It's SUCH a win that they managed to roll this out to a small set of tax situations and states to start. Every government project I've been on has required creativity in defining an MVP that doesn't include shipping to everyone. This was cited consistently as one of the great successes of this project, they were able to ship something that successfully filed 150k taxes b/c they were able to scope things down to something doable in 9 months.
It gives me hope and positive energy that no matter how bad governments ( all around the world ) and especially US given how something so simple is still missing and so broken, manage to move forward. I would imagine the hard part isn't even the MVP or defining MVP phase, but to get it started in the first place. The amount of politics involves.
And that is speaking as something who used to work inside government.
- Many if not most software engineers in California earn more than the $200K household limitation for using Direct File
- From my understanding there is no way auto-generate my state tax return from Direct File so I would have to do all the work twice even if I can use it
- Complicating my tax situation (legally) allows me to save more money, I would save far more than the price of TurboTax by using TurboTax instead of Direct File, as much as I hate it
In an effort to keep the scope manageable for the pilot year, the Direct File team chose to have an upper income limit so they would not have to support Form 8959: Additional Medicare Tax (https://www.irs.gov/pub/irs-pdf/i8959.pdf) which only kicks in at that threshold.
Though it's also very likely at these high incomes that you would be disqualified for other reasons (investment income etc)
What makes you say that? I'm assuming you're adding other assumptions.
My wife and I combined make about $300K/year. We don't run a business, don't make charity contributions, only pay ~$5K in mortgage interest, and don't have kids. We don't even do retail stock investing (EDIT: And I haven't exercised any employer stock options), just a 401k, an IRA, and a 5.25% savings account.
We take the standard deduction. I can't imagine a CPA would be able to find so many possible deductions that it would be worth itemizing.
Which is also silly. My experiences with HR Block was that they basically had their own version of a TurboTax-like thing, and all they were doing was literally asking you for the numbers for each question. There was zero critical thinking applied.
I had just bought a house, just bought a hybrid, started working from home, and was new to the US.
"What are you claiming?" "What can I claim from this?" "I'm not sure. But I can put these numbers in here and see what it says."
You're literally paying for someone to type in the same numbers you would, with as much (or at times less) knowledge than you (who is also less invested than you in getting it right, but much more invested in selling their 'audit protection' stuff).
I disagree. If there's a CPA who wants to give me money-back guarantee, be my guest.
I do my taxes first. You (CPA) look over it, if can save me any additional money, I'll give you 1/2 of the additional money saved as your compensation. Deal?
There are alternatives to CPAs, who are licensed by individual states and don't necessarily specialize in taxes. Several states, including California, require testing and registration for paid tax preparers who aren't CPAs or Enrolled Agents. EAs are the only federally-licensed tax professionals with unlimited practice rights before the IRS.
It's reasonable to assume that CPAs pass along the costs of their marketing and lobbying efforts to their clients, without any guarantee of higher quality compared to the other professionals available.
I kind of wonder if software engineers making this kind of money but no tax problems should be getting advice from folks who can look back and see what they should have done. (tax problems sometimes come from outlier behaviors that might be good)
The problem is you're exposing yourself as someone extremely self-centered, and someone that assumes their lived experience is equivalent of everyone else's, and adjudicating the utility of this particular thing as if you are reflective of the larger population.
Saying the majority of engineers in California make at least $200k makes you even more out of touch. According to Glassdoor, over $200k for a SE in CA is 90th percentile. The average SE in CA makes $132,000
>The problem is you're exposing yourself as someone extremely self-centered, and someone that assumes their lived experience is equivalent of everyone else's, and adjudicating the utility of this particular thing as if you are reflective of the larger population.
Most of Hacker News and indeed the tech community at large exhibit "I don't understand life outside of California cities." syndrome, this by itself is nothing new.
>make at least $200k makes you even more out of touch.
$200K as the entry level for FANNG ( what it used to be call ), and then Big Tech and now Magnificent 7 has been the norm on HN since 2016. It wasn't until 2023 did reality started to hit many.
Use Levels, but change the location to the other big cities in California. The LA number is ~$80k lower than the SF number, while the Fresno average is $120k. The SF area is a wild outlier even in big California metros.
Sorry, but they're far more representative than levels.fyi. The latter has a very strong sampling bias - most of the companies in its DB are on the high end of the payscale.
Your suggestion that we don't / shouldn't care about anything other than ourselves is more than a little insulting, whether you intended that or not.
In any case, like the root of this comment tree says, the best way to make sure this program lives to reach us is to make sure it paces itself. If that means another year or two of TurboTax, that's A-OK!
They are still a tiny minority. I mean HNers from everwhere from Wyoming to Germany and Brazil.
One of the best ideas the Reagan administration had was paperwork simplification, they introduced a 1040EZ for (roughly) the same kind of filer that Direct File works for.
My son put off paying his 2023 taxes to the last minute, I told him he should try Direct File (I'd believed the story that it would be easy) but when he tried it he had extreme difficulty authenticating himself, I think because they check you against consumer databases and they could not compare to past tax returns, credit history, etc. because this was his first tax return and he had no credit history.
We were forced to wait for a long time to talk to a human operator for him to verify his id. In that time I found out that there was no longer a 1040EZ, see
but I was able to fill out a complete 1040 and the New York equivalent of it before we got through to the operator. We just got the check from New York the other day after about 6 weeks, haven't heard from the IRS yet.
In practice, for software engineers in CA, I'm guessing that https://www.freetaxusa.com/ will be superior to Direct File for a while. It also files federal taxes for free with no limits AFAIK.
In terms of societal and long-term impact of eliminating the middlemen, Direct File has much more potential. Hopefully, in a few years, states will integrate their tax systems with Direct File. Perhaps one day the government will finally send us a completed tax return as opposed to the other way around.
> Many if not most software engineers in California
have complicated taxes, due to how they're making that much money. I don't have a problem with them optimizing for the simpler case (eg the intention behind the 1040EZ) while software engineers, who can afford a CPA to deal with optimizing their tax burden off non W2 income, aren't initially able to use it.
DirectFile was created by the IRS, a federal agency, for preparing your federal income tax return, in a manner similar to the streamlined e-file options available in other countries (i.e., for the most common/basic situations).
There are 50 states, and every single one of them has their own idea of what an income tax return should look like, so a direct file that handled state returns would take several years and hundreds of staff to develop and maintain.
The US also has significantly more tax planning/tax structuring opportunities than do other countries, and DirectFile doesn't even try to handle those...but neither do its foreign counterparts. If you have a more complicated tax situation, like most software engineers do, than DirectFile isn't for you, and never was intended for your use case.
> so a direct file that handled state returns would take several years and hundreds of staff to develop and maintain.
The way to extend this, if the federal government wanted to push it, would be to define a standard export format from IRS DirectFile, containing all the information in it...
... then make some federal money contingent on states implementing a filing system with an import function (for the shared data).
Nice clean interface, and still states' choices on if they want to support.
> There are 50 states, and every single one of them has their own idea
That's not my problem. The states are part of the country. This is as bad as restaurants charging tips instead of stating one number. Government dudes should meet and work it out between state/federal and give me one damn number.
Incorrect. You must not be a US citizen (or else went to a poor quality K12 school that failed to teach the basic civics)
States are NOT an administrative subdivision of the larger country. This is a common misconception. They are not at all like Japanese prefectures, not like Canadian provinces, nor like the counties or parishes that US states are subdivided into.
States are fully sovereign entities that retain to this day certain inalienable rights vis a vis the federal government.
A good analogy is that the US is more like a stronger version of the EU. States like New York and Texas within the US are more like Germany or France-- they've ceder some rights to the federation but retain many others. The US constitution, which is short and easy to read and required reading for the US Citizenship test, clearly outlines which powers are reserved for which part.
>That's not my problem. The states are part of the country.
While I'm at it, the very attitude of "that's not my problem" reveals your foreignness (or if you are from here and very young, perhaps the sad fact that civic culture is dying everywhere but maybe new england)
America has or has traditionally had a strong culture of self determination and citizen involvement in and ownership of politics and government policy.
Another word for this is democracy. Real, genuine, messy democracy. America is not a service provider to you. It is a union or coop you are a part of.
You are not a customer of your country. You are a member. A shareholder.
This attitude is I know very foreign to many people who come from elsewhere and only know authoritarian states or democracies in name only. Or very young people who have caught on that civic culture is dying in most of America.
But it's fundamentally diametrically opposed to what this country has always been intended to be at its best. it is very very much your problem
US states are not fully sovereign. There is a simple test for that: can a state secede unilaterally. If not, states are subordinate to the federal government.
The original idea of the US was a decentralized state. The Union is the sovereign entity, while power rests with the individual states, unless explicitly given to the federal government. Over time, it became clear that you can't run a country like that in the modern world. Slowly, with creative interpretations of the Constitution, the federal government gained more and more power over the states.
One of the distinctive features of the actual US system is that it's often unclear which level of government has the authority to regulate a particular matter. Much of the political debate is about the constitutionality of laws and regulations, which may have been in force for decades. And controversial legislation often ends up in the Supreme Court, which may then decide that the state or the federal government did not have the authority to regulate that.
Not formally, but might as well be. Plenty of the questions can be answered by looking them up in the Constitution, and it can be read through and annotated thoroughly in an afternoon.
The US is a federated system, the states' tax laws are independent of the federal tax laws (mostly, there are some interactions in there) and the responsibility for collecting state taxes falls on the state. The federal government cannot step in without authority which would have to be delegated by the states because it is their authority, not the fed's.
From you early comment along the lines of "I make my taxes as complicated as possible so that I can save money on taxes"
You would never take the one number if you could save money by making it a thousand instead. Eg. if your state did that simplification, youd move to a different state that doesn't have the simplification so you can save a couple bucks on the taxes
> so a direct file that handled state returns would take several years and hundreds of staff to develop and maintain
Or just contract one of the companies that already do it with a public-private partnership. HR Block or whatever gets paid say 2x their current tax prep revenue in exchange for being the white-label direct-file available for free to everyone.
Like these tax prep companies are crazy cheap for just being able to hit import next next next next next submit and never think about taxes ever. The work is already done, why duplicate it?
Yes? That was the point of my comment? If they had tried to support everyone's tax situation on day one they likely would have failed, but instead they shipped something that works, got made permanent, and now we all get to look forward to using this tool sometime in the next few years as it graduates from MVP to entrenched software
This comment, specifically, makes me hate this website. I don’t specifically care about “engineers in California”. Tech bros deserve all the hate they get.
I mean, I don't dispute anything that you said, but a baby step is still a step. As they onboard more people onto the platform, they're be able to suss out bugs and fix issues and be able to raise income thresholds and maybe start handling state returns as well.
I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics. Looks like it helps the economy by creating jobs but the job is redundant and does not create anything of value.
Where are crimes more likely to occur, a city with 10,000 or 1 million? Where are financial crimes more likely to occur, people that make $10,000 a year or people that make $1 million or more a year. I rather have these accounts move into forensic work and go after the wealthy tax evaders.
IRS is an enforcement agency that specializes in tax collection and fraud. People that are clamoring for reduced IRS staffing are ultimately support of defending the police. I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy.
Conventional wisdom is that if one can fund the IRS with one extra dollar, and they use that dollar to collect two dollars more taxes (from evaders), than that was a good way to spend taxpayers money.
Many economists don't agree though. If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.
Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc. However, effort your citizens put into trade that (for various reasons) ends up under-taxed, usually does add to the economic wellbeing of citizens.
Therefore, it's only necessary to collect mostly-correct taxes from most citizens, if doing so let's you redirect labour from tax collection into other work.
Is it unfair? Yes. But it's still good economic policy.
> If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.
But the goal of taxation isn't to maximize the country's economic success or overall wealth.
It's to fund necessary government services (schools, courts, police, military, etc.) and to redistribute wealth (Social Security, Medicare, Medicaid, etc.).
We only want to maximize national wealth after we've funded government services fully and redistributed wealth (and sufficiently protect the environment, protect workers, etc.).
So if funding the IRS gets you back more money, that's always good, because it's by definition going to the things that we have democratically decided are a higher priority than maximizing national wealth. And if we democratically decide that we're spending too much on services or redistributing too much, then we cut those intentionally -- not "accidentally" by underfunding the IRS.
Even if under-collecting taxes is good economic policy by the extremely narrow measure of GDP, it's terrible national policy. It's like saying that accidentally redirecting an extra $500 per person to the military is good military policy. I mean, sure it might be. But that doesn't mean it's good national policy.
>We only want to maximize national wealth after we've funded government services fully and redistributed wealth
There's a chicken or the egg issue here. If your country isn't rich enough to fund government services such as education, transport and healthcare you need some economic development first.
Except we are vastly more wealthy than needed to provide these services. Wealth inequality is so laughably bad that a tax on just a handful of mega rich billionaires could cover the cost of many important social services.
> If you care about economic success of the country, the goal isn't 'collect as many taxes as possible'. The goal is to make the citizens wealthier in real terms.
Just like how "collect as many taxes as possible" isn't actually a good goal, just "make the citizens wealthier" isn't actually a good goal either because it says nothing about the distribution of that wealth.
If we enacted a law that made 99.9% of all citizens absolutely destitute to the point where they must eat rotten food found in the trash to survive, but this law also multiplied the wealth of Bezos and Elon a millionfold, then that would successfully "make the citizens wealthier" in sum.
Taxes are used to run society, from it's roads, fire department, education, social services, and much more. A lot of people are pushing to cut down on those things, to decrease the bounty that society offers regular people who partake, because "we just can't afford it." and the reason we can't afford it is because there is an overly focus on "make the citizens wealthier" even at the cost of most citizens.
> Taxes are used to run society, from it's roads, fire department, education, social services, and much more
The "much more" is much, much, much more than anyone thinks. The federal budget is tremendous. People cannot conceive of trillions, yet the federal government alone spent over six of it a year, three years in a row.
Virtually nobody has a problem with tax funds being used to build roads and bridges, fire departments, and whatnot. It's everything else that's contentious. Public schools are visibly wasteful, with the number of students and teachers overall remaining largely constant, but the number of administrators having increased many-fold in the past decades; at this point it's a jobs scheme for adults, not an education scheme for children. Nonprofits received hundreds of millions of taxpayer dollars to support illegal immigration. Et cetera.
So many things in the federal budget appeal to a fringe minority of advocates, yet the money hose continues to flow. This is not the way that a federal government with clearly delineated limits should work. Something is wrong.
In part, because of comments using wording like "hundreds of millions of taxpayer dollars" as if it were huge, when it describes a pretty miniscule part of the 6,000,000 millions in the budget. (It also misses those same immigrants paying billions in sales and other taxes here, including quite a bit of Medicare/Social Security funding they'll never get back.)
Defense, healthcare, and social security make up the vast majority of Federal expenses. Education is, comparatively, a pittance; nonprofits serving immigrants don't even show up on the chart as a full pixel.
You need to ask yourself how the tax evader uses their $2, and how the government uses their $1. And you need to ask yourself about the perceived rule of law, and how many more tax evaders you would create by letting it be known that it is easy to get away with tax evasion. And you need to ask yourself if you want tax evaders to have a leg up on investments compared to full-tax-payers.
No matter what society you live in, you will have to obey rules. There has never been a society where this is not the case, and there never will be one.
Basically, it’s a super-important thing to have if you want to live in a “developed” country that doesn’t have all kinds of very-bad problems, and isn’t some proxy for level-of-authoritarianism, which is how it seems you’ve read it. It’s about actual and perceived equal treatment under and efficacy of the law, not how much law (if you will) you have. A minarchist libertarian state would sensibly seek to have high rule-of-law, for instance.
I'm not confused at all about the concept. Your stance is incomplete. "Rule of law" does not stand alone either, you've also mixed in a few concepts that frankly do not apply, but we'll ignore that for now.
"Rule of law" requires government (and it's officers) be above all, both in practice and in theory. Just on the basis of who can violate rights, perceived or otherwise, and who in turn pays for the consequences, it fails in the test of "equality". And in reality, it's enshrined in multiple jurisdictions varying levels of immunity.
Even if you think tax money, once assessed and collected, belongs to the government.
Ah—you know the sense in which it was intended but, unusually (I intend this descriptively, not pejoratively), reject its definition as self-contradictory. That, I was not expecting.
I don’t think we’re gonna bridge that gap productively in a comment section. Have a nice weekend (sincerely).
> Effort your citizens put into tax collection is 'dead weight', and doesn't contribute to exports etc.
Hot take: a lot of tax revenue does contribute to exports etc. The government is spending a lot of money re-digging that shipping channel in Baltimore after the bridge collapsed. Just one recent example, but pretty much every bridge and port and road in the world has a lot to do with taxes.
The government is also spending lots of money on social programs people like too much for even the Republicans to try to repeal, yet the government is not taxing enough to cover them. Letting rules slide for certain people means more debt for everyone else, and is what a lot of economists would call "arbitrary redistribution", which is bad.
One good way of measuring economic success is by ignoring the income and wealth of the top 10%. The exact percentage is not important. What matters is the idea that the success of the well-off only benefits the society to the extent it improves the lives of ordinary people.
Many government activities make sense from that perspective. By redistributing money from the top 10% to the bottom 90%, they increase the economic success of the country, though possibly at the expense of economic output.
And fairness is also important, because societies are built on trust. When people don't trust government institutions and each other, everything starts falling apart.
it is not good policy to reward people who break the law to the detriment of people who abide by the law. if tax fraud occurred less, it would give us latitude to lower taxes which would give the broad based economic improvement you are discussing.
The problem with the conventional wisdom is taxes don't fund government services. Fairness is a real asset. Deciding how to weight fairness as an asset against computers and food is political.
It's good economic policy based on what? Did you run a counterfactual already? Comparing the US to other countries is meaningless, it's not the same set of init conditions and variables.
Do you realize that those taxes go to fund public services and help people stay afloat, which I don't need a study to show you, creates far more customers for all these tax evaders in the first place? Go back 50 years to see what this country used to be and how much shit it got done and compare it to today. There are measures of productivity engineered in math, and then there is common sense: majority of existing infrastructure was built decades ago and now it costs billions in overrun projects to build a single station in NYC.
The current system works just fine in terms of punishingly taxing everyone on this website and the poor, that's why it feels like I'm contributing half of my salary to the federal government. What it doesn't do is take its share from extremely wealthy, who in turn DO NOT SERVE the economy because they're effectively stateless agents, who can put their money into Seychelles or whatever. Nobody would bat an eye if those billionaires would contribute the billions to the economy. Instead you get people crying about how "the government is inefficient, it gets nothing done, I'd rather the titan spend it as they see fit." But if this ship called United States floods they will be the first to abandon it, just like a famous critter.
I'm sorry but posts like this are the exact definition of bootlicking.
Economics is not divorced from ethics. Fairness matters. If people think the system is rigged they won't participate, or they will try to find their own way to exploit the system.
> Where are crimes more likely to occur, a city with 10,000 or 1 million?
A city of 10,000 may very well have a higher rate of crime. In terms of your analogy, consider my lawn man, who only takes cash for his services. I know he's not taking in millions of dollars a year (or even hundreds of thousands), but I also strongly suspect that he does not report all of his income.
Same goes for every cash-only business I know.
> I rather have a well staff IRS going after those that evade paying their taxes, probability speaking the wealthy.
I'd rather the tax code be simplified so that nobody has access to loopholes, not just the wealthy. Not much you can do to hide, for example, a land value tax.
I mean a Georgist land value tax, where you are only taxed on the value of the land underneath any improvements, and not on the improvements themselves. Of course, that doesn't prevent the kind of valuation mistakes that your article points out, but they are orthogonal.
Of course that's precisely why "people" (Republicans) want to defund the IRS.
Note that it's also totally incompatible with their idea that the government should be run more like a business... so you're going to strangle the one part of it that actually generates revenue?
I think this has been studied and low-to-medium income filers are more likely to actually commit tax fraud so you get better returns as the IRS by focusing on these filers
By mapping audit costs and returns across the income spectrum, he continued, “We saw very clear evidence that the return from audits at the top of the income distribution really exceeded by quite a bit the returns at the bottom of the income distribution.” With the top 10 percent of earners, they found, audits have the potential to return more than $12 for each $1 spent.
thank you for sharing! i'm having trouble finding it but the explanation i gave i believe was one given by the IRS commissioner in some hearing which i took at face value, but this seems like a much more thorough analysis
That's exactly it. The earned income tax credit (EITC) is a direct transfer of money from the government to tax payers that only low income households are eligible for.
Most of the low income audits are related to the EITC, because people tend to fudge checking a box to get more money.
probably because high-wealth individuals have a lot more wealth preservation instruments available to them and paying a $300/hr to professionals that help them navigate these tax reduction techniques makes very little sense when youre income is less than $100k
"I would argue that having to file taxes through a 3rd party accountant or service is not only forced commerce but also broken glass economics"
Where are people being forced to use a 3rd party? My understanding is that direct file is optional, hiring someone is optional, and using tax software is optional. Isn't it still possible to file with paper on your own?
Anyone with company stock grants, investments, or unusual scenarios is going to find it difficult to file their tax correctly without an accountant or software. The US tax code is too complex for a regular person.
I personally used TurboTax the first few years I had RSU and ESPP income to report (and ran the end result by an accountant) but eventually switched to filling out the forms manually because I found it easier than entering the same information into TurboTax. Tax prep software is great for when your taxable circumstances change and you don't even know which forms you need to fill out, but I didn't find that it let me skip understanding the relevant parts of the tax code and I got to the point where I was having to generate preview pdfs look over exactly what it was generating to make sure I'd entered numbers into the correct spot in the software.
Filing a DIY tax return with investments is intimidating at first, but it's really not hard once you've done it the first time. Assuming you're not doing any esoteric cost basis adjustments, it's just a matter of knowing where to copy the numbers from your consolidated 1099. Interest and dividends go right onto your 1040. Realized capital gains go on Schedule D. If you hold any foreign stock, claim your foreign tax credit on Schedule 3. Investments in IRAs, HSAs, and 401(k) accounts are, of course, not reported at all.
I choose to use software to make it easy. I don't feel like it's being forced since I could use paper if I wanted to. Indo understand that the tax prep lobby generally doesn't want simpler taxes or simpler filing, but it still feels way less coercive than many other areas of legal life.
Not only is it still possible to paper file, almost half of taxpayers still paper-file their returns, and a lot of them filled out the returns manually (by hand) on a paper copy of the return.
I keep hearing that its mostly the wealthy who evade tax, but I don't understand it. Service workers love being tipped in cash because its easy to not report. OTOH the wealthy have more to lose if they're caught, and can afford to pay their taxes and accountants.
Even if that's true, the number of dollars being evaded is substantially lower. Not reporting $2000 a year in tips isn't exactly going to have the same effect of a billionaire not reporting $100,000,000 of their income.
There are plenty of legal ways to evade (or at least not pay) taxes as well, though. An easy way, for example, is to store wealth in the form of stock; generally you don't pay taxes until you sell, so increased value is ignored until then, but once you have that many assets you can borrow money using the stock as collateral, and in some cases I believe you can even write off the interest. All of this is perfectly legal, and I'm not sure if it can or should be "fixed", but a lot of cash that might otherwise be taxed simply isn't.
For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes.
> For that matter, they could also buy a piece of art for a million dollars, a year later get it appraised as worth $40 million, donate it, and then write off $39 million. Again, as far as I know this isn't strictly illegal, but it can be used to evade taxes.
This is so wrong it hurts my brain. The IRS requires using a qualified appraiser, and none of them will suddenly appraise an artwork for 40x its last sold value. The IRS aren't fools-- they'll quickly clamp down on such an anomaly.
Even if this amateur scheme were true, the individual wouldn't write off $39 million. They'll deduct the tax rate (%) of $39 million.
Isn't this one of the reasons why most very expensive art pieces are sold in auctions? The auction acts as a qualified appraiser because of price discovery via competition makes the price very real (after all, what is price but supply and demand?)
Although I guess there is nothing stopping Soteby's from setting the base price absurdly high to begin with . . .
It's all layers of legalized scams. Business expenses, mortgage interests on investment properties, technically charitable donations, massive tax exempt funds, etc. And all these interacting in creative ways.
not sure how you keep hearing this, the IRS is very clear that lower income filers commit much more tax fraud which is why they focus audits on filers in this income bracket because it generates the best returns
I do wonder if part of this is because lower-income people don't have the legal resources to fight this though. If a billionaire hides their wealth in an illegal way and they're caught, they'll hire a bunch of lawyers and fight against, potentially dragging a court case out for years, and costing the taxpayers millions of dollars.
Since I cannot respond to everyone that broke of this binary tree and I take you for the view points.
Let say you won the lottery, now you can buy that dream house. Do you get a mortgage or pay off the sum in the cash on hand so you are not losing moneys in interest payments? Why waste money on interest and save in the long run? Which is it, take a mortgage or pay interest?
Take the mortgage and the tax deduction. First open a trust or a shell company. Move $1,000,000 into it to back the house purchase as Lender X. Take a loan against Lender X, which is yourself. Now on the tax deduction, state the amount of interest you paid to yourself as mortgage interest on your house, since you could / didn't pay in cash. Use this to place yourself into a lower tax bracket and put some of those tax dollars into your account. Creative account is legal and can be exploited by the rich. Even more when you use money to maximize the legal loop holes by paying others to find and construct other legal loop holes.
Now try to remove that tax loop hole. Near impossible, this would remove that the tax loop hole that allows others not paying a mortgage to themselves, but to a Lender Y, a actual bank or credit union. This tax deduction is near impossible to remove because it cuts out the middle class and poor ability to buy a house.
Where is crime most likely to happen, in a city of 10,000 (A) or 1 million (B)? 10,000 is 1/100 of 1 million. Now where would you bet single (1) crime will happen, city A or B? City B 100 times more people to commit a crime than city A. Lets rephrase, you have the ability to take 10,000 (A) lottery different lottery tickets or 1 million (B) lottery tickets? Which would you take tickets A or B to maximize your winnings?
Cash based business that don't declare income in hospitality industry as tips. How many of those individuals make 10,000 or 1 million a year? How many people tip in cash versus in credit or debit card? More people have been using credit cards to make purchases versus paying in cash. When was the last time you payed in cash or be a party member in a pure cash based transaction in a restaurant? How many people use their company business credit card to pay for corporate deduction dinners and how many pay in cash?
How do you plug this legal loop hole that places more tax dollars into a rich person's hands? Start by shifting money into a trust or shell company. Pay an artist $5,000 to create a new piece as Company X. Company X now auctions off the art. You, as the hidden supporter of company X, buy the art, and pay yourself at auction, for $50,000. Now you donate that art to a museum or other non-profit that fits the tax deduction bill. I just donated $50,000 because I made the declaration that $5,000 is actually $50,000 as proven by my auction bill, secretly paid to myself.
Lets deploy a use tax. A person that drives more should be paying more for the road, repairs and maintenance. How much do you use your vehicle for person versus business? How much of your driving is just to get to work and back home, or driving from work to lunch and back to work? I'm using my car 80% for work driving to and home, and only 20% for personal. My use tax should be 20% of what I own, my employer should be paying 80% of the usage because it is being used to benefit them, but since I am the owner of the vehicle I pay 100% of the use tax. Now I am being taxed 80% to be employed.
How volatile is this to the political winds? As the article makes clear this was largely done with the support of the current incumbent, but what if the next one is more amenable to TurboTax's ideas?
That seems to be an ongoing headache in the US with executive branch created programs, courts can just immediately squish them or political winds can change, then they're suddenly gone.
Something like this, in order to be permanent, needs congressional approval.
Very. Had the GOP won the senate in 2022, this would have probably been cut already. Depending on how this November goes the policy could definitely be reversed.
> Something like this, in order to be permanent, needs congressional approval.
This program did come from Congress. It was apart of the inflation reduction act.
It's a huge problem that when the opposition comes into power, they immediately try to revert and undermine what the previous party did. Not because of merit, but just because of partisanship. So you end up with a lot of programs that get started and after a while get repealed or maintained badly. This costs the country a lot of money.
The ACA is a classical example. Instead of improving it or proposing a real replacement, they campaign for repealing it and some incantations of "free market" without explaining how patients won't get screwed over even more than now.
That's not how the opposition is undoes something. The opposition reduces funding and scope and passes legislation that effectively nullifies previous laws.
The reason Republicans are mentioned above is that they have a well documented public history of endorsing and carrying out these kinds of shenanigans. Democrats, though cut from the same cloth, somehow manage to be one step above on an imaginary decency scale.
I was mostly focused on the policy part of their comment. A lot of the changes come based on a level or two removed. You generally don't see laws fully flip flopping. Instead it's quite common for someone to get appointed and then their decisions are the ones that change policies (especially internal policies at various agencies). SCOTUS, both now and in the past is a good example of the external law/policies changing based on interpretation. But yeah, actual repeal of laws is very rare.
Which ones specifically? I haven't followed how the individual elements have played out. Many of the elements seem minor, but I don't remember if the CBO broke down which portions would create the deficit. I assume it's the corporate pieces, but don't know which ones.
We didn't even allow the 2001 Bush tax cuts to automatically expire at the end of 2010, despite control of the House, Senate, and White House passing from the Republicans to the Democrats during the intervening years.
I would give the example of the 2001 Bush tax cuts.
Since the Republicans lacked 60 votes in the Senate and zero Democrats supported the Bush tax cuts, The law enacting them was passed using budget reconciliation rules.
> Budget reconciliation is a special parliamentary procedure of the United States Congress set up to expedite the passage of certain federal budget legislation in the Senate. The procedure overrides the Senate's filibuster rules, which may otherwise require a 60-vote supermajority for passage. Bills described as reconciliation bills can pass the Senate by a simple majority of 51 votes or 50 votes plus the vice president's as the tie-breaker
Using budget reconciliation rules automatically set a sunset date for the tax cuts, after which they would automatically expire.
When the tax cuts should have automatically expired at the end of 2010, the Democrats controlled the House, Senate and White House. Despite frequent claims over the decade that tax cuts for the rich were morally reprehensible, the Democrats did not allow the tax cuts to automatically expire, extending them for two years in the lame duck session of Congress, and then most were made permanent two years later before they should have expired again.
Despite frequent claims over the decade that tax cuts for the rich were morally reprehensible, the Democrats did not allow the tax cuts to automatically expire, extending them for two years in the lame duck session of Congress, and then most were made permanent two years later before they should have expired again.
The great increase in illegal entry into the country through the southern border is a good recent example. Though, I suppose this is predicated upon it being "good policy" that illegal immigration be slowed.
I would love to see your sources; everything I've seen across the partisan spectrum shows a large increase from the 2010-2020 period to 2020 and onwards.
But the Democrats haven't made an¥ significant changes to immigration policy. In fact, they offered an bipartisan immigration bill that tilted significantly toward the Republicans' wishlist and the GOP rejected because Trump wants to run on immigration and giving Biden a political win in that area was unacceptable to thim (even though many on the left found the proposed legislation very disagreeable).
The main change at the border is a larger number of migrants. Migration trends are up globally, for a variety of reasons including climate change.
Sorry but the elected leader of a party openly stating his objectives is not "partisan propaganda." So free of Koolaid you think simply citing the actual words that a grown adult said of his own free will and cognizance is "partisan propaganda."
Care to explain what happened during the Trump Administration then?
It's so easy for people to hyper-focus on "my side good" that they lose sight of the overall picture. Resisting an administration's agenda is pretty normal and expected... the people who voted for Mitch simply do not agree with the Biden agenda. Mitch (and other R's) are there to enact the agenda their constituents want. What a shocker...
Why is this surprising to you? Have you pondered, even for a few moments, what Democrats do when there's a Republican administration in office?
Surely you can find examples of Schumer saying that his party is fully committed to obstructing the Trump administration, right? Or Harry Reid saying it during the Bush administration?
No, it's not normal. That's exactly my point. If it's normal, cite it.
Believing it's normal for one party to have as an explicit goal to simply obstruct everything the administration is doing is a symptom of drinking too much Koolaid.
> "One-hundred percent of our focus is on stopping this new administration"
Actual words stated by Mitch McConnell. His goal is not to pass policy that's good for the American people, not to prevent the administration from overstepping or making mistakes, not to do anything except simply "stopping this new administration."
The purpose of our government is to collaborate and compromise to find solutions that are good for the country.
Consider two children tasked with collaborating on a problem. One of them walks up and says "One-hundred percent of my focus is on stopping you."
Are you similarly confused about who's the asshole? Is that "partisan propaganda" to say that the child who states that is an asshole? Are you really so smart that this becomes a tricky situation to understand?
> The purpose of our government is to collaborate and compromise to find solutions that are good for the country.
> Consider two children tasked with collaborating on a problem. One of them walks up and says "One-hundred percent of my focus is on stopping you."
The purpose of our government is clearly lined out in the Constitution. A lot of people happen to think that the federal government has stepped way outside of the bounds prescribed therein[0], and that this causing harm to the country. If you take that view, then being 100% obstructionist at the federal level is in fact acting for the good of the country.
[0]: To be clear, this has been going on for nearly a century. It's not a recent thing, nor is it specific to the parties or presidents involved at any given time.
Clearly by "collaborate and compromise" you actually mean "so long as my side gets their way". This is the negative result of buying into entirely one-sided propaganda - it limits your perspective to, frankly, bullshit.
I do not see a point in continuing since you seem unwilling to actually contemplate the entire environment. Not only do you have absolutely no response to obvious intellecual hypocrisy, but you are indeed one of "those" people who links to propaganda to support their deliberately narrow and naïve perspective of the world - and demands others participate in this alternative reality.
It's not fun, nor intellectually stimulating to engage in this type of debate.
No, that's actually not what I mean. Note that I'm not taking issue with any GOP policies, because I don't have a problem with GOP policies. I have a problem with stated goals of simply obstructing the people they are supposed to be collaborating with, thus I am directly quoting statements made that explicitly state their goal of obstructing their collaborators.
Again, citing someone's own words cannot possibly be considered "propaganda" against them, lol. They said it, and to my knowledge they weren't even held at gunpoint!
I mean you haven't even given me an analogous example of the problem I'm pointing out, so I'm not sure what "clear hypocrisy" I'm exhibiting. Give me an example case and I'll tell you what I think and then you can decide whether I'm hypocritical.
There was oodles of collaboration during the Trump Administration - how did I ever forget how willing to compromise and collaborate Democrats were back then! It was an amazing time for our Congress - so much collaboration was done that we got sick and tired of collaborating!
This is a feature of the US constitutional system, not a bug. It's designed such that things move very, very slowly. If Congress isn't able to pass laws, it probably reflects a division in how the voting populace feels about the subject of such laws.
The president may be all we have, but he is constitutionally forbidden from acting like a king. Though, of course, that hasn't stopped presidents from trying.
100% Correct. People all too often look at Congress and say "gee, they aren't passing all the things I want them to do, therefore Congress must be broken!"
This fails to realize Congress works entirely the way it was designed. As you said, inaction == lack of consensus.
Imaging running a country where significant ways of life (influenced by laws) change willy-nilly depending on the flavor of the day? The legal whiplash would be absurd.
So, people often look to the president as some sort of king analog, and demand action via Executive Order - then cry foul when the next president undoes the previous one's EO's... it's lunacy and not a good way to run a society.
> This fails to realize Congress works entirely the way it was designed.
Don't really think so.
The 1929 Permanent Apportionment Act subverted the intentions of the founders and clearly swayed the power balance back towards rural areas, even though they have equal representation in the senate.
Oh man this and the 17th Amendment I think created a serious flaw to the framers' original designs. But people look at me crazy when I say that the 17th Amendment probably was a mistake and the 1929 Permanent Apportionment Act a serious mistake to our democracy.
Posting this demonstrates a clear lack of understanding of how the US government works - and a gross misunderstanding of the founding of the US and the framer's intentions.
The "And?" was a prompt for the poster to elaborate on their uninformed view. You apparently saw fit to double-down on expressing your lack of understanding as well...
Perhaps you would like to take a swing at explaining how Congress passing a law somehow "subverts" Congress?
“ it probably reflects a division in how the voting populace feels about the subject of such laws.”
I don’t think that’s correct. There is way too much propaganda coming from the parties to think that voters have made up their minds based on the facts. It’s actually quite hard to get the facts because the media is mostly reporting politics like they report a football match.
I'm actually curious on the reverse. What programs did the GOP start that were cancelled by the Dems? Note I'm a biased liberal, so potentially the reversals might've been propagandized to me as lifting restrictions or some other such political language and I might be unaware of the actual policies.
A couple of examples would be reduction of some of the Reagan-era defense spending under the Clinton administration, and partial rollback of some of the Reagan-era tax cuts under the Clinton administration.
Of course these were not complete elimination of programs, but adjustments. And you could argue that there were other reasons besides partisanship, like the end of the Cold War and budgetary issues.
You're totally right that it's especially bad with e-branch stuff, but it's not necessarily limited to that. Most programs established by congress will be given an expiration date beyond which it would require another act of congress to reauthorize. I think it's mandatory for anything that costs money, basically. I can see the basic rationale that if something is not popular enough to be reauthorized, why keep doing it, but it sure does contribute to instability not knowing if you can depend on something important continuing to exist.
In 1991 the ACA was the conservative proposal, but in 2010 when it was passed under the Obama administration it suddenly became communist marxism. Sigh.
You have a pretty loose definition of talking point. It was pretty widely televised that McCain broke ranks with the party to prevent an ACA repeal [1] but ignoring that event there were many attempts over the course of 7 months [2] to replace it. That time could've been invested into literally anything else.
But yeah a lot of things end up being campaign talking points. Like Obama saying they'd enshrine abortion rights into law and uh didn't.
> This program did come from Congress. It was apart of the inflation reduction act.
The inflation reduction act directed the IRS to perform a study on Direct eFile. Implementing an actual pilot and then expanding to a permanent tool was based solely on executive authority, so either congress or the president could choose to scrap the program in the future.
> Inflation Reduction Act §10301(1)(B) TASK FORCE TO DESIGN AN IRS-RUN FREE ‘‘DIRECT EFILE’’ TAX RETURN SYSTEM.—For necessary expenses of
the Internal Revenue Service to deliver to Congress, within
nine months following the date of the enactment of this
Act, a report on (I) the cost (including options for differen-
tial coverage based on taxpayer adjusted gross income and
return complexity) of developing and running a free direct
efile tax return system, including costs to build and admin-
ister each release, with a focus on multi-lingual and mobile-
friendly features and safeguards for taxpayer data; (II)
taxpayer opinions, expectations, and level of trust, based
on surveys, for such a free direct efile system; and (III)
the opinions of an independent third-party on the overall
feasibility, approach, schedule, cost, organizational design,
and Internal Revenue Service capacity to deliver such a
direct efile tax return system, $15,000,000, to remain avail-
able until September 30, 2023: Provided, That these
amounts shall be in addition to amounts otherwise avail-
able for such purposes
Virginia had a dead simple and free e-File system for years. It cost the state almost nothing to maintain and worked wonderfully. The tax companies were able to bribe a few members of the legislature to have it killed with relatively little fuss, and now Virginians pay some of the highest rates for e-filing at the state level.
Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all. The IRS should have to declare what they think you owe before you pay or submit any paperwork, I don't know if that'll ever happen but any baby or big steps towards that reality will win bipartisan support, easily. Just have to get past the conflicted-out members of congress who are truly being controlled by Turbo Tax and other industry lobbyists.
"Not very, absolutely everyone hates doing their taxes and the whole shady process behind it all"
That's the Grover Norquist (and Republican) argument for not having IRS Direct File to begin with: if filing taxes becomes easy, people might not hate the IRS and hate taxes.
And it's really because they don't know any poor people.
Because if they did, they'd know that filing taxes for low income people with kids is a HUGE bonanza, and they'd work like hell to implement a system where all tax credits were applied to individual paychecks, not lump sums during tax season. It's the one time of the year when their pockets are flush with cash.
If cost basis was reported to the IRS by your brokerage, you can typically just report the summary total, since the IRS already knows about the individual trades.
As a Brit it's baffling that this is even an issue. I filed my taxes online with HMRC for free this year (we call it Self Assessment), it took 20 minutes, and I received a 4 figure refund in ~2 weeks directly in to my bank account.
the tax difficulty in the US is overstated, we have plenty of services that will let you do it for 20 minutes for free. the most popular one is obnoxious and tries to upsell you often, but there are alternatives and you don't need to pay
I finally tried FreeTaxUSA this past year based on recommendations on HN and it was a huge breath of fresh air compared to TurboTax! They treat you like a person and not a wallet, and it was also just way smoother and easier to understand than TurboTax's nightmarish interface.
This is true, but up until recently, tax filing companies would also do all kinds of underhanded tricks to make free filing difficult. For example, Turbotax had two different tiers of free tax filing software, one with a much lower income threshold than the federal mandate. You only find out you're in that tier when it comes time to file. Guess which one they bought tons of google ads for?
I can't speak for the UK, but in many other countries, the tax forms are already filled out and you simply need to verify the numbers. You don't get that in the US.
Turbotax and other like companies lobby for more complex tax law and to restrict access to government services that would assist citizens with filing taxes. The more complex the tax code is, the more people need Turbotax. It is not a healthy dynamic. https://abcnews.go.com/Business/turbotax-lobbies-lawmakers-t...
US government services are bad almost across the board. Most of us would pay a premium to use a private version over a government version of almost anything.
I’m guessing you would find it equally confusing if I told you we’d pay a premium to use a private DMV or private post office. Here in the US, that statement wouldn’t be controversial at all.
I recently renewed my global entry, and it was a piece of cake. I occasionally interact with the FCC because of my amateur radio license, and the FRS is super easy to use. I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected.
> I recently got passports for my kids, and that was super easy to do as well and the passports came much faster than expected.
Interesting. I am currently renewing my and my spouse’s passports while also trying to get first time passports for my children and I couldn’t find the process more outdated and borderline kafkaesque. If you told me the website was built in 2003 and hasn’t been updated since then I would believe you.
I can only renew my passport by snail mailing everything including my existing passport. I can only get my kids a passport by physically taking them to an approved location for processing. I could not get an appointment for about a month at any location near me. As a bureaucrat myself, I just find this level of hoop jumping to be ridiculous.
I got an appointment within a week. The post office took the pictures and submitted everything for me. Couldn’t have been easier. Sounds like experience varies based on location.
I did a digital renewal for my passport and it was fine also. It’s a once in many year event, so it doesn’t bother me that I need to go to a special place to submit documents.
For a short time (maybe 6 months or so) the state department was testing out fully digital passport renewal. I was able to slip in and it was great, digital phone photo, fill in some forms and I had a new passport in the mail after a couple of weeks (I didn't pay for rush processing).
It was taken down after the pilot for them to adjust and fix the process but there are improvements in the works.
I'm from a third world country and have lived in a few European countries.
Switzerland was the only one with better govt service. Everywhere else it was significantly worse than the US.
Surprisingly France and Germany were worse than India in terms of obscure things needed for getting anything done and no exceptions for anything. The US on the other hand, if you can go talk to someone in person they'll make it happen.
I'm in the US and I find your statement confusing. With the exception of the irs which was deliberately made hard to use by the republicans, most government services are fine. I certainly doubt a corporation would do any better.
DMV varies quite a bit state by state. Where I live it’s quick and easy, but in some places you go early in the morning, and you should probably pack a lunch.
The tax system here (usa) is an absolute joke. I owed $5k this year and I literally did nothing different except receive a small 5% raise last year. I have the most basic taxes you can, single, no kids, no house. Literally just a salary paycheck every 2 weeks. Had no idea I would owe anything, much less that much money until I filed 2 weeks prior to our tax date in April and you're expected to pay everything you owe to them on that date.
I sold a house in 2019, I walked away with only about $15k profit after paying everyone. Bought the house for $335, sold for $370ish. I think my principal was around $310k at the sale. I got a letter in 2022 that I owed the IRS something like $150k or so, some shocking amount of money. Freaked me the hell out. I had to dig out all of my paperwork from the sale and send it to them. All of it but, I forget, maybe $100-1k was dropped. I have no idea what their deal with that was. I had a mortgage, paid the mortgage to my mortgage broker, and when I sold it paid the mortgage off to that mortgage broker. Don't they handle that? I don't know, it was my first house sale.
I'm 40, I've never had the IRS annoy the hell out of me until the last 5 years and now I get a letter from them and my heart stops.. Like, what is it now, masters of my w2? Where I have erred today? It feels like they're practically targeting me at this point. I get letters from them and wonder if they're even legitimate so I call in to verify. When I go to the irs.gov site that tells you what you owe, it doesn't even match what any of my letters say. Right now it says I owe money from I think 2016 that was sent to collections and I've never received a letter for that. Collections! For my taxes? That you pull out of my paycheck?? I don't have ANYTHING about that on my credit report. I also have no way to pay it because it's "In collections."
Seeing all of the rich assholes skate by with tax evasion and all of the loop hole work they do, then knowing they're on my ass when I'm just a dude getting a salary just pisses me off so much.
> I owed $5k this year and I literally did nothing different except receive a small 5% raise last year.
This is a common gripe I hear from US tax filers, and I fall into the same psychological trap myself. After all, it always feels bad to have to pay a 4 or 5 figure sum to anyone.
Instead, you should see this as a benefit -- you had the opportunity to extract gains from the stock market (or other investment) on money you rightfully owed to the government; they only came to collect it at the end of the year instead of with each paycheck. Conversely, a tax refund should be seen as a disadvantage, as the government withheld more money from you than it was entitled to.
I don't remember what all the limits are but the first time you underpay beyond a certain amount the government looks the other way but the second+ time you have to pay penalties. Penalties for a situation wholly in control of the government. They wrote the withholding tables your employer is abiding by to withhold _not enough_ to avoid you having a penalty at the end of the year.
Although I suspect this only matters to FANG where the changes to withholding from the Tax Cuts & Jobs Act meant you had to modify the supplemental withholding rates so you wouldn't get penalized.
Default federal income tax withholding on bonuses is 22%. If your marginal federal tax rate is higher than that, then you underwithheld, meaning you owe more in taxes than you paid over the year.
For your home sale, the person responsible for closing the transaction files Form 1099-S with the IRS, reporting the sale amount (which they're responsible for) but not how much you paid for it (because you're responsible for that). You should have gotten a copy of the 1099-S, which was your clue that you needed to report it on your return.
I do get a 20% bonus at this company and I think it is attributed to that. It was my first time getting that bonus. What do I even do here? Talk to HR? I don't think I can do anything and just suck it up and pay it and expect it next year? I dunno.
It might be worth a conversation with HR and reveiwing your tax withholdings just to make sure there is not an error and misunderstanding as to how your company or the HR software is handling it. I ran into a somewhat similar situation early on at my current job, but we were able to find an issue and correct before I got hit with a nasty surprise at tax time.
My issue was that my with-holdings and everything looked fine. But I was not having any federal taxes taken out on my paychecks for federal with-holdings. Turned out to be a software issue that the company who makes it was able to correct.
Thanks! I'll speak with them. I know everything is through Bamboo/whatever software nowadays so I wasn't sure if they really had any control/input on these things.
> I know everything is through Bamboo/whatever software nowadays so I wasn't sure if they really had any control/input on these things.
You have control, they don't.
Withholdings are calculated based on elections you make on an IRS form called a W4 (which could be electronic or paper). Neither your employer nor the IRS "control" that, but there are some common case defaults.
It's on each taxpayer to understand their actual tax liability situation and adjust withholdings accordingly.
Yep, here we go, the condescension of Hn. The point is they know my exact income and should be able to handle it, not make me figure it out at the end of the year. I have no idea why I got a random $5k bill. It could be something else. And that's the annoyance.
I'm not "blaming the IRS" for shit, I'm complaining that they don't give me THEIR side of the information which would massively help you (anyone) figure out issues. Fucks sake the reading comprehension on here.
I'd love to hear you disprove to some omnipotent government entity, with no information from their side, that you did NOT make $150k extra cash last year. Lets go, bud. Prove your lack of $150k. You didn't make an extra $150k last year? Prove it. Show your lack of paystubs against our information that we won't provide you with.
Some of you absolute mental giants think I'm crying about my anecdotes when they're literally just my examples of how the IRS gives you no information and just sends you a bill for $150k. That's the point of the post. I absolutely am not asking for your tax advice.
Use your W-2 and this calculator from the IRS[1] - ensure that your W-2 includes the bonus you received (I would imagine it would since you got taxed on it). That should give you the values you need to have in your W-2 to avoid a massive tax bill at the end of the year.
You can also set a additional flat amount of withholding per paycheck. You get any overpayment back as a refund.
It absolutely was taxed. I also have never received a paycheck that wasn't pre-taxed. It was something like a $30k bonus and I received about $17kish of it.
Be more condescending though, that's helpful, wise one.
I didn't say I KNEW it was the issue, I said it was potentially that. The IRS doesn't say "Hey you messed up here, fix this, that's the problem." They just send you a bill, which sucks. I had NO information on my $150k house sale tax and had NO idea what information they needed to rectify it.
> Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences."
Sounds like something Turbo/Block would say.
I don’t understand how more competition in this area could hurt the customers. All the “file federal taxes for free” offers usually cost me around $70 since I have more than just W2.
> Taxpayers Protection Alliance spokesperson Kara Zupkus said in a statement that expanding the program will "radically increase the IRS's authority and scope" and "have devastating consequences."
There are special taxation concerns for high income individual. Dealing with these would have certainly delayed the launch of the service. I'd rather have the service launch now for 95% of people and have coverage improve over the years, than have it launch in several years (or possibly never) for 100% of people. Besides, if you're in the top 5% of income, you can afford a CPA.
Based on those numbers it sounds like the limitation is more "Direct File can't handle the Additional Medicare Tax or overwithheld FICA yet" than a baseless exclusion of higher income taxpayers.
good to know, thank you! totally support excluding features if it helped them get to an earlier release for most taxpayers - but hopefully they go to it eventually
Thanks! It's also weird that that's buried on a webpage that they really don't want you to find anymore and not prominently displayed on the flyer they put out.
it might have been this limit only existed for last years pilot (but i guess still should have been in the flier)? i was also surprised i was having trouble finding reference to it but it's definitely a thing
> Rep. Brad Sherman (D-Calif.), an accountant and senior member of the House Financial Services Committee, told Axios in April that he wants to go "way beyond Direct File," calling for a "self-populating form."
>
> "Why in the heck should you have to fill out your return when the government has all the information. They know what's on your W-2 form before you do. They know what's on your 1099 … Do you know how many mistakes people make?"
That's the way it should be. Even the anti-tax people should be for this because it allows people to see what the IRS already knows. That would allow them to request changes as needed. I know people where the IRS had wrong 1099s and it was hard for them to figure out the problem and correct it.
Anti-tax people like Grover Norquist and Republicans who have made his pledge have long been concerned that if paying taxes were easy, then the American people might not despise taxes anymore. So making paying taxes painful is part of the plan.
Pretty much the same in Canada at this point for many people. Your tax software, and there are lots of free ones, pull the data from CRA and populate your whole return.
1. It surely costs way more in employee expenses to monitor, correct, and collect such small fines. Plenty of times they'll just let a $200 fine go because it's not worth the effort to collect.
2. Taxes are a means to an end, as is the government. There's no benefit to fining people for clerical mistakes besides encouraging them to not make them. There's no value created by fines. There's no shareholder greedily pocketing the revenue. If they can avoid mistakes for people, that benefits government employees by having to waste less time on stupid stuff, the taxpayers by not having to waste time on stupid stuff and avoiding fines, and the people at large by not having to waste public money on paying people to fix stupid stuff on people's returns.
The people who are downvoting my "disagree" are likely assuming that I am speaking philosophically. I'm not. Philosophically, sure: the purpose of the government is to serve the people. A philosophy written specifically for the consumption of people. But now I'm speaking about its practical purpose. What a system produces is always its purpose.
Even with your definition of "What a system produces is always its purpose" is still usually incorrect. The US hasn't "turned a profit" (had a budget surplus) for the majority of the past what, 100 years? Lots of places don't tend to run long-term budget surpluses either. Governments generally don't "turn a profit".
There is no such conscious entity as "the US government". Said entity is a legal vehicle. It can't consciously seek to profit, nor does it care whether or not it profits. However, the point of legal vehicles is to benefit people. My point is that I disagree with the characterization that the primary benefit is "for the people".
Most returns are not audited, and most screw-ups don't result in fines. The kind of thing that (sometimes) gets big fines is sophisticated shenanigans done by rich people, and completely preparing such a complex return is (imho) way out of scope for the 'tax automation' we are speaking about here, where a basic 1040A or 1040EZ (simple forms which a massive plurality of Americans are eligible to use) can be populated entirely from IRS-known data.
> all the fines they give to people who accidentally fuck up their tax return.
You only get fined if you deliberately (and fraudulently) fuck up.
If you make a mistake, they give you a chance to correct it before fining you.
I forgot a W-2 once (I switched jobs 4 weeks into the year and the first employer gave me my W-2 late) and filed without it. My return was rejected and I got a letter telling me why and requested an amended return. I amended, re-filed, got accepted, and got my refund. No fines.
And certainly no jail time like a lot of memes like to suggest.
That revenue isn't even a drop in the bucket. The issue is and always has been parasitic jobs: you wouldn't need anywhere near as many IRS employees and tax accountants.
If anything it’s a great opportunity to put personalized suggestions for how to reduce one’s taxes (=change behavior) directly in front of the eyeballs you want to see it. Put it directly on the page where you click “looks good to me” on the automatically-filled-in tax form.
“Looks like you’ve never used your one-off solar panel federal tax credit. Click here for information on how to save up to $xx,xxx on next year’s taxes, while also reducing your energy bill!”
> Tax policy is the government's strongest tool to change personal behavior, and if the system is simple and automated it doesn't do that at all.
I'm not sure I agree. For example, I used to pay city wage tax to one municipality, and I decided I did not want to pay that city tax anymore so I took a job in another area that no longer had the city wage tax. I would be due the wage tax no matter what, and I was aware of exactly how much the wage tax was by looking at my pay stub every two weeks. Having my taxes prepared for me doesn't really change that.
The Taxpayers Protection Alliance spokesperson quoted at the bottom says:
> Private tax services "have every incentive to find the deductions that will yield them the best return," Zupkus said, adding that the IRS wants "to extract as much as possible from the taxpayer."
I think it's worthwhile to acknowledge that there are indeed slightly different incentives involved when it comes to the private sector handling tax prep versus the government.
But it's laughable to argue that the private sector is not in it to extract as much as possible from its customers.
Edit: I think some commenters are missing my point here. I'm not agreeing with this spokesperson. I'm saying that it's disingenuous to argue that the government is trying to fleece consumers when it's clear that the private sector has been doing so for some time.
It's not even correct - the IRS wants to follow their rules as closely as they can.
I have had the IRS unprompted send me an additional refund because of a mistake I made on my forms, and they caught.
(They also included a letter saying that if I thought my mistake was right, I could fight the refund, or file a new amended form and go for a bigger one.)
Similar story here. I had quit my job to return to college full time, but I worked for a few months that year. Turns out that qualified me for the Earned Income Tax Credit.
This credit is supposed to encourage poor people to work instead of living off government assistance. I would have never thought to claim the credit because I didn't think of myself as low income. On a monthly basis, I wasn't. But because of working for part of the year, on an annual basis, for that tax year, I was.
One day I got a letter from the IRS saying essentially, "Hey dummy, why didn't you claim this credit on your return? We fixed it for you. Here's a check."
I have done[1] my own taxes most years over the last 4 decades, but only in the last few years has the Federal IRS fixed my errors for me and sent me more money[2] than I expected. Pretty cool.
I moved house from AZ to GA in 2022 and both State revenue departments refunded me more than what I expected from filling out the partial year forms. GA was almost double[3]. The move included a corporate 6 figure relocation package, with all the fraught income tax issues with that. A lot of anxiety... just dissipated.
[1] I download the pdf forms and instructions and just fill them out, and if I have to I print 'em out and mail 'em in.
[2] I try hard to keep refunds to a minimum, certainly less than $1K.
[3] My partner and I puzzled over the GA instructions for quite some time, which are impressively ambiguous. I could make an argument for 3 different scenarios given the instructions, and we decided to go conservative and use the middle strategy. However the refunded amount did not match any of the scenarios I myself calculated!
To be fair, that's also the kind of thing Intuit would love to catch since it will make them look good (as they bill people for the privilege of filing taxes, of course).
The taxes had been filed via TurboTax - I had fatfingered some data entry (so it's not really Intuit's fault they didn't catch it). The IRS had the data from other sources.
I have had the IRS charge me tax and accuse me of lying to them over a UTMA withdrawal used to pay for tuition even though the fund running the account refused to send me the paperwork because the account is in my parent's name first instead of mine.
It is a massive organization filled with uncoordinated people doing their level best to produce Brownian motion.
That sounds like you are agreeing with the post you are replying to: the IRS is trying very hard to stick to their rules. You have a deduction that neither you nor the IRS have paperwork for (since the fund is not acknowledging it as a covered expense), so they are following the rules.
I can understand how you are frustrated about the situation, but this does not seem to me to be random behavior, but rather straightforward rule following.
If the income is taxable for me, but I get no form in the mail and can't even request one (because it's not my account), then how was I supposed to file a correct tax return in the first place?
Maybe? I would think this would be a legal requirement and not something they have discretion over.
Zooming out though, I think Direct File or something like it is actually the right way to go. This would never have happened if the IRS just told me what it expected of me instead of playing this weird entrapment game where I was expected to tell them what they already know.
> Zupkus said, adding that the IRS wants "to extract as much as possible from the taxpayer."
The IRS doesn't want your tax dollars, they are just the mechanism by which the federal government enforces tax collection according to the law.
I've gotten refunded by the IRS for taxes they found that I overpaid years ago. Neither I nor my accountant did anything to initiate that. I'm not alone in getting an unprompted refund.
Maybe they were talking about the program where you report tax evasion and then once the missing money is collected you get up to 30% of it? That exists.
Sure. But during a casual chat maybe somebody mentioned that reporting tax fraud can earn you money, and then somebody else assumed that they were talking about IRS employees even though they were not.
It would be a real problem if IRS employees were promoted / rewarded based on extra dollars collected. As far as I know it's all political & unionized.
I am a big fan of this, however since it doesn't do state taxes I will be forced to continue using freetaxusa since they do federal for free and charge a modest fee for your state filing. I hope that more states will follow the federal governments example and start allowing free filing online.
My son tried Direct File in New York and had trouble signing up for it I think because he was filing for the first time and has no credit history. They make the process arduous because it’s a common scam to fill out a fake return — I had an uncle who worked for the IRS in the 1990s and he told me they were overwhelmed with this even then.
We were put in line for 40 minutes to talk to someone to validate his id. Maybe it would not have been so bad if we had not procrastinated but we managed to print out the 1040 form and the corresponding New York form and file on paper before we got to the end of the line. I think he would have struggled to fill it out on his own but I have filled out easy and hard 1040s many times and I found it easy.
I realize "baby steps" and I should be happy for the incremental improvements. But somehow I just can't help feeling this will stall. freetaxusa was already "free" for federal and I don't see a seamless transition to filing for states anytime soon. The cost will just shift to that value point.
in this thread: people clueless to the political process giving excuses for the wins of lobbyists.
no, the irs is not "avoiding code complexity" by those limits. the limits are purely chosen by intuit and irs "goals".
first, irs already have how to calculate all of your tax. period. they do that since the 50s and let you guess if you got it right.
then the limits exclude everyone who is the market for intuit, not some complex to code form. have a job were paying $200 is nothing? keep payinh intuit. have some stocks in your retirement plan? keep paying intuit. are too poor that you would rather no bother paying taxes? heres free file from the irs!
The pilot didn't support that, but there isn't any detailed information about what the expanded version will support yet. I would guess K-1 will not be supported for a while, here's what the announcement says:
> The IRS is also exploring ways to gradually expand the scope of tax situations supported by Direct File. Over the coming years, the agency’s goal is to expand Direct File to support most common tax situations, with a particular focus on those situations that impact working families. Announcements about new state partners and expanded eligibility are expected in the coming months.
The IRS is taking an agile / minimal viable product approach. So for now it only supports very basic W2 only tax filers. My guess is that K-1 is low on their priority list for now.
I'll still be using 3rd party software. The main benefit is the guarantee of audit support and legal representation. For such a small fee, that's decent insurance. You'll get no such benefit working directly with the IRS.
You're probably in the minority, or you make a significant amount of income.
If you are single or married without a family, a 1099 contractor or just inputting in a W2 or two, and have a single form from your healthcare company, chances are this really, really helps.
The IRS isn't going to audit someone who just files a single W2 and claims maybe 1-2 deductions and a small stock portfolio appreciation.
I'm not saying it's a bad service. I'm saying for $30 some audit and legal representation is cheap insurance. The IRS can audit anyone they want. My finances are not exceedingly complicated, nor am I a high earner. It's an extremely low risk but still can happen.
I'm sorry but paying $30 for legal insurance sounds like a red flag. Either they know for absolutely sure that they will never have to pay out on the insurance, or they don't intend to pay out if/when you need it. Have you read the fine print to make sure there isn't an exclusion that will void the insurance as soon as there is any kind of problem? E.g., if the user made any kind of mistake in declaring stuff to the filing company (even a trivial one), then the insurance is voided?
Yeah, they'll provide support if it was a mistake. It's not they they never pay out, it's just that it's exceeding rare. Group life costs me like $200/yr and pays out over $300k. Insurance can be cheap if the frequency is low.
Yeah, it's not like they give you a high priced litigator. What you do get is someone to work through the return with you to verify things and a consultation on what the options are. The details vary by which company you go with.
Is it going to be open to itemizers? IIRC this year it wasn’t, which means a lot of people weren’t eligible (and basically had to pay an itemization penalty to a tax preparer/company).
In CA it’s still 15%, which is millions of people. There are other states with a higher percent. You’re right that the number dropped due to the SALT cap. But the SALT cap is set to expire in 2025 (who knows what will happen, though).
It seemed like the initial Direct File rollout was limited to states that didn't have a state-level income tax, or directly cooperated with the IRS. Are they forcing all states to play ball, or will Direct File not cover state tax submissions?
"will be made permanent for the 2025 tax season with all 50 states and Washington D.C. invited to participate"
It seems very much that this is an opt-in thing, state by state. I would suspect that the results of this will be most Democratic-leaning states at least trying to opt-in for next year, and many Republican-leaning states refusing loudly during this election year, then quietly starting to opt in in a few years.
States part of the pilot program (i.e., 2023 tax year): Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington (state), Wyoming as per https://www.irs.gov/about-irs/strategic-plan/irs-direct-file....
Looks like exactly half and half, Democratic/Republican to me ...
If you look at the tax situation across the states, the party split makes a bit more sense. Of the states involved in the pilot program, Florida, Nevada, South Dakota, Tennessee, Texas, and (to some extent) Washington do not have individual income tax. Also, Arizona and New Hampshire both have a flat rate income tax, which I readily admit knowing nothing about, but which I presume simplifies them being part of the pilot. So California, Massachusetts, and New York are the only states which have a variable tax rate and also opted in, and are also all about as Democrat leaning as it gets.
> The Direct File pilot doesn't prepare state returns. However, if you live in Arizona, California, Massachusetts or New York, the Direct File pilot guides you to a state-supported tool you can use to prepare and file your state tax return.
> If you live in Washington state, Direct File guides you to a state site where you can apply for the Working Families Tax Credit when you file your federal return with the Direct File pilot.
I'm aware of a much more efficient solution. Don't believe will ever be adopted, not at scale. Because threatens livelihoods of too many grifters with political power, haha.
