated away and they wouldn't have to pay Intuit a single penny.
Edit: looks like this line didn't go over so well. To avoid distractions, I'm going to move these links to another post and mark this subthread off topic.
Sometimes I add little twists into these things to make them less bone-crushingly tedious. Occasionally they cross a line. That's how I find out where the line is.
Assuming positive intentions, it's unlikely that this is a snarky trivialization and more likely that it is acknowledging/praising the persistence of the topic.
I suggest you change "HN has always been at war with TurboTax" which unless I'm mistaken is a reference to 1984, in which history is rewritten retroactively[1]. To me this phrasing seems to imply that half of your links would be strong support of TurboTax.
Since this whole subject includes a lot of doublethink (such as the fact that according to a video someone posted in this thread, the Free File Alliance is a front group to hide free filing), I think it would be better not to include phrasing that suggests doublethink. I could be misreading your comment, though.
It seems that you might not have been aware of this reference? (But the other people responding to your comment are picking up on it.)
[1]
>To hide such contradictions, history is rewritten to explain that the (new) alliance always was so; the populaces are accustomed to doublethink and accept it.
In the US, we've had decades of (largely GOP) messaging that the government can't do anything properly. A substantial portion of the population believes it.
As noted in a sibling comment, the IRS could pre-fill forms that would be correct for the vast majority of tax payers (who take the standard deduction/don't itemize, have a single job, and no other edge cases). These people should not be paying TurboTax either way - the forms they need to submit are relatively straight-forward. People who do need a CPA would have to hire one regardless. TurboTax is literally just ripping off average tax payers.
I forgot to file one of several 1099 forms one year. I got a friendly call from an auditor. He explained what the discrepancy was, how I could appeal if I wanted, and what the payment options were. When I told him I'd take an IRS loan (i.e. a payment plan with interest), he advised me it would be cheaper for me to get a loan from family, friends or the bank.
This was about as far from being threatened with prison I've ever been... And believe me I've come pretty close to being arrested (during exercise of my 1st & 4th amendment rights on multiple occasions).
You don't go to jail for filing a wrong number accidentally. Only if you are intentionally lying/hiding income. I know people who didn't pay tax FOR THEIR BUSINESS for several years and they settled the debt for much less than they owed and definitely did not go to jail. This is just misinformation.
This is true, but you can be asked to pay gigantic fines. IRS wanted me to pay more than 50k in fine (luckily they were wrong and accepted that right away). So maybe jail is hyperbole, but it can get pretty serious.
Having a tax lien on your business is not fun. Neither is going through the settlement process. You also are not guaranteed a settlement and could end up owing the full amount plus interest. At best they let you pay it over time. At worst they take your property and liquidate it. But jail time is unlikely unless you had malicious intent.
You can have the irs figure out how much you owe if your income is simple enough. This is similar to a lot of countries just taxing you at your income sources and not requiring you to file a return. However, the American system has a lot of deductions, exemptions, status modifiers, etc... so you often need to pay less than that, hence the need for everyone to do tax returns.
The thing people misunderstand with the government not being able to figure it out is because there's a huge variety of complexity that is truly individual based. Did you make a contribution to a tax deductible IRA? Did you make a retroactive payment to that account in the following tax calendar year? There's a ton of variables going on here, where the government doesn't have this all-seeing system where everything gets accounted for across the vast array of income sources and employment statuses, dependents, filing status, and all the increments and decrements to those things through time. There's no one central source where all this information is collated and waiting for someone to turn the crank and grind out a number from. Folks have to remember that nothing is implemented by default.
The effort to reduce the complexity of the 1040 into 6 new schedules was a great way to factor out those with complicated situations such that the majority of tax payers are oblivious to those nuances. The crux of the matter is that legislators passed into law all these onerous mass of rules to turn various levers to entice and discourage certain things and bite those with progressive tax rates. It is precisely the existence of these rules as to why the government doesn't know what tax valley you land in that huge parameter space. It will not presume to know your specific circumstances but assume that you being aware of your own money and circumstances are in the best position to know these things. At the least one thing I learned is that with tax laws if you have no idea what a thing is it probably in not applicable to you.
Needless to say all of this would be much more simple if we just pay a flat tax on all income for all people. Nothing simpler than that.
Literally all of that information is already being reported to the IRS by the relevant companies on forms 1098, 1099-whatever, W-2, W-4 and whatever other schedules apply. The IRS defines the rules, they built an engine to take all that into account to ensure you're not lying on your taxes. They just have to literally run it and send you the printout for verification with a remittance stub. The rest is regulatory capture and graft.
I wonder if I could FOIA myself my tax return from the IRS for the coming year haha.
Flat tax is totally unrelated and a conversation worth having. It's regressive, disproportionately impacts those least well off (the poor) and doesn't make sense when you index the taxes paid to the marginal utility of money. For someone who makes 10K/yr, 10% is 1K and may be the difference between rent and homelessness. For someone who makes 1M/yr 10% is 100K leaving them 900K to futz with. 1K to a poor person ls worth way way more than 100K to a rich person. That's why we don't do it. That's why almost nobody does it.
Flat tax is "simple" in the way it's always easier to re-write something from scratch: what you're left with tends to be a bastardization followed by a long and expensive lesson in how it got that way in the first place.
Literally all of that information is already being reported to the IRS by the relevant companies on forms 1098, 1099-whatever, W-2, W-4 and whatever other schedules apply.
But not instantly. And not all of it in time for April 15th. Sometimes those details don't make it to the IRS for years.
We don't yet live in a world of instantaneous information transfer about every American citizen to the government.
> But not instantly. And not all of it in time for April 15th. Sometimes those details don't make it to the IRS for years.
And yet it has to get there by tax time so I’m having trouble believing it takes some tax forms literally years to make it to DC. Especially when you go to jail if they don’t.
> We don't yet live in a world of instantaneous information transfer about every American citizen to the government.
Buuuut it all has to get there by April 15th (actually February right) so I’m having trouble following this line of reasoning.
> Some people also see that as a good thing.
Why would information arriving quarterly (bi-weekly even) instead of annually be a bad thing when that information is legally bound to arrive at its destination anyways?
The only thing you're arguing is that the government shouldn't run their program a few months before you submit the documents, then send it to you for review, instead of afterwards and sending it to a tax judge. That's madness.
And yet it has to get there by tax time so I’m having trouble believing it takes some tax forms literally years to make it to DC.
It sounds like you've never needed to file a revised tax form for a previous year. I have, and millions of other people do it each year.
Especially when you go to jail if they don’t.
The IRS doesn't show up on your doorstep on April 16th if you don't file. There's a process. A long, involved process. Even if you pay nothing, it takes months before they start forcibly taking money from you. If you file for an extension or two, it's even longer than that.
Why would information arriving quarterly (bi-weekly even) instead of annually be a bad thing when that information is legally bound to arrive at its destination anyways?
Because the vast majority of America's accountants are one or two person shops with neither the time nor the technology to make this happen. In spite of the rhetoric you see on the internet, the government (via the politicians) doesn't like to make things hard on small businesses unless it really has to.
The only thing you're arguing is that the government shouldn't run their program a few months before you submit the documents, then send it to you for review, instead of afterwards and sending it to a tax judge.
> It sounds like you've never needed to file a revised tax form for a previous year. I have, and millions of other people do it each year.
Wouldn’t it be great if it was automatic and right the first time and you didn’t have to file amendments as a consequence because the source material made its way to the IRS AND they told you how much to pay? Or the frequency was dramatically reduced via automation?
> Because the vast majority of America's accountants are one or two person shops with neither the time nor the technology to make this happen.
(a) companies, employers, brokerages, etc all do this filing.
(b) we wouldn’t need nearly as many tax accountants, they’re just a drain on the economy. They’re employed to do the same thing as TurboTax: fill a hole intentionally left open in the IRS as a make work project. Like lamplighters, some jobs get obsoleted by technological and legal advancements.
Regular accountants sure. I’m talking about starting with individuals not business edge cases though.
(c) accountants already file quarterly, for me anyways...
Wouldn’t it be great if it was automatic and right the first time
Except that life doesn't work that way. Not everything in life is linear. Things have to be changed. Going back and making revisions is what humans do.
Nobody’s proposing not allowing amendments though, just that the government send you a best effort of your taxes to verify and for you to send back if correct. Amend away.
Then by all means, make citizens send in the relevant documents to the IRS- but don't force them to have to figure it out on their own if the IRS's software can already do it with those docs!
Tax filing and payment periods can be amended to accomodate that, even the fiscal year. It is not like these periods are unchangeable articles of basic law.
FYI we get all those figures ready by the start of March here in Turkey (Turkish yearly income tax deadline is March 20th). US can clearly figure a way out with three times as more people than Turkey.
We have to remember too that the government itself is dealing in approximations and assumptions of its own. People make mistakes including those in government and corporations.
I do agree, that ultimately there are several deductions that can reduce the taxes you owe in a given year. But most americans don't have enough of these deductions to make a significant difference.
So the ideal solution would be that the IRS sends you a letter in January that basically says "You made $XX,XXX this year, you are in YYY tax bracket, and thus you owe $ZZ,ZZZ money".
So if they sent that in January, then Americans could have until April 15th to either send a check for the amount owed or to send back an approval for the refund.
For most people, the amount the IRS sends us will be accurate. But if you do want to submit additional deductions then there could be a deduction form you fill out that takes the IRS' total and submits deductions against it.
Again, most Americans would not need to do anything. Self-employed individuals or individuals with many investments or donations might need submit additional information. But this would be the minority. Most people honestly could just agree with the IRS' determined amount due.
This is how it works in Sweden, at least for people with reasonably simple situations: You get a piece of paper saying "this is what we think you made and how much taxes you should pay". Unless some reporting is wrong, you just log on to the tax website and approve it.
They also keep a running tab on your tax account, if you underpay or overpay you have an interest-yielding balance that you can either correct or let sit until next year if the amount is so little it doesn't matter. And it's symmetric with respect to a surplus or deficit, unlike the IRS "if we owe you, then thanks for the zero-interest loan you gave us, but if you owe us then there will be interest and possibly penalties" scheme.
> Did you make a contribution to a tax deductible IRA? Did you make a retroactive payment to that account in the following tax calendar year?
For these specific two examples, the IRS need only introduce monthly reporting requirements for all tax-affecting investments, at which point they once again have sufficient data to do your taxes for you. They already have your SSN, so there’s no excuse not to have integrated reporting.
What tax-affecting data does the IRS need to be collecting that they are not, in order to prepare viable estimates taxes for 90% of citizens?
“If your tax situation has changed in any of the following ways, please check the appropriate box(es) and mail this back to us or submit online; we’ll issue a revised estimate within 30 days and extend your review deadline accordingly.”
If you can cover 90% of citizens with an estimate and a list of predictable circumstance checkboxes that can be phoned in for a new estimate, would that be sufficient to make it viable?
(Or, if you’re being sarcastic, please indicate so more clearly.)
Agreed, your response was totally cool and I'm sad to see people downvoting it. I honestly didn't think of children as a tax-impacting event, so I was glad it came up.
Tax brackets are the simplest thing in the world but I've heard this argument several times. Is it made it good faith? Are there really people who think tax brackets make taxes complicated and not 401ks, mortgage interest tax deductions, capital gains, etc?
A flat tax is completely orthoganal to the complexity of the tax system(which is almost entirely what counts as income, and what type of income does it count as).
If tomorrow we merged all tax brackets into one, no one's taxes would get any simpler, just the poor would pay far more in taxes and the rich far less.
If you have 5 tax brackets, all the other parts of the tax system basically get multiplied by 5 in the number of combinations that could cause weird optimal equilibriums.
Eg, maybe the most optimal retirement plan changes depending on whether you are in the 2nd-to-lowest or highest tax bracket. That means advice for one person might be suboptimal for someone else solely because they are in a different tax bracket.
Factoring in indirect taxes like payroll, in Australia about half my marginal income is directed to government purposes (Australian tax system). Rationally I should be spending 2-3 days/year of thinking time reading up on changes in tax law and scheming on trying to optimise my tax burden if I believe I can find a way of reducing that by 1% somewhere. Having 5 different tax brackets is just asking for me to try and find some complicated scheme where I filter income to unemployed relatives (eg, the ol' put income earning assests in the wife's name). I don't want to be incentivised to be thinking about that sort of thing, I'd rather just know there are no options.
The more combinations there are, the more weird schemes people come up with. Having everyone pay a flat 30% and with some sort of minimum income scheme would reduce the number of alternatives there I have to think about and make it easier to be confident that my taxes are properly optimised.
> I don't want to be incentivised to be thinking about that sort of thing, I'd rather just know there are no options.
That's the flip side to a flat tax, we save a ton on the opportunity costs paid for with time and the development of expertise in all this minutiae. We have entire industries and corporations devoted to taxation. At what point does the benefits gained by our tax complexity get outweighed by the regulatory costs and burdens associated with compliance to that complexity?
A quick check
> Tax preparation is BIG business – there were 300k people employed at 109k firms in 2012 - generating $9 billion in revenue in 2012. The industry grew over 2% from 2010-2015, and is expected to speed up the pace of growth. Revenues of $11 billion are forecast for 2018.
https://www.franchisehelp.com/industry-reports/tax-preparati...
What else could we get with that sort of brain/man power?
> Needless to say all of this would be much more simple if we just pay a flat tax on all income for all people. Nothing simpler than that.
That would be a highly regressive tax system that dramatically transfers even more wealth to the already wealthy. But sure, it's definitely simpler. That doesn't make it better.
The regression application here seems flawed, that assumes a fixed percentage is applied to a fixed amount, where that amount is invariant to income. That is not the case with a flat tax where a fixed percentage is applied to a variable amount. The flatness of the flat tax is on the percentage, the amount (income) is the variable portion that will be more or less based on the individual. The percents however will be equal. That's about as equal and fair as you can get as far as I can see, equal treatment for all, namely everyone pays the same percentage whatever that percentage is. It's a simple inequality too: p$XXXX(rich) > p$X(poor) so the rich still pay more right?
My understanding is that while yes, in some sense a flat tax is neither progressive nor regressive, that's not really what people are talking about when they say a flat tax is regressive. Instead, the issue is that the poorer you are, the larger percent of your income is spent on essentials.
If I go from spending $200/month on groceries and then I get an enormous 300% raise at work, I'm not going to start spending $800/month on groceries, maybe $300. The rest goes into the discretionary part of my budget. So, to someone making $40,000/year, paying 20% of that in rent, 10% for food, 20% for healthcare, and 15% for other stuff, adding a 15% tax is a decent chunk of the rest of their budget. But, for someone making $400,000/year, paying 15% for rent, 2% for food, 10% for healthcare, and 15% for everything else, then 15% of their income towards taxes is comparatively much less of their total budget!
This is true, even though everyone is paying a proportional amount of their income. Another way of thinking about this is as follows: if there is a homeless woman on the side of the street who makes $30 one day begging for change, should she be taxed at 15% and have to give the government $4.50 because it's "fair", or, should she be receiving more value in benefits than the average citizen because there is a floor on how much you can spend on food and survive?
Thus, even a flat tax can in practice be regressive, because essential spending does not scale with income.
An addendum: While it is not relevant to this argument, I also agree with the other commenters that whether a tax system is flat or has marginal brackets is not the main source of complexity, and is relatively super simple. The main complexity comes from determining which sources count as income. Presumably, birthday presents don't, but whoops, now there's an exception. And this is suddenly how tax laws get super complicated.
Yes, I'm starting to awaken to the fact that at this point we're no longer talking about income but disposable income. The points about what you're calling essentials. I'm trying to think about this mathematically, this is what I'm feeling out so far...
Premises
X = income
c > 0 (income difference)
p = tax rate
e = some expense
==> X+c > X (income inequality)
==> (1-p)(X+c) > (1-p)X (income after taxes)
==> 1/[(1-p)(X+c)] < 1/[(1-p)X]
==> e/[(1-p)(X+c)] < e/[(1-p)X] (expense relative to disposable income)
Like with many things people mean different things by the same terms. I'm thinking more along the lines of the second investopedia article which makes the point of This type of tax has no correlation with an individual's earnings or income level.
A flat tax would be more regressive than a progressive tax scheme - it's a spectrum.
> That's about as equal and fair as you can get
Equal in terms of % of income paid: yes, fair: no way. Your statement makes the assumption that the opportunities to gain higher income are equally and fairly distributed, which they are manifestly not.
Actually I just tried to tease out a definition from the investopedia article, which I was mislead reading the sales tax example which has a fixed amount (the price of some taxable goods) which holds no sliding scale based on income. The regression appears to be strictly around the idea of burden to the individual and how much disposable income they get left with.
Looking at the wikipedia article they claim that flat tax lies between a regressive and progressive tax.
> The opposite of a regressive tax is a progressive tax, in which the average tax rate increases as the amount subject to taxation rises. In between is a flat or proportional tax, where the tax rate is fixed as the amount subject to taxation increases.
https://en.wikipedia.org/wiki/Regressive_tax
Where in my statement does the assumption of equal income mobility pop up?
> Where in my statement does the assumption of equal income mobility pop up?
You wrote:
> [A flat tax is] about as equal and fair as you can get
I disagree about the fair part, but we likely have different ideas about what fair means in this context. For me, equal opportunity to income mobility is part of what fair means.
It probably does, but why is that relevant? I'm curious about these branching criticisms that come up, another fella above mentioned equal opportunity to earn higher income, you and a few others mention this marginal utility idea. I think these are valid concerns but lumped into taxation break what I think should be an application of the single responsibility principle (https://en.wikipedia.org/wiki/Single_responsibility_principl...). That single responsibility in this case is to make a contribution of our income to fund the government, period. We should have a simple tax formula strictly dedicated to funding the government where everyone has skin in the game and contributes equally along some metric. The flat tax seems a dead simple reasonable metric and is unquestionably equal when focused on contributions.
Once we start trying to equalize along these other dimensions of marginal utility or equality of some other thing we're no longer focused on funding government but enacting some equality/justice endeavor. Those I imagine probably also suffer from holding no simple formula to calculate their equalities against. Let such endeavors be handled by some other government agency dedicated to those causes, why drag the tax system into the mix and complicate things is what baffles me.
> Once we start trying to equalize along these other dimensions of marginal utility or equality of some other thing we're no longer focused on funding government but enacting some equality/justice endeavor.
Creating equal opportunity and administration of justice are functions of government. You seem to agree:
> Let such endeavors be handled by some other government agency dedicated to those causes,
How would you fund such government agencies except via tax revenue?
> why drag the tax system into the mix and complicate things is what baffles me.
The IRS doesn't administer, i.e. Social Security and Medicare. It is just responsible for collecting the tax needed to fund them. Otherwise each government agency would need it's own revenue collection arm, which makes little sense from an efficiency perspective.
A flat tax set at the very low levels its proponents advocate would effectively defund government programs like Medicare and Social Security, which is often the goal behind such proposals.
Note by the way that social Security tax is today an example of a regressive tax which caps out at around $132,000 of income.
> That single responsibility in this case is to make a contribution of our income to fund the government, period.
Yes. And as part of that you have to decide how much each person is to contribute.
> We should have a simple tax formula strictly dedicated to funding the government where everyone has skin in the game
Yes.
> ..and contributes equally along some metric.
Yes, according to their means. The metric is contribution proportional to your ability to contribute and that folds in implicitly the idea that your "means" are non-linear with respect to marginal utility. Noblesse oblige. [1]
> The flat tax seems a dead simple reasonable metric and is unquestionably equal when focused on contributions.
No, it is not. Because 10% of 10K/yr income of someone working at burger king is an undue hardship whereas 10% of 1M/yr income of someone running a big company is no burden at all. 1K to someone making 10K may be the difference between sleeping in a bed and sleeping in the street, but 100K to someone making 1M, frankly, they wouldn't even notice it.
> Once we start trying to equalize along these other dimensions of marginal utility or equality of some other thing we're no longer focused on funding government but enacting some equality/justice endeavor.
No, we know how much we need to fund the government based on cost of policies enacted. That's not the job of the IRS, that's the job of the budget committee in congress. What the IRS is doing is figuring out how to apportion that burden among the population.
> Those I imagine probably also suffer from holding no simple formula to calculate their equalities against. Let such endeavors be handled by some other government agency dedicated to those causes, why drag the tax system into the mix and complicate things is what baffles me.
Again, the goal is to figure out how to apportion the burden, and that's done by indexing to marginal utility, bringing us back to where we began.
To be clear this isn't coming from someone looking to take from others, I'm in the top marginal income tax bracket, and I think it should be much higher than it is. IMO it should go back up to 70% as it was for much of the 1900s. [2]
We don't need a flat tax rate to simplify the system, though. A progressive tax rate is just fine, as long as it is consistent across all types of income with no, or few, deductions. Inheritance is income. Capital gains is income. We may still need some offsetting - it seems unreasonable to tax capital gains when moving your primary residence, for example (which the US does now, with some unnecessarily complicated value and time based offsets).
Flat taxes would not help at all, because the government still needs to know all your data. After that it is just computations which computers are pretty good at.
This is the essence of the idiotic premise of the current administration that they simplified taxes enough to fit on a post card... The number of brackets isn't the source of tax complexity, it's all of the other shit. That's why that 'postcard' can be accompanied with dozens of supplemental forms. Predictably they killed the 'postcard' after one year:
I thought that argument was because they doubled the standard deduction, making it much less attractive to itemize and hence, simpler. What is idiotic about that? For most middle to lower class families it reduced their tax burden and made things simpler. There were a few exceptions, primarily upper middle class families in high cost of living areas, but those were exceptional situations.
The net effect of the changes was absolutely tiny for low and middle income folks, and disproportionately rewarded the already well off for whom the marginal utility of money is the lowest. It was a totally regressive change.
Just doubling the standard deduction is fine. Capping SLPT was a kick in the nards to liberals on the coasts. It's not just "upper middle class" folks who got hosed, its actually people on the bubble, for whom their SF property tax (1.188%) already eats their entire deduction, and now they're double-taxed on their state taxes. 100K may be upper middle class in Iowa but it won't even get you a studio apartment in SF. That's who gets hosed.
And anyone with way too much money got more money. The net of it was dumb.
Capping the deduction for state and local taxes is proper. The cap should be $0.
If those taxes can be deducted, the nation is subsidizing the more wasteful states. We create a situation where the winning move is to jack up state and local taxes. This diverts more money to the state. The cost of wasteful spending gets spread across the nation, while the benefits stay with those who are wasteful. This encourages a race to see who can be most wasteful, with the federal government being forced to have higher tax rates to make up for funds lost to tax deductions.
That’s double taxation. It’s not fair to literally tax me on the taxes I have to pay to another government entity. I don’t even get taxed on the taxes I pay to foreign governments with no cap (?!). The government is “one” from my perspective wrt taxes. No reason for me to pay federal tax on my state tax, period.
Your argument just makes it more efficient for the federal government to be wasteful than state governments which do way way less. It’s useless. The federal government has no business keeping states “lean” that’s up to the voters of said states. There’s nothing in the constitution that makes it the federal governments responsibility unless I missed an amendment.
Further these high tax states also pay for literally all the other states. California is massive net givers of transfer payments and the flyover states being given a break from this are net takers of transfer payments. It’s just biting the hand that feeds. Of course it’s not politically expeditious to say that. [1]
I was in fact thinking of that idea that "high tax states also pay for literally all the other states", and I pointed out a flaw in that argument. They are underpaying their federal taxes. The voters in those states also happen to be the ones voting for expensive government programs, so it is only fair that they pay.
There is no double taxation. You owe tax first to the federal government. The state could let you deduct federal taxes from your state taxes, or not. The federal government has no duty to give you a discount for your choice to live in a place that would divert lots of your income to local purposes.
As a thought experiment, consider the ultimate extreme. The local government takes 100% in taxes, then provides you with everything (house, food, clothes, etc.) as government services. Your region thus pays ZERO federal income tax despite having wealth to enjoy (you are fed, etc.) and receiving federal funds for various things.
What you have is a partial version of that extreme. Your state isn't being 100% unfair to the other states. It is just modestly unfair. The federal government shouldn't enable that kind of unfairness.
BTW, politifact is not credible due to strong partisan bias. I also don't think that "transfer payments" are a proper accounting for differences.
How is it fair that my taxes paid to the state of California, a US state, are much less deductible than my taxes paid to foreign governments? No cap on those. The idea is that taxes paid are not really income but rather my cost of doing business, nothing to do with who gets them. It’s like an expense for a business. No matter how high or who they go to they’re not taxed; they’re deducted against income.
California takes that tax revenue and reinvests it into the populace which is what generates the income the federal government relies on in the first place. Think of state tax revenue as COGS. The federal government has always been second behind the states and been severely limited in scope and responsibilities. You know what if a state had 100% tax, they could decide between themselves and the federal government how that would be used to service national obligations without involving me.
Further it is patently double taxation if I have to pay taxes to two entities based on the same unadjusted income. Fair or unfair (in your opinion or mine) it is what it is: double taxation.
Consider the people of California as a group, not as individuals, seen from the federal perspective. They should not be able to evade federal taxes by spending the money on themselves.
Double taxation and beyond is the norm. You have sales tax, paid to a vendor that pays their own income tax, for goods that were imported with tariffs.
Unless you voted against the California politicians, you should enjoy paying your taxes. Those politicians are why we can't cut expensive government programs at both the state and federal level, and why we must tax heavily to compensate.
> Consider the people of California as a group, not as individuals, seen from the federal perspective. They should not be able to evade federal taxes by spending the money on themselves.
Nobody's evading anything. The federal, state and local governments together are your government. That's why you've always been able to deduct the local from your state and federal, and state from your federal. In fact I can't think of a country where that's not true, can you?
> Double taxation and beyond is the norm. You have sales tax, paid to a vendor that pays their own income tax, for goods that were imported with tariffs.
Not with income taxes. Historically not within the United States, and again, as you continue to refuse to address, not for taxes paid to foreign governments. The US has a huge network of no-double-taxation tax treaties with foreign governments because it's not fair to tax people on their taxes.
The IRS has a no-double-taxation treaty with Azerbaijan and yet it can't manage to sustain one with California? [1]
> Unless you voted against the California politicians, you should enjoy paying your taxes. Those politicians are why we can't cut expensive government programs at both the state and federal level, and why we must tax heavily to compensate.
California's top tier is 13.3%, the US federal is 37% + FICA. You can't tell me with a straight face that California's measly tax rate is the reason the US federal government has to charge 40% of both my income and my taxes.
I have no problem paying my fair share. I'm also a non-citizen so I can't vote.
The situation with other countries is irrelevant to the matter of California income evading federal taxes.
If I'm in Texas, my state income tax is $0. My federal tax rate will be higher without having state taxes to deduct. Part of this money goes to you, in California.
If you're in California, you get a reduced federal rate if you can deduct California taxes. The money from California taxes stays in California to benefit you. I do not benefit from your California taxes.
California would be getting money from you without paying federal taxes on it. The money then goes to you, via services provided by California. You're getting that money back in the form of superior services like better schools, homeless services, and roads. You're getting to spend that money in your state, free of federal taxes.
The deduction is thus a massive subsidy to states with high local taxes. It places a greater burden on states that are less wasteful, since nobody there gets to deduct state taxes. Such a deduction thus encourages wasteful local government.
As viewed from outside California, money owed to the federal government is staying in California to be spent for the benefit of people in California. That simply isn't fair.
If you are unhappy with the resulting high tax rate, you can leave the state or you can try to get the state to eliminate taxes.
> The situation with other countries is irrelevant to the matter of California income evading federal taxes.
No it’s very relevant. You’re trying to have it both ways. Either the state represents an arm of the government in which case taxing taxes makes no sense or it’s more akin to a country on its own where you could make the argument double taxation makes sense. But you argue it’s part of the government to the extent it should be contributing to your state but autonomous enough that it should be double taxed.
> As viewed from outside California, money owed to the federal government is staying in California to be spent for the benefit of people in California. That simply isn't fair.
If you want those services you can move to California. However that money isn’t wasted it’s used to support the people and economy of California which in turn would by itself be the 6th biggest economy in the world. That money is being invested in California and other states benefit from the tax revenue it generates.
> If you are unhappy with the resulting high tax rate, you can leave the state or you can try to get the state to eliminate taxes.
No haha I’m good, then I wouldn’t live in California where the state invests in its people (to an extent).
You can perform all the mental gymnastics you want to justify this but I think you’d feel differently if a democratic administration wanted to tax the tax revenue paid by oil companies or lord help us carbon. This was done plain and simple to own the libs on the coast. Anything else is backing out a justification and fighting for double taxation isn’t a good look.
California is neither an arm of the federal government nor akin to a country. It is in most ways a subservient and inferior government, owing resources to the federal government. That's part of the deal that California got when it joined the union. (in exchange, California gets stuff like a currency and a military)
California (the land and the people and the government and every other way you could view it) must pay. Internal use and abuse of funding shouldn't have anything to do with what is owed.
When you say that the change was "done plain and simple to own the libs on the coast", you presume that the previous situation was fair. It was not. Those "libs on the coast" were evading taxes, plain and simple.
That "6th biggest economy in the world" was doing so well partly because it avoided taxes. That was unjust enrichment at the expense of middle America.
I think are more steelman'ed version of the GOP argument is: when government does things badly, they can go VERY VERY badly.
It's a risk viewpoint. Whereas the progressive viewpoint letting government do more and more things.
The other risk is bloat. Once a government program exists, it is very very hard to stop it and get the funds back ( from a political perspective ). It's unpopular to fire people.
When government does bad, it gets more money ( bigger ), to do worse things, or other pathological outcomes. When industry does bad, it merely gets replaced by another company.
It's not so much saying that all government is bad, but it's looking at worse case scenarios and balancing risk.
> Once a government program exists, it is very very hard to stop it and get the funds back ( from a political perspective ).
Experience in the UK tells me otherwise. Our government has been doing little else for the last decade.
> It's not so much saying that all government is bad, but it's looking at worse case scenarios and balancing risk.
It's funny how worst case scenarios (like monopolies or oligopolies) aren't considered for private companies. Doesn't seem like a balanced risk analysis to me. Internet service would be a prime example of this in the US.
Edit: oh, I forgot about healthcare. You guys are currently living pretty much a worst case scenario (bar there not actually being any healthcare provision).
Competition also plays a role here... not that there should be competition in filing simple tax returns... but competition often leads to better goods/services. There is not much to incentivize a government run program to be better other than the current administration cracking the whip so they can get re-elected.
People tell me this, but I've been waiting for years in the US for competition to make our healthcare cheaper/better than other countries, but it never seems to come.
Sure, but that argument just doesn't track. Both parties are similarly aggressive about big government programs and spending. The real variables are what they want to spend money on (health care or national security or schools or the Farm Bill or whatever) and where they think the money should come from (tax the beneficiaries of these programs or tax their children and grandchildren unto the tenth gener-- er, finance it with debt).
Different stories get told during election season, of course. One of the most perplexing things about politics, though, is the way that everyone generally acknowledges that all politicians are shameless liars, but not during election season, when the person who's hawking the tastiest-looking pile of horseshit is speaking God's truth, and it's just all the other politicians who are shameless liars.
People are irrational and complex. Its not surprising.
Whats really disturbing is the amount of "my team is the best" thinking that is out of control, which I believe is learned from the various sports franchises? Regardless, when applied to politics, it can lead to a very unhealthy outcome. The worst that can happen if your team loses in sports is: they lose in sports. The worst that can happen in political battles is that you're economy is hamstrung, your community doesn't get the support it needs etc.
Maybe there have been corrupt wolves in sheeps clothing... but the word "republican" and the word "democrat"... the "republic" is the very few set of rules which usually limit what the government can do, and the "democracy" is all the oodles and oodles and oodles of legal code on the books. So, if the parties respected their names, republicans would be for smaller gov, and democrats for more gov. I would say modern day "libertarians" resemble the republican name most truly.
There's also a political lobby (see: Grover Norquist) for the idea that filing taxes must never be made easier, because that will make them more palatable. Combined with their axiom that taxes are inherently bad, the result is an argument that tax filing should actually be as painful as possible. (The surprising strength of this lobby is one possible reason that the "file your taxes on a postcard" idea died a few years ago.)
Yeah, I don't buy Norquist's theory. Making taxes easier doesn't make them any more palatable. Probably the opposite because people would have a better understanding of how much they're paying. Right now, a lot of people mindlessly fill in their needlessly complex forms, and pray they get a refund or don't owe more than $20 or so (because that's all they have in their wallet).
It's not really about the yearly filing but the withholding. Imagine if employers stopped withholding, each person got their full pay in their bank, and then had to write a check to the govt each month like they pay their power bill.
It's also anti-tax activist like Grover Norquist’s Americans for Tax Reform who hate automatic filing and prefilled forms too. Their reasoning is if taxes are "too easy" then somehow Americans will blindly accept tax increases so they actually want to keep tax filing as difficult as possible.
I am definitely not a Grover Norquist fan, but I do taxes for a living and a lot of people are VERY surprised at the amount that is withheld from their paychecks, but they never notice how much it is unless something happens and they are required to write a check.
A couple illustrations:
It's very common for people to owe tax at a lower rate than they did the year before, but be upset because they have to write a check (and this is when the amount is trivial relative to wealth, so it's not because of financial inconvenience). They don't think in terms of tax rates, just in terms of do they owe or not. Owing is worse than not owing, regardless of total tax paid. And these are successful, otherwise financially savvy people.
There are also people who try things they think are "tricks" to maximize their refund that are literally just paying more in. They think a giant refund is great, not realizing that it's just money that they could have not sent to the IRS in the first place. Once again, owing bad, refunds good.
This is all to say that I believe people are indeed, to some extent, blindly paying more taxes than they would agree to if they had to write a check every month for the amount due. For a lot of people, even people who don't make very much, if they paid their half of their payroll taxes with a check every month, it would be pretty close to the biggest bill they have each month, and it goes basically unnoticed by most people.
For the record, I don't have any problem at all with current tax rates, but I know very well what they are, and I think if there was more transparency and education, I don't believe it would lead to people wanting to raise tax rates, but that's just my opinion.
Could not agree more, and it's incredible to me how few people feel this way. I'm not an accountant but I have a lot of friends who are (I was a software eng at a tax software company) and they all say the same thing as you. IMHO it comes down to psychology. Out of sight, out of mind is universal and will bite even very attentive people.
I think this is where things get unfair. As a system we are more comfortable taking advantage of these people’s ignorance than teaching them. As your said even savvy people don’t get this concept because it means understanding the whole system not just when they get their checks.
I agree completely! I think it’s impossible to have a productive discussion about taxation on the national level when no one even knows how much they’re paying and where the money is going. Not that that information isn’t fairly easily attainable, but in my experience, very few people attain it and even fewer fully understand it.
> Their reasoning is if taxes are "too easy" then somehow Americans will blindly accept tax increases so they actually want to keep tax filing as difficult as possible.
It's simpler than that: They want taxes to be a pain in the ass so people hate them.
There's actually some wisdom in that sentiment I imagine since many personal finance sources suggest putting everything on autopay be it savings, utility bills, etc because you're less likely to screw things up or deviate from the course. It's human nature to let inertia set in and have one less thing to think about. In fact there's an age old saying to this phenomena: _out of sight out of mind_.
Along the same lines, there used to be three different tax forms: the standard 1040 form, then two progressively more simplified forms for people who didn't want to do itemized deductions.
Well, the GOP takes power in 2016, and declares that they will "reduce" paperwork by removing... the two simplified forms! Now everyone has to fill out the complete 1040, which is also now strangely cramped and calls out to a dozen different worksheets, since the GOP also wanted to brag about how the form "fits on a postcard", and it has to contort itself to use every square inch of paper. A miserable experience! I miss the 1040-EZ.
From a refactoring perspective this actually made a lot of sense. One source of truth (1040) not three (1040, 1040A, 1040EZ). The complex parts of the 1040 have been refactored into separate functions named Schedule 1, Schedule2, ..., Schedule 6. The problem isn't in the forms its in the laws which necessitate line items in the form to begin with.
If you think about it the 1040 has taken on the more simple case as the default and the more complex cases have been shifted into schedules. That's a good thing in my book.
See the sibling comments about Grover Norquist; this wasn't incompetence: there's actually a pretty strong political group in favor of this kind of thing.
The funniest and most ridiculous thing is when they cut taxes so they need to cut back on federal agencies so they cut the resources OF THE IRS so now the IRS can’t afford to audit rich people and their staff, only poor people. Perhaps it was intentional?
(By the same people who complained the IRS was targeting them for audits.)
You can go further back to the founding of the nation for why this is. It didn't start with the GOP. Things that would be nationalized in other countries like the railroads have always been private in america. Even when Alexander Hamilton and George Washington had taxpayers of New Jersey pay for the country's first manufactories in Paterson, they were all private industries. Abraham Lincoln privatized all the railroads and telegraph lines after the civil war. (We had nationalized them for the war effort, so taxpayers paid for thousands of miles of railroad that was handed off to railroad companies.) You can even go further back, before the united states was even a thing and look at mercantilism, where merchants/private industry ran the country, but it was understood that they were subservient to the nation, economic growth's sole purpose was for national defense, and you took care of your citizenry because they were your troops. Thanks to the civil war, the 2nd industrial revolution, the gilded age, globalism, america has taken more and more turns towards 'every man for themself' and not giving a shit about the country, so obviously well-intentioned privatization of public utilities makes less and less sense.
I don’t think it’s quite as simple as “not giving a shit about the country”, as much as it is the simple fact that different reasonable people can have different opinions about collective ownership.
Recall that both companies and countries are abstractions; they are not real. Some people (reasonably) think that it is logically impossible for a country to own something. Others (reasonably) think it is logically impossible for a corporation to own something. Reasonable people disagree on these things sometimes.
I have had a different experience. Last year I filled out my 1040EZ and was unhappy with the final amount owed. I decided to click through turbo tax who found me a lot of deductions related to student loans and things. I think I only paid like $35 and they saved me over a thousand I would have missed otherwise.
And truthfully, it's not a lot of money. I would gladly pay $30-40 just to not have to deal with the hassle of filling out a piece of paper and mailing it and all that. Now that the IRS seems to have a decent electronic system, I'll give that a go this year and see if turbo tax is worth it anymore.
Yeah, turbo tax is a pretty scummy company with all the lobbying and deception. I won't argue that. But their product is genuinely good and provides utility to me, and I'm sure I'm not the only one.
> I decided to click through turbo tax who found me a lot of deductions related to student loans and things.
We require any companies who collect interest payments on things like student loans to automatically report that to the IRS. We could then have the IRS fill that in for your tax return automatically.
Back 10 years ago I had a complex tax situation and my gut feeling on reading the IRS booklets is that the tax preparer (I tried 2 of them) were taking the "safe" route to prepare it. I called up the IRS hotline and they directed to me an expert who agreed that I could file it in a better way that saved me $5000+. And they were even willing to go over the form line by line to help me fill it out. I've heard that since then the help lines have been gutted as part of a crusade to weaken the IRS in auditing rich people.
The majority (~70%) of tax-payers don't have $12k/$24k (single/married) worth of things to deduct. Yet, ~90% of tax-payers use either a CPA (~50%) or tax software (30%) to file.
Between overly complex rules, heavy advertising, and lobbying, the tax prep companies have us all convinced we'll go jail if we don't pay $40-$400+ for prep services.
I'm a CPA, and I pay another CPA specialized in taxes to do mine. Our tax code is far too complex. Basically no one can just sit down and do their taxes and be sure that they are paying the minimum amount they owe.
On the contrary. I would wager that the vast majority of Americans can do a very simple tax computation (especially after the Trump administrations' increase in the standard deduction, whatever you think about the politics of it) and get their taxes correct.
Yes, there are several million people with special cases. If there were 3 million of them, that's not even 1% of the population. A significant group, but hardly demonstrative of "basically no-one".
Income - [ 3 or 4 basic deductible items ] - [ N * exemptions ] - standard deduction => go to tax table => tax. Done.
I still think you are seriously discounting the added convenience and peace of mind.
If I was an older person who wasn't super comfortable dealing with computer programs, I would absolutely pay a CPA a few hundred bucks to do my taxes. It saves me time and I don't have to worry about screwing it up.
It's the same reason people get food delivered. I'm paying someone to cook food and bring it to my house. It's something I could do myself, but its a hassle that I can pay to avoid. Plus, I can be confident that a professional chef is much less likely to prepare me burnt / raw / untasty food than I would be myself.
But Turbo Tax is only useful because of how terrible the IRS is. It's a whole cottage industry propped up by a complex tax code and poor filing system.
In Norway, the government already has the data needed for your tax return: Withholdings, bank interest, capital gains, property income, loans, etc. The exceptions are things like foreign income, property, etc. that don't get automatically reported.
The tax return is automatically filled out for you, and if you don't amend it by the deadline (which you do by logging into the government portal and editing the form, adding additional forms, etc., all digitally), it's automatically submitted as-is.
(And the forms are simple! When I look at my US tax returns, which are prepared by a CPA, I can barely make heads or tails of it. But I could easily do a Norwegian tax return from scratch myself without a CPA.)
Most people don't need to anything at all, even if they have a situation that in the US would require a bunch of number crunching.
The above is also true about most European countries, by the way.
For non-americans reading this I presume the parent poster means "paying on top of the amount already withheld by the government", not total income taxation.
Even most Americans struggle to understand this actually. It shocks me at the amount of Americans that still think the government is gifting them money at tax time.
No it is like buying a stick of gum at the gas station, you give the cashier a $10 and he gives you $8 back. That $8 isn't a gift, the cashier was giving you back money you gave him that you didn't owe. The majority of tax refunds are exact this, a refund of your own money that the government took from you, and is now giving back to you without paying interest for holding it for ~1 years
>A substantial portion of the population believes it.
I think it is somewhat disingenuous to suggest that these people were simply duped. The average person has tons of exposure to government incompetence in other arenas.
"All right... all right... but apart from better sanitation and medicine and education and irrigation and public health and roads and a freshwater system and baths and public order... what have the Romans done for us?"
USPS is often faster and cheaper than private delivery companies, delivers to all addresses (unlike FedEx and UPS, which contract to USPS in rural areas), and would be profitable if not hamstrung by pension funding restrictions from Congress that are more stringent than private companies.
USPS is almost never cheaper than UPS or FedEx except for areas highly subsidized (AK and HI) and light weight international items. USPS has special (and anticompetitive) arrangements with foreign countries that UPS and FedEx can't have. Even with the special arrangements USPS is more expensive and less reliable than private carriers.
Prisons
law enforcement
firefighting
warfare
regulation of industry
regulation of environment
protection of civil rights
equal opportunity employment
employee benefits
retirement
healthcare
research & development
protection of intellectual property
passenger rail
postal mail
industry standards
The first is crumbling and a major cause of urban sprawl and global warming. The second has brought some benefits like a microwave, but nothing of any meaningful use. We lack moon bases for example. National parks should be state run. This is a massive power grab by the feds under feel-good logic.
National Parks exist because we are a nation of united states, not an independent fiefdom of states. All citizens of these united states deserve the same right to enjoy the natural beauty of this country, and no individual state should have the right to remove such privileges from the rest of the citizenry through inaction, nor through lack of management make it less than ideal to enjoy.
Conservation of land is a national priority. As such, no state or private entity should be entrusted or made to be solely responsible for the upkeep and management of said valuable resource for all the people. That's why Yosemite Valley's management was transferred from the State of California to the Federal Government.
As Wallace Stegner said, "National Parks were the best idea we ever had. Absolutely American, absolutely democratic, they reflect us at our best rather than our worst." (Except for that whole disinheriting the native peoples of their own lands thing... but definitely American...)
Then there is no limit to the power of the Federal government. If they can say, “We can do a better job than you, person or State”, then can run roughshod over personal and State’s rights. I guess that’s fine as long as they are running over people and States you don’t like. What happens if Trump goes into California and takes over due to the humanitarian crisis that the State brought in itself ie the tent cities?
The states are subservient to the federal government as restrained by the constitution. If the federal government (Trump, Obama, Nixon, Clinton, it does not matter) wants to take over California and can find an emergency power to do so authorized by Congress then the federal government will take over California.
The argument isn’t “we can do a better job than you” it’s “we are allowed to do this job for you”. Whether they can do it better is irrelevant.
As an aside, if we are looking as a whole, the federal government generally can and does do everything that they do better than the states could do it.
Countries with public rail systems (or railway companies that are largely owned by the state) are usually way better than privately operated railway lines. Private railway service almost always sucks (crappy trains, high fares) and is only profitable on the most popular routes.
Toll Roads? Generally better maintained and provide a shorter pat for a small but willing-to-pay segment of the population that government programs overlook.
Based on empirical evidence the government is terrible at doing pretty much anything. I don’t remember the last time I had a logical, efficient, pleasant, and cheap interaction with a US government agency. I happen to have those with private companies all the time.
> In the US, we've had decades of (largely GOP) messaging that the government can't do anything properly. A substantial portion of the population believes it.
What are your top 5 well-run federal government programs?
"Both have done it" is not the same as "both have done it equally". Nor does it mean "we should therefore be okay with it".
If we support the idea of Democracy, we should stop abuses that harm democracy, even if it prevents abuses those we otherwise agree with have taken advantage of.
Not trying to defend the practice. I'm just annoyed by all the people who only complain about it when their preferred party is hurt by it and not when it goes the other way.
>Under the new rules, participating companies also have to standardize the naming convention of their Free File version as “IRS Free File program delivered by [product name].”
Respect to ProPublica for their commitment to this issue. I first learned of the Free File deal from their reporting and enjoyed the HN comments on their articles.
On the 20-year fight to stop Americans from doing their taxes for free: https://news.ycombinator.com/item?id=21281411
On hiding Free File from search engines: https://news.ycombinator.com/item?id=19758126
On tax industry lobbying: https://news.ycombinator.com/item?id=21393758