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IRS Reforms Free File Program, Drops Agreement Not to Compete with TurboTax (propublica.org)
1721 points by danso 19 days ago | hide | past | web | favorite | 448 comments



>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.

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


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.

Quality journalism.


Not only quality journalism, but a really solid look at what modern data-driven journalism should be like.


This is great news.

The US is making great strides towards joining the rest of the civilized world in the 20th century, finally.


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.


This is why the Australian system is better.

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.


Cost basis reporting from brokers to the IRS has been around for several years.


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.


Rarely do I have income not on a W2 or 1099. Should automated.


> They know all of your income down to the cent

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. -.-


Don't they know that from the W-4? Or does that not go to the IRS


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.


W-4s are not filled with the IRS. Employers are required to maintain them for inspection whenever the IRS wants though.


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.


True, this was a very nice suprise on my last tax filing. I had even almost forgotten myself about those donations!


I think it comes down to who people trust.

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.


Tax filing is very complicated and ridden with risk if you don't check the right boxes.

"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.


> 1040EZ, if you even know what that is

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?


(Edited to correct an error)

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.


1040EZ died after tax year 2017: https://www.irs.gov/forms-pubs/about-form-1040-ez


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.


> 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.

Except many people will try TurboTax or a competing solution anyway, just in case they can get a little bit of money back.


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 thing of it is, the US government hasn’t run on tax revenue for over 20 years. Clinton was president last time the US had a balanced budget.


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...


That doesn’t matter, because it’s not a binary choice — that is, we don’t not spend money on NASA because of the deficit.


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.


> They're used to encourage people to do or not do things:

They might be better if this were the goal if people could actual interpret what they're being encouraged to do!


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


Australia gives tax cuts if you have a family with children. (Family tax benefit part A and B). Do you think that's unacceptable social engineering?


That’s ok, because by having children you provide a service to the state (i.e. ensuring its existence in the long run).


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.)


Yes, Why should a person the choose not to have children be punished by the state with higher taxes for their choice?


If having children benefits society those who choose to do that should be rewarded.


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.


Citizens do demand it, but the US does not have a government that is in any way responsive to the demands of the general citizenry.


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?


That's a great example of something most Americans don't have to worry about. They could take advantage of autofile and you wouldn't. Simple as that.


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.


It's intentional. Anti-tax republicans believe taxes should hurt. That's the main reason it's still not automatic.


"Why wouldn't citizens demand a public tax filing process?"

Our government doesn't respond to citizens, only corporations.


> 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.

[1] https://www.taxpolicycenter.org/briefing-book/how-do-us-taxe...


"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.


Not if you into account the price of health insurance...


> 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.


Corporate tax policy has no impact on the complexity of individual taxes. It's two completely independent sets of rules.

Your theory is wrong.


Tax deductions for retirement, mortgages, etc. are tax code complexity that benefit the financial and real estate industries.

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.


OK sure, there are some tenuous connections, but none of that has anything to do with "Amazon passing $0 in taxes."



There's a large backstory documented by (mostly) propublica, some of it is here: https://www.propublica.org/article/inside-turbotax-20-year-f...

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.

[0] https://np.reddit.com/r/technology/comments/bgj6oz/turbotax_...


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.

[0]: https://www.youtube.com/watch?v=Piuv7KH37D4


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.


Which 'prominent people'? It sounds like an incredibly silly argument, one I had never heard of before.


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.


Fantastic news!

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.


The IRS is always hiring software engineers [1]. You could go there and help them do it.

[1]https://www.jobs.irs.gov/careers?field_usajobs_category_ref_...


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.

Not tax advice etc, all just guesswork.


my understanding was that the appreciated value of short-term capital gains aren't deductible as a donation. only the cost basis.

that said, donating stock that has a long-term capital gain is still extremely tax advantageous.


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.


Isn't that like being arrested and hoping the court will streamline your judgement, sentencing and incarceration.

In other words: the government and the IRS should have checks and balances to income taxation, not (literal) carte blanche.


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.


This is good news, right? I'm kind of amazed that good news is happening and that the lobbying forces (eventually) got defeated in this case.


Very much so, if you're opposed to H&R Block and Intuit's stranglehold on tax filing.


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.



Many agencies are well-intentioned but wear congressional straight jackets. It's not all Anjit Pai land.


Any further examples of regulators not captured by industry in 2019?


Not sure how factual Adam Ruins Everything is, but his skit on taxes is pretty damning for tax software companies: https://www.youtube.com/watch?v=Fj4anUL-LvY


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.


Now we're just left with this illogical part of the tax system:

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!


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!


This change means the state will stop saying "you tell me" and start telling people.


Do you have a source for this? I can't find any mention of it in the linked article.


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.


> What kind of insanity leads to this? The government is prohibited from creating software that helps its citizens?

"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.


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”.


> They can't so much as coordinate with the PAC.

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.


> So it's more about having money to get reelected than a simple personal bribe.

I think that's a distinction without much of a difference.


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.


Well, you can “downgrade”... You just have to start all over. Which IMO is absolutely atrocious.


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

https://www.propublica.org/article/turbotax-deliberately-hid...

HN discussion: https://news.ycombinator.com/item?id=19758126


You'll hear differently, but: https://www.youtube.com/watch?list=PLKePI0ZbnT69klhhdVXnd9-e... the US effectively functions as a plutocracy. Public opinion and interest just doesn't matter.


The cost of freedom is eternal vigilance.

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.


I think a lot of people don't really want to download a piece of software made by the government.


In Sweden it's a form on a website. Simple, fast, comes prefilled with the regular stuff and of course free.


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.


You can in fact request a private letter ruling from the IRS. They are not obligated to respond to it, but typically do.

E.g. For §25D

https://www.irs.gov/pub/irs-wd/201809003.pdf

https://www.irs.gov/pub/irs-wd/1130003.pdf

You also apparently did not review

https://www.irs.gov/pub/irs-drop/n-13-70.pdf

(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.


How did you find these documents? I spent a considerable amount of time on the IRS website and never found anything even mentioning them.


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.

There are also specialized search engines. E.g. search for 25D at http://www.legalbitstream.com/irs_materials.asp?pl=i1


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.


Interestingly enough, I've heard conflicting advice from different tax attorneys on this, which is one reason I was trying to research it myself.


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.


If you get a tax return at all, you've essentially given the federal government an interest-free loan all year.


And most people think of that money they get back as a bonus! Like it was never their money in the first place but a gift from the government


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.


People aren't terrified of plundering their retirement accounts? There are massive and scary tax penalties if you do....


10% isn't that massive or scary for someone facing something like a big unexpected medical bill or whatnot.

"I can take out $2k to fix the flooded basement and it'll cost me $200 in penalties? OK."


But that’s on top of whatever income taxes you didn’t already pay in some cases.


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.


I once filed taxes late (filed like 2012 taxes in early 2014) and my refund included interest, I think it was sent in a second check.

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.


Yes the government always pays interest on money it owes you.


Is that interest taxed?



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.


Unfortunately, the IRS includes ignorance in their definition of deliberately.


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.


They'll tell you, if you file a FOIA request.

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.


W-2 would be an end all if not for deductions which can change throughout the year and do not apply equally to all tax payers.

the raise of the standard deduction; doubling; in effect made deductions simpler for many and transferred wealth back to those earning less


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.

[0]: https://www.irs.gov/filing/free-file-do-your-federal-taxes-f...

coldpie 19 days ago [flagged]

> There is no reason the IRS shouldn't have a simple, online fillable 1099EZ that makes the calculations and validations for you.

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...


> Voting matters

Gerrymandering and voter purging matters


FWIW, The GOP control of the senate is clearly not due to gerrymandering, or at least not any gerrymandering that happened in the past 100 years.

I think gerrymandering is an issue, but it's only a fraction of the reason why representation is not particularly proportional.


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 once had a PS professor that liked to say "The problem with our system is the people who vote."


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.

[0] http://www.erights.org/


> 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.


Every state has at least one representative in the House, not three.


Thank you, I had a huge brain fart on that and my EC knowledge got all mingled in with house reps.


Happens to the best of us. Happy new year!


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.


[flagged]


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.


[flagged]


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.


[flagged]


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.


> The problem generally comes down to the fact that no Republican is for improving tax filing.

And that’s a lie:

https://www.tedcruz.org/postcard/

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.


Are we reading the same article? Don't invent partisan issues, the article makes it clear it's not a "Republican" thing, it's an Intuit thing.


In the 2004 and 2006 election cycle, Intuit donated substantially more to Republicans than Democrats: https://www.opensecrets.org/orgs/totals.php?id=D000026667

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.


FTA:

>> 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.


Did you read it? Intuit lobbied....Republicans.


I suppose the lobbying could be unbalanced, but that wouldn't be consistent with the numbers when you look at campaign contributions (even if you ignore individual contributions). https://www.opensecrets.org/orgs/toprecips.php?id=D000026667...


$68k in contributions vs several million in lobbying. That's not apples and oranges, that's apples and coconuts.


"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.


You mean the guy that got 95% of GOP congressmen to sign his tax pledge? Lobbying Norquist is lobbying the GOP.


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.


What about States? Should the IRS make a online form that will do your state tax too?


Virginia used to have an online system like that. It was wonderful, so Intuit/H&R block lobbied the state legislature and had it killed.


The states can do their own application. If you're issued a W2, the issuing party will usually send a copy to the IRS and your state's tax office.


CA built theirs ten years ago and should have twenty.


It would be nice but that's on a per state basis and would need to be provided by either third parties like Intuit or state governments.


They could provide an API to the states that makes doing the state return (once federal is done) very easy. And provide a link, etc.


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.


The big problem here is that without good validation being used, the system could be subject to data compromise/identity theft type attacks.


> Just don't outsource it

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.


You mean 1040EZ? Because a 1099EZ doesn’t exist, I think.


I always use TurboTax online to complete my taxes and then copy all their info into freefillableforms.com to file for free.


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?


I just want to move to a system where the IRS sends me a bill, they know how much I owe them.


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.


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.


Only if you don't care who you hurt on the way to your goal. We may have different definitions of sanity.


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].

1. https://www.wikipedia.org/wiki/Grover_Norquist


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?

https://www.thenation.com/article/meet-conservatives-who-cam...

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.


Look at it from the other side.

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.


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