>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
The US is making great strides towards joining the rest of the civilized world in the 20th century, finally.
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.
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.
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.
The IRS information is at times comically incorrect in fact.
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.
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.
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.
This is all explained in the letter they send you should you fail to file.
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.
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.
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).
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.
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.
"there should only be one optimal answer once the facts are already created"
Yes, there should be. The reason why accountants can make a living filing taxes for fee is because that optimal answer is often difficult to find.
"Paying for tax filing itself is basically a low-level scam."
Not for me it isn't. If a private company can create a service that makes filing a lot easier and safer, I will gladly pay the fee.
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.
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.
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
Except many people will try TurboTax or a competing solution anyway, just in case they can get a little bit of money back.
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.
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.
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...
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.
They might be better if this were the goal if people could actual interpret what they're being encouraged to do!
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
(FWIW, I'm generally in favor of this kind of "social engineering" when done by democracies.)
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.
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".
Our government doesn't respond to citizens, only corporations.
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.)
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. 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.
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.
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.
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.
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.
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.
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.
Your theory is wrong.
Even if it could be done simpler, TurboTax and other tax prep companies will lobby against it.
You'd be hard pressed to find any government financial policy that isn't tied to business interests. The tax code is no exception.
6 months ago: https://news.ycombinator.com/item?id=20119916
8 months ago: https://news.ycombinator.com/item?id=19613725
9 months ago: https://news.ycombinator.com/item?id=19392673
I'm sure there are others...
The current submission passes the significant new information test, so we won't count it as a dupe. https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
* 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.
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.
> 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.
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 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.
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.
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.
- 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.
Not tax advice etc, all just guesswork.
that said, donating stock that has a long-term capital gain is still extremely tax advantageous.
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.
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.
In other words: the government and the IRS should have checks and balances to income taxation, not (literal) carte blanche.
1 - https://www.propublica.org/article/irs-sorry-but-its-just-ea...
2 - https://www.nytimes.com/1997/03/09/us/scientology-s-puzzling...
The State: Pay me taxes or I'll put you in a cage!
Citizen: OK, how much do you need?
The State: You tell me, but if you're wrong you'll regret it!
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.
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.
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.
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!
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 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.
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.
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.
"Lobbying" and "campaign contributions", aka paying congresspeople aka straight up corruption but you can't use the C word in US politics.
H&R Block and Intuit have been greasing palms for years to keep the agreement in place and encode it in law: https://www.propublica.org/article/congress-is-about-to-ban-...
> 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.
So it's more about having money to get reelected than a simple personal bribe.
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.
I think that's a distinction without much of a difference.
Related: TurboTax Deliberately Hid Its Free File Page From Search Engines
HN discussion: https://news.ycombinator.com/item?id=19758126
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.
Just don't outsource it. I'm sure USDS could have it ready in less than a year.
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.
E.g. For §25D
You also apparently did not review
(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.
There are also specialized search engines. E.g. search for 25D at http://www.legalbitstream.com/irs_materials.asp?pl=i1
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.
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.
"I can take out $2k to fix the flooded basement and it'll cost me $200 in penalties? OK."
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!
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.
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.
They also sent me some form the year after that so I could declare the couple dollars interest I got from the IRS as income.
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'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.
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.
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.
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?
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.
the raise of the standard deduction; doubling; in effect made deductions simpler for many and transferred wealth back to those earning less
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.
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.
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.
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.
It is largely due to Republicans that we don't have such a program. Voting matters. https://priceonomics.com/the-stanford-professor-who-fought-t...
Gerrymandering and voter purging matters
I think gerrymandering is an issue, but it's only a fraction of the reason why representation is not particularly proportional.
> 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.
> 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.
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.
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.
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.
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.
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.
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.
And that’s a lie:
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.
Bush campaigned on (among other things) rewriting and simplifying the tax code. Bush's executive order pushing that forward was signed January 2005: https://en.wikisource.org/wiki/Executive_Order_13369
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.
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."
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.
And Intuit did not lobby Republicans, it lobbied Grover Norquist.
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.
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.
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?
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!
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.
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.
How can you get the MAXIMUM tax revenue from your citizens?
The easiest way is to do it slowly, and if possible hide it.
#1 1913 implement an income tax
#2 1942 implement payroll withholding (easier to take what you never saw)
#3 make it convenient to just say "ok" to complicated taxes (free filing)
I'm surprised they didn't give you a "tax break" for letting the government do your taxes for you.