> “A direct-to-I.R.S. e-file system is a solution in search of a problem,” said Tania Mercado, a spokeswoman for Intuit. “And that solution will cost taxpayers billions of dollars.”
Funny, I think she has conveniently recast "the problem" as whether to replace the commercial tax filing industry with something that might be free to the taxpayer. Because yes they doing just fine, thank you, paying us for that convenience, so there is no problem if you look at it that way.
But if the problem is helping people file their taxes easier, then clearly Intuit didn't think that that was a solution in search of a problem, for them to build a whole industry around it...
Funny how entrenched interests will go to great lengths to redefine and recast what the fundamental goal of the government should be. And usually that recasting is some kind of distraction away from the question whether the government should serve the people, or serve specific entrenched interests.
Everyone is falling for tax-prep propaganda by even implying that this is a new service.
The IRS already prepares your taxes for you. There is simply no way around this: they have to prepare them to check the numbers they get from personal filings (or from Intuit etc). The additional service is the one that compares the forms people send against the form the IRS already has, and then has to follow up on every minor discrepancy.
So the direct-to-I.R.S. proposal isn't adding anything new to big government: it's eliminating an utterly pointless literal box ticking service they currently provide for free, at the expense of tax payers, and for the benefit of Intuit and pals.
If you think filing taxes is annoying, imagine working at the IRS with this system.
I don't live in the US and as such have never interacted with the IRS, but you're equating actions with a very different scope.
Looking at it from a game development Perspektive:
The tax filer(intuit in this example) is the client running on untrusted devices,
The tax office is the server which has to do a sanity check for each action to assure they're not cheating.
Essentially the "client" has a lot of branching actions it could generate and the server only has to validate one of these.
From my perspective this client should be provided by the government with public apis for alternative implementations, as they're the one's providing the server.
It depends on the extent to which "validation" is recomputing exactly the same information. If you have a game that runs every single computation server-side it's not a sanity check, it's just a game running on a server. What we have set up is more akin to a game that runs both server side and on the client, with some added latency on both sides because every update has to be cross checked between the two.
You don't see a lot of games like this, because it would be absurd.
To be fair this is a slight oversimplification. I've lived in the US and dealt with the IRS, and while most of the information must be completed server-side there are some things (like deductions) that would indeed need an API. I think your suggestion, allowing multiple clients to use that API, is a good one. But there's no reason to force the client to recompute everything the server already has.
> The IRS already prepares your taxes for you. There is simply no way around this: they have to prepare them to check the numbers they get from personal filings
I'd be interested to hear that I'm wrong, but I believe this is not true. The IRS almost certainly does not calculate on their end what your taxes should be, but rather uses some much cheaper heuristic which they compare to your return and if it's "close enough" then the amount they stand to recover from auditing you is less than the cost to audit, and the IRS simply accepts the difference.
Exactly this. In particular, the IRS does not/likely does not have knowledge of a range of taxable income that we are bound to self-report: sales of goods and property, cash tips or payments, small consulting projects, rent you earned renting out a room, etc. The deductions side is even more opaque to the IRS, for example they have no idea how far you commuted to your job, or that you cared for a sick parent, or that you made tax-saving energy-saving improvements to your home.
The system is essentially an honor system with a barb for those who get caught cheating.
My experience with TurboTax was that in two subsequent runs on the same tax year the refund I got would vary by 20-50% (I had to start over at one point). I didn't dig in: and the reason I was using TurboTax is that I didn't care.
So I'll take the IRS heuristic: better than the Intuit heuristic.
OMG. But the problem already exists. It's THEM. Intuit.
Also, one could say that Intuit wouldn't be left out, they still could create software that could connect directly to IRS, and they have great experience to offer the best solutions to taxpayers (do they?). But of course, then they would have the 'captive market' experience they have now.
I'm Spanish, and, although our tax filling system is not the best, it still baffles me how far behind us is the US one in this case.
Tax filling season is near, and for most people (if you don't have investments or weird tax deductions), you just ask for a pre-filled "draft" from the IRS equivalent. You review your salary and taxes numbers on the web site (nowadays most of the info is sent directly from banks and so on), and just hit "Accept" if it looks OK. If something's weird just re-fill the form numbers.
I've been checking on their Open Source work ( Argo CD, Argo Workflows... come mostly from Intuit. I hate the Corporation, not their people ;) ) and when they talked about their K8s deployments in KubeConEU past year I was surprised by them.
Straight from their slides:
900+ teams
5000+ developers
230+ clusters
7000+ namespaces
~77320 nodes
She previously worked as a Congressional Intern in DC, and as a Press Aide at the California Department of Justice under Kamala Harris (later a Press Secretary)
I hope the tax prep industry is scared out of their minds…
Asking citizens to pay their fair share of taxes should not include them spending a day or two every year trying to find a piece of paper to mail to an agency which _already has that piece of paper_ and is categorically more equipped to process it.
Here in Sweden my employer reports my income tax and my investments app reports capital gains, to the Tax Authority. Last week I could log in, review the data, and e-sign it in less than 5 minutes. It turns out that I payed 53.80 dollars to much tax last year. Since I filed my taxes early (before March 30) they will pay it back on April 6 (instead of June 9).
The US system is incredibly complex. The federal government wields very little on-the-ground political power compared to states, but what power it does have is effected via tax policy.
It is as if the EU wanted to regulate mobile phone roaming charges by offering a tax rebate on your phone bill, which it then used to calculate a penalty that is added to the phone companies corporation tax bills. There is no federal EU tax bill passed on to citizens of course but if there were you might continue to have your payroll taxes go to your country’s government but you could then submit your phone bills to the federal EU government to get money back from any tax they levy on you. They’d have to levy it in the first place but to avoid unfairness they offset it against anything your state takes, first.
At the other end of the spectrum, some city funding is done via income taxes. That seems a lot more equitable than, say, the UK where you pay a rate based on the value of the building your landlord bought. Because it’s an income tax though, and because double taxation is anathema to any voter, it too must be used
to offset state and federal income tax.
In a way it would be a lot easier if each entity could just stick to one kind of tax. Maybe city funding via property tax, state funding via income tax, and federal funding via corporation tax. The power of federal government is restricted via the tenth amendment, so it’s always going to try to end run states rights via the only means it has — your tax form. That seems unlikely to change. Also I’m not sure my off-the-cuff idea of having the federal government answer only to corporations (via corporation tax) is a very good one, but it is a good example at least of how the machinations of taxation, if not the politics, might be easier if things were picked apart.
To give some idea for our not-American friends, here's a very general, far too simplified gist of how the tax system is laid out:
* Federal taxes, overseen by the IRS.
* State taxes, separate and independent from Federal taxes and overseen by the governments of each State.
* County taxes, mostly separate and independent from State taxes and overseen by each county's government.
* Municipal taxes, mostly separate and independent from County taxes and overseen by each municipality.
Taxpayers need to file their taxes with the IRS (Federal), their State, their County, and if applicable their Municipality. No, these taxes are not handled together in the bureaucratic machine (for good reason; individual rights and all that).
The reasons for the complexity are rooted in how the United States is structured politically, where having certain rights and freedoms at each level of governance is a very big deal.
But literally even JUST THE FEDERAL taxes is incredibly complex.
As far as income taxes, the state income taxes have always been pretty simple for me. City even simpler, and I've lived place with and without them. Most of the complexity is federal (although in part because state and city take the income from the federal as their starting point). But that's enough! And sure, adding more on top doesn't help.
The federal taxes keep adding complexity, even for people with relatively simple situations. It's true for low-wage earners who don't have many assets, federal taxes can be... relatively simple. Maybe as simple as European ones. I dunno, it's a mess.
Having done personal taxes in both Scandinavia (Denmark) and the US, I would claim the opposite: The US system is relatively simple, and finding precise instructions is possible. Admittedly, my life was simpler then (rental property, no investments), but event with international income I remember it as a mater of filling out two sheets of paper.
I got a message on Saturday of all days that my prefilled tax return for 2022 was ready. Logged in to the Finnish tax services website and found out that was the government owes me about 100 euro in overpaid taxes. Won't be paid out until August though.
I did have to go correct my tax information for 2023. For some reason my work-from-home tax deduction was set manually to 900€ instead of the full 920€ that I'm allowed. Hopefully now my 2023 tax filings will be correct.
The US was a weird model where they ask you to resubmit the same information they already have in hope you will declare more income than they know about.
In part, because the US taxes you on your global income, not only your US income, which means that there will be income they won't know about unless you declare it.
For the majority of people that only have income from salary, it's an unreasonable burden and Intuit has lobbied the government so that it continues to be a burden.
It's not that income abroad would be particularly easy to hide. Since financial institutions around the world have reporting duties regarding US customers, Uncle Sam will find out about it. The true, completely legal way to hide income abroad is establishing holding structures to siphon most of it into tax shelters abroad.
Same in Australia. The complexity increases if you have investment properties, or self manage tax, etc. But for the large majority of employees in the country you can simply log onto their website and effectively one-click confirm that your details are all correct, and that's it.
Not PP but I've been employed & self employed in Norway, with a similar system, and being self employed was a bit more work throughout the year, keeping up with invoices & receipts. You have to keep up to date for that as you have to send regular VAT statements. You need to use some accounting software, but if you're a small business you probably have that anyway. That accounting software has to integrate to the tax authorities and at end of year was just push a button to submit final numbers.
Then you wait for your updated tax return later in the year, which would automatically combine self-employed earnings, wages, investments, debts, tax deductions due to paying for childcare, etc... I normally have to spend 10-15 minutes to correct that if something like a travel calculation for my employer is wrong.
What?! You can’t be serious. You think that a local shop with $1m in revenue but 5% net margins should pay the same tax as a services business with $1m in revenue but 50% net margins?
Does that not imply that everyone else — through taxes — subsidizes losses, and thus poor business decisions? If so, why should these be subsidized for businesses? Should regular expenses also be subsidized for individuals?
Consider a scenario where I have £100 and decide to start a business as a self-employed individual. I invest £100 in inventory, but only manage to sell it for £100, resulting in zero profit. Under your hypothetical tax system, the tax authority would demand (let's say) 20% of my revenue, which amounts to £20. However, I don't have £20 to pay since I made no profit. Consequently, I am now £20 in debt to the state and essentially penalized for trying.
For a self-employed person, or a company, profit is analogous to an employed person's salary. Both represent the net flow of money or disposable income resulting from business activities or employment. This is why self-employed individuals and companies are taxed based on their profit, while employed persons are taxed on their salary.
Moreover, your use of the term "subsidy" is incorrect. A subsidy implies that the government provides financial support. In the case of a loss, the government does not send money to the individual or company. Instead, they simply refrain from taxing them, which is not a subsidy.
Note also in this example that in investing my £100, I likely generated tax revenue for the government through taxes on sales, salary, and profits on those who I bought from. So even though I paid no income tax, my activity still resulted in positive tax flows.
Finally let's imagine another example - simplified but makes a point. A grocery shop receives $1000 from customers selling bread. It bought the bread for $900 from a baker. The baker paid $850 for the flour from a mill. The mill paid $800 for the corn from a farmer. The farmer paid $750 for fertilier. In this example each entity recieves revenue, but a large portion of that money is passed on to the next entity where it is taxed again. By taxing the same money again and again even when it has already been taxed in a previous stage, the cumulative tax burden becomes higher and higher the longer the supply chain. With a long supply chain it could even exceed the total money in circulation. Mathematically, taxing revenue just doesn't make sense.
I'm regularly filing taxes in the UK and in Germany. The German ELSTER system is a bad joke compared to how this is handled in the UK.
In the UK it's a bunch of nicely designed web forms with clear worded explanations what they expect you to fill in the fields.
In Germany it's ... well you can be masochistic and try to use ELSTER webapp which runs only on certain browsers. With explanations like "fill in here any amount if you fall under §223 EKST, 4 II".
So you either get a paid 3rd party software which still isn't the quality of the official UK filling service (somehow Germans have a love for their cryptic explanations directly referencing laws - god forbid someone would use simple and clear explanations) or you pay a professional to do your taxes. Which is what most people do.
> Asking citizens to pay their fair share of taxes should not include them spending a day or two every year trying to find a piece of paper to mail to an agency which _already has that piece of paper_ and is categorically more equipped to process it.
There are so many duplicate fields and redundant parts in Elster and the pre-fill function is a joke.
I hear Sweden is also a cashless society with occasional negative interest rates -- sounds wonderful. Are there any benefits? For example if you pay on negative interest rates can you apply that to your income tax filing?
> an agency which _already has that piece of paper_
Sooo... the IRS knows that you installed solar panels last year and will be taking an energy credit for them? They know how much bitcoin you sold? How much mortgage interest you'll be deducting? The strike price of the stock options you exercised in your private company, and their current fair market value?
There's a bajillion variables that go into filing a tax return, and only you are the one that knows all of them, and sometimes not even then! This idea that the government "already knows" how much you owe in taxes is a complete fiction.
That's funny, my friend just fills out his taxes as soon as they are eligible to be submitted with rough guesses. The IRS sends the forms back to him corrected (they already had the correct form) and then he mails them back again.
The US already has pre-filled forms, the interface for the "pre fill" button is just a bit convoluted.
More than the tax prep industry being scared (which they clearly already are given the amount of lobbying that they do (I think the largest of any industry the last time I looked)), I hope that the Biden administration has the guts to actually follow through on this.
This is a remarkably consistent topic that most of the populace agrees on, and is only at all difficult because of this lobbying.
You're catching a lot of flak and downvotes for your comment. I'm Canadian yet your general sentiment, made famous by Thomas Jefferson, seems pretty reasonable to me: "When the people fear their government, there is tyranny; when the government fears the people, there is liberty."
Yet now it seems people think it's reasonable to fear an elected government (and its civil servants) as if we were subjects instead of citizens.
Back on topic ... the effort involved in tax preparation here is also ridiculous. Millions of man-hours wasted every year on this. !!? Reform is needed.
"I hope we shall take warning from the example and crush in it’s birth the aristocracy of our monied corporations which dare already to challenge our government to a trial of strength, and to bid defiance to the laws of their country"
-- Thomas Jefferson (12 November 1816)
> I hope the tax prep industry is scared out of their minds
I am pretty comfortable with an elected government putting the general interest before Inuit's. I am pretty confident that Thomas Jefferson would have agreed.
The cause of liberty will probably be better served if you distinguish aptly between general categories like "citizens" vs tax preparers lobbying against the state providing some margin of built-in tax prep services.
Public defenders do not preclude private defense in the courts, they provide an option for people who don't have other options or don't like the ones they have. Public tax prep would probably work much the same. Mostly this expands liberty rather than taking it.
Well that's a bigoted attitude. As long as we acknowledge that taxes are necessary for the functioning of a country, I'd rather our tax agency be calm, professional, and boring.
I think there are kind of two sides barking at each other when both largely agree on the same things. While there are a handful of people on some extreme of anti/pro tax stuff - perhaps anarcho-libertarians or communists - nearly everybody falls somewhere in the moderate middle. And here I think everybody would obviously agree that some taxation is necessary for the functioning of a country.
The question is how much? Federal revenue in 2022 was $4.9 trillion. That's more than $37,000 per household in America. The median household income in the US is $71,000. [1] So I think these sort of data are what "really" draws the dividing line. Is $37,000 per household enough to ensure the functioning of a country? Is the problem more with a lack of money, or more with how that money is being spent?
Splitting the federal revenue across household doesn't make sense since a lot of these taxes are collected from companies as well. Also, in the presence of a progressive taxation rates splitting it across the number of households makes it even worse.
You're misunderstanding the point. When the government collects an average of $37,000 per household, that means they are also spending an average of $37,000 per household (actually substantially more, but let's stick to ideal scenarios for now). Ought that be enough money ensure the functioning of a country?
That's hard to tell without comparisons to other countries. Also, my gut feeling is that most of that spending trickles down back to those households. A lot goes into social security, healthcare, and defense, which drive huge part of the US economy and maintain competitive advantages for it across the world.
My point still stands that the $37k per household are just an illustration, as the tax base are not just households, and that a lot of what US foreign policy achieves is to the benefit of a very few of those households.
Your figures are meaningless in a world where the top 1 percent of households control half the wealth. The median household is not paying anywhere near $37,000 in federal taxes. My household is in the top 5-8 percent and didn't pay that much.
This is all irrelevant. If more funding for the IRS increases tax revenues (which it does, at a rate of $7 for each $1 last I checked) then that's revenue coming from taxes which are legally owed and not being paid.
If you are paying taxes as you legally are required too, then they are higher then necessary because other people are cheating the system.
> Are tax enforcers an oppressed or marginalized community?
Well, historically, yes. But in my dictionary, bigoted means "obstinately or unreasonably attached to a belief, opinion, or faction, in particular prejudiced against or antagonistic toward a person or people on the basis of their membership of a particular group". So you can certainly be bigoted against the IRS and its employees. No need for the "oppressed or marginalized" part.
Are we talking about the same people here? Cause when I hear tax collector I think sheriff of Nottingham lol. I feel like something has gone way off the rails here.
The "well historically, yes" was a silly quip, but I was thinking about the story of Saul in the bible, who was despised and endangered due to his career as a tax collector.
I'm not sure if you mean it this way, but your comment reads as if you presume that taxes on income are the only way the provide for "the functioning of a country".
I prefer wholesale deprecation of the state - also to advance functioning of the country - but even during the time period where the state continues to exist, I think that income tax is specifically unjust (compared to taxes on gains and consumption, for example).
because all of the libertarian ideals apply in any collapsed state (no governmental controls, unfettered free market, etc). What that state started as before it collapsed isn't relevant.
Arguably the various insurgencies and federal government of somalia all form a state. The communities over which they rule have little say in the governance. If the OP is arguing for anarchy or communism, Somalia isn't a good example.
It seems that you could also say it didn't run fine if there were an invasion, for much the same reasons, but that wouldn't, in most cases, make it a valid critique of the way things were being run, especially with regard to the actual subject here, which regards the tax regime.
He means permanent. In times of urgent need, such as in times of war, the government would raise money as necessary. The federal government assessing a permanent tax on people was a huge deal and required a constitutional amendment, the 16th, passed in 1913. The act you're referencing was in response to the Civil War (which started in 1861), and would be allowed to ultimately expire about a decade later.
2. From reading this thread, it seems US citizens are scared out of their minds. Scared of making a mistake, when filing their taxes. And it appears that Biden's proposed reform aims to alleviate that fear.
They said tax preparation industry. That's not citizens, that's the major ruling class in the united states, directly and indirectly responsible for many laws at the federal and local levels. Sometimes various branches of the government even consult them to write policy directly, skipping the lobbying step.
> Don't forget that the IRS is one of the largest purchasers of ammunition of any govt agency.
“The IRS purchases guns and ammunition for special agents in its criminal investigation division, a law enforcement branch established in 1919. The typical IRS auditors that Americans would encounter in a routine audit are unarmed.
…
Special agents train for weeks at the National Criminal Investigation Training Academy in Georgia, the 2021 report said. That includes firearms training and handgun qualifications for agents, which is a big reason for the large orders for ammunition.”
I'm not blaming Biden or a boogeyman army. It doesn't make sense at all that a revenue department purchases guns and ammunition. Does your company's accounting department train with weapons and purchase large amounts? Why does the US Government?
Let the IRS do money works, and any of the other armed departments do the shooting, I guess.
> It doesn't make sense at all that a revenue department purchases guns and ammunition.
Historically, it made plenty of sense. Financial crimes can’t always be solved behind a desk - there was a time when most tax evasion investigations were against gangsters running illegal liquor operations, for example. Al Capone was arrested by treasury agents, not the FBI.
Whether it still makes sense in 2023 is different question that I’d never really thought about until this moment, but my knee jerk reaction is…maybe it does? Hoover taught us what happens when you concentrate too much power in a single law enforcement agency.
No, I think it's just because of an overall lack of centralization and the tendency for US federal agencies to continue to grow in power instead of coordinating with other agencies, resulting in a massive amount of duplication of functions and capabilities.
In a well-designed government, the IRS would not have any armed agents. If they have an operation where they need armed support, they'd simply call up some other agency (perhaps the FBI, or even local police or SWAT teams) that specializes more in armed agents and operations, and partner with them to conduct the operation. IRS agents don't need to shoot at people; they can let some other highly-trained people do that, and then come in after the bullets have stopped flying and seize documents and analyze them.
Questioning why agents of any government department that does field work might need to be armed, in the US, land of "buy a gun at Walmart" seems like an odd take, when you have people open carrying to go to Starbucks.
"...lobbyists representing tax preparers who fear that the agency’s growing power will cripple their businesses and infringe upon taxpayer privacy."
Taxpayer privacy? Ridiculous complaint coming from them.
It will be a win for Americans if the tax prep industry is relegated to voluntary-use only. Even better: let the IRS prepare your taxes for you. Accept their filing or file your own (optional) return.
>> Even better: let the IRS prepare your taxes for you. Accept their filing or file your own (optional) return.
That's the way it has been done in Norway (and probably a host of other countries) in later years.
I received my tax return for review a few days ago; all income, debt, possessions of note, deductions for kids, tax deductable gifts &c were already filled in; after a few minutes comparing key numbers to my files, I simply clicked 'Submit', and that was that.
Norway is far from being the only that has oil but to me it seems it has / had the best management of this resource. From what I understand the money doesn't go to a few people / companies but a good part is used to prop up the economy. https://en.wikipedia.org/wiki/Energy_in_Norway
Most of the oil money goes to the sovereign wealth fund, but the industry itself is huge including both drilling operations, corporate and a gigantic service sector and so on which of course participates directly in the economy. Oil is taxed at a very high rate and that tax money is what goes to the sovereign wealth fund. F.ex. Equinor, the majority state owned oil company payed 50 billion dollars in tax for 2022.
Some of the funds profit can be used to prop up the state budget, but it's regulated so as to not over heat the economy.
This is an important point; rather than just serving as a supplier of the raw resource, local industry has developed lots of equipment which is used within the oil&gas sector worldwide, ensuring we have something to fall back on when we're done pumping hydrocarbons out of the ground.
The industry is currently seeing the writing on the wall, though, and is trying to reinvent itself in a greener hue - for instance, my employer, who's been developing handling systems for ROVs and various seismic exploration equipment are now going all in on motion compensated walkways intended to bring crew and equipment out to offshore wind turbines.
Anyway, once petrodollars dwindle, we are reasonably well positioned to handle the transition. These are exciting times for engineers!
I still enjoy the one liner that's probably generations old at this point. "America: We have the best democracy money can buy". At 40, reading many comments feels like watching a younger generation notice the same things I did. I'm glad the current administration at least seems to have it's heart in the right place, but I'm pretty jaded and don't think that we'll see big changes any time soon. I'd be happy to be pleasantly surprised, though!
I think we've had online tax-filing for perhaps 15-20 years here in Denmark.
We log in with our digital signatures, report what income has not already been reported by employer and bank, and claim the deductions that have not already been granted automatically.
I won't say it's that easy, and often the system can't be accessed on the day they open up for filing last year's taxes, but at least it's not pen and paper anymore.
I'm surprised there's no way to generate the "Form 1040, U.S. Individual Income Tax Return" from JSON. I have the same ~10 forms to enter every year.
The IRS already knows how to import W2s based on SSN, right? There's some kind of data connectivity between employers/HR/payroll systems and the IRS database of somesort.
Why can't this be expanded to the top 10 most popular forms so that all of the forms that get sent to both me and the IRS are pre-populated yearly for me?
And others, but chiefly this. This is not a technical constraint, it's a lobbying-fueled legal, policy and political constraint. We're keenly behind the ball as technicians on this one.
I'm gonna respectfully disagree. Sort of. Does Turbotax and H&R Block lobby to protect their businesses? Yes, of course. However, that lobbying is basically meaningless compared to the political pressure from the real beneficiaries of the current US tax system: the wealthy and big corporations who spend, say, $5-million on tax attorneys in order to save $50-million in taxes. That's who ultimately created the US tax system, that's who stands to lose the most from reform, and that's who's gonna work to protect the status quo.
Those are two disconnected things. Turbotax and H&R Block lobbying to stop the IRS from having an auto-file system protects them, and doesn't change anything for the wealthy and big corporations who will continue to pay accountants to dodge taxes.
You might be thinking about filing directly on the IRS site, which has an income threshold? There are free filing services, like FreeTaxUSA that I use.
You could, but the data can be a mess and often needs interpretation. I wouldn't trust the numbers to be pulled directly.
1099-K - you could easily be sent a 1099-k that includes money that shouldn't be included in your return
1099-B - it's not unusual for cost-basis to not be included, so you need to calculate a bunch of numbers from your 1099-B before entering into your tax return
1099-R - depending on the distribution you took, it may be taxed or not taxed depending on other information not included in the form
I mean, it would save you the trouble of entering the numbers, but it doesn't solve the problem that there is a good chance the numbers aren't correct.
- Various sources provide the tax authorities with your taxable income, already withheld amounts etc.
- Your tax filing system, which can be the authorities' or a third party's, pulls these numbers and shows them to you.
- If they look good, you press "send" and you're done. If anything is missing, you amend it; if anything is wrong, you correct it.
- If you omit anything that wasn't included, that's still tax evasion and punishable in the same way as omitting data or forms on your IRS return.
An important scenario here is "I have nothing to amend, and I'm sure you got it right" – in which case you don't need to do anything but are still liable for any omissions. Not filing a report is the same thing as filing a default report. And if the tax authorities find anything unclear or suspicious, they can still require you to file one.
But in those other countries the tax code tends to be simpler and the reporting back to the tax agency more accurate.
If you've ever been transfer more than $600 through a payment platform you're going to need to do some tracking on math to make sure the right amount gets reported. The payment platforms aren't going to do that for you.
You realize they changed the rules this year, but delayed implementation? The threshold used to be $20,000/200 transactions, but it's going to $600 for even a single transaction.
Your friend sends you $1000 for a shared vacation? That's a 1099-k.
Your roommates send you $1000 as their share of the rent? That's a 1099-k.
Sell your car for $5,000? That's a 1099-k.
None of those are actually taxable, so you need to sift through the 1099-Ks you receive to see which ones need to be reported and which ones don't.
I suspect it may actually come to fruition this time because the IRS is so understaffed they want every efficiency measure they can get to audit people with money and skip the rest of the riff raff.
>”they can get to audit people with money and skip the rest of the riff raff.”
The IRS has no qualms with auditing people of average wealth. Each year they invest a substantial amount of time and effort going after waiters and other staff that work for tips. The rich usually have the money to defend themselves rigorously, whereas middle class folks tend to end up just paying the fines and the amount the IRS claims they actually owe.
Are you suggesting they should completely give up auditing middle-income taxpayers? That feels like demanding the police should stop all road traffic monitoring because it targets regular people who are just trying to get somewhere by car.
If the law isn’t enforced for a particular group, it doesn’t exist for them. But completely even and fair enforcement is an ideal that’s usually impossible to reach — the traffic cops only catch a small minority of speeders and drunk drivers.
Deliberately investing less IRS money into checking low capital individuals doesn't actually cause damage if it means there's more high net accounts being investigated.
There's tax waste in the system no matter what you do. The question is where it is preferable for this waste to occur. It is vastly preferable for the whole economy that the people who are most likely to get away with fraud are also the ones with the lowest net wealth.
Poor and middle class people probably really do cheat on their taxes a lot more.
I used to wait tables. Not reporting most of your cash tips was absolutely standard - you reported the minimum amount necessary to equal minimum wage, so your employer wasn't required to make up the $7.25-$2.15 difference, and both of you had to pay less taxes. Some bigger companies, in collaboration with the IRS, started instituting "tip compliance" schemes, which do really suck in that they assessed your tip income to be a % of sales, regardless of reality.
Additionally, tons of middle and lower class people use not tax software, but local "accountants" of varying quality. In the US, anyone can do your taxes for you. The selling point of these accountants is that they're going to get you back more than anyone else. Well, most people have fairly simple taxes, unless they own a business. There's not much they can do besides the standard deduction and child tax credits. So these accountants claim all sorts of deductions for which their client is not actually eligible. Sometimes they are "smart" and choose ones that are relatively hard to audit (e.g., mileage), sometimes they choose ones that are easy to audit (EITC). A lot of people get away with these for years or sometimes, seemingly ever. I have a close friend who did this type of thing for 10 years before finally getting caught.
A wealthy person is paying a real accountant who is going to do things by-the-book. They're also more able to structure their wealth to reduce taxable income. Probably the most common fraud you see with wealthier people is small business owners claiming business expenses that aren't. Once you get into the ultra-wealthy, there's all kinds of entirely aboveboard games they can play.
And this is the biggest problem with our modern societies. Even when a change to the status quo will clearly make life better and more affordable for the masses, there is enormous push-back and billions of dollars are spent to prevent it.
In that way the biggest and most powerful systems in our societies are not even working to make life (and the world?) better for everyone, they just want to keep their massive wealth and power.
The same problem prevents many things getting better - healthcare, higher education, pollution, public transport, etc. etc.
Politicians are bought cheaply. What a great return on your lobbying investment!
BTW--Someone pointed out that the 'bribery' also takes the form of "If you don't support our effort we'll fund your opponent's campaign and he/she will play ball!"
You say modern societies, but historically this used to be vastly, vastly worse. Serfdom used to be a thing (still is in some parts), slavery too, to give only the most obvious examples.
These were staunchly defended by special interests who put a large fraction of their country's resources into maintaining the state of affairs.
It would be great to have a free, IRS-provided alternative to the various for-profit softwares out there. One that’s not hidden behind dark patterns desperately funneling you towards the paid product.
But the proposed solutions always seem to be geared towards the simplest returns (admittedly fine for 90% of taxpayers). Please don’t leave taxpayers like me out in the cold! My federal return was over 15 pages this year, and gets more complex every year. We hate Intuit, too…trust me!
> It would be great to have a free, IRS-provided alternative to the various for-profit softwares out there.
See, you've fallen for the trap too. The IRS already prepares your return for you based on all the information they have, they just won't show it to you. Instead you have to use third party software to prepare basically the exact same document and then you can risk fines or jail if yours is different.
This is a myth that the IRS already knows what everyone owes. They usually have most of your income information because it gets reported by employers and banks. They have information on some deductible expenses but not all. They often don’t have the cost basis for capital gains, so unless you want a huge tax bill, it behooves you to provide it. I didn’t fill out 15 pages of information they already have.
Yes, for 90% of the population who have one W2 and take the standard deduction, the IRS could just mail you the bill. But that was the point of my comment: don’t leave the rest of us in Intuit’s clutches!
Have you heard of people paying fines for getting their taxes slightly wrong?
I know people who spend 5 minutes filling out the form with rough adjusted guesses based on the previous year, send it in, and thus trigger the IRS sending the corrected version.
They will charge you extra [edit: I meant "the amount you owe"] if you underestimate, but this is hardly a fine.
"Charge you extra" is in fact the definition of a fine. :)
If you are off by more than 10% or $5000 you have to pay 120% of the under payment plus interest from your filing date. If you overpay you just get a letter and a check with no interest.
We could simplify the tax code. That doesn't mean a flat tax because the marginal rates are the simplest part of our current tax code. Get rid of most (all?) deductions and tax income at the resulting appropriate level. There's no good reason capital gains should be taxed at a different level than other income. The tax changes under Trump mean that 90% of filers take the standard deduction. The remaining 10% can pay the same as everyone else and adjust their future behavior accordingly.
Even if the tax code didn’t change at all and we still filed our taxes the same way I would support this. A couple of years ago I had to mail my taxes in. It took them over a year for them to process them. During that time the government owed me over $5000 which may no seem like a lot but I was a poor student. (They sent me a check for a whole $50 in interest.)
There are apparently millions of other tax returns in the backlog. Those returns often represent people like me whose money was locked up. I was fortunate that it didn’t cause me true financial hardship but I’m sure others weren’t so lucky.
The tax code is full of subsidies in the form of "credits". Some are non-refundable, so it only applies up to the amount of taxes you owe. But many are refundable so it can send your tax bill into the negative. That is, a refund. It's a convoluted form of social welfare in all but name.
Because before I was a poor student I was a well-paid software engineer. Not as well-paid as I would’ve liked (and not well-paid enough to buy a degree in cash), but enough to have taxes withheld from my paycheck. The money they owed me was mostly that withheld cash.
For non-Germans - the Elster is the magpie. According to Wikipedia, in German folklore the magpie is a thief.
As a Brit I do not associate the magpie with stealing per se but rather with having a fascination with shiny objects like jewellery - which also sort-of works, for the joke.
In French speaking traditions the magpie is also a thief.
To me magpies are literally thieves. They take shiny objects which are sometimes valuable. I've heard more than one story of people who lost jewelry to magpies.
Of course, even though they are territorial it isn't obvious that magpies understand that they are stealing. But their intention doesn't change the result.
Sometimes I am grateful that our country is so large and prosperous that it can afford to have industries that exist like minor parasites on the government and the people, sucking just enough for their sustenance off the inconvenience of everyone, and they put up enough of a fight that people accept it.
Because in some other country that wasn't so well off, these entities (and other countless other interests) might be enough to push the country over the edge into [outright inefficient | corruption | drag on economic growth] territory and people would be rightfully indignant at middlemen skimming off people's inconvenience to enrich themselves.
Maybe it's also the curse of having had such a long and stable history that enabled legacy interests and systems to arise, where eventually you need another country to show you what's possible when you start from scratch for you to realize that the way you're doing something is just stupid.
I think this is more or less the exact tale of every single empire's rise and fall throughout history. Each emerging nation, and inevitably "empire", learns from the mistakes of those existing at the time and is able to make rapid progress as a result. But over time they begin to rest on their laurels, grow fat, and start falling into the exact traps that they previously fought against (often literally) and overcame, only to then eventually be overcome by the next great power.
The big change in modern times is nuclear weapons. The passing the torch is rarely a pleasant affair. Add nuclear weapons paired alongside the poor/myopic leadership inevitably present in times of decline, and you end up in uncharted waters with a storm on the horizon.
It's interesting to see that taxes are such a big deal in the US.
I did my taxes in Germany in 10 Minutes a few weeks ago while sitting in the waiting area of our local tax office. Granted I'm just a default working class citizen without anything "special". It gets more complicated if you have some sort of other income. Not for stock investments though, because that's handled entirely by our brokers. Nothing to do there.
As someone that would love to be able to file complex tax returns more easily, bring it on!
partnerships part owned by LLCs, trusts, personally, through S-corps, etc. I'm able to walk a CPA through it, and can do it myself with Turbotax. But free would definitely be better.
Yep, here's the tax code, here's the forms, here's my scanned box of receipts and bank statements. Figure it out. Oh, and while you're at it, take a little license and get creative please, I still need to get my kids through trade school before you evolve and make that work obsolete too.
Amazing! I know it's unlikely, but I want to believe that this is at least partially MSCHF's doing (with Tax Heaven 3000, the – to my knowledge only – dating sim that can do your federal income taxes [1]).
what's more interesting is that people thought Ron Paul was a little crazy when he spoke about abolishing personal income tax, though it was completely possible (and in fact personal income taxes have been a relatively new concept)
I very much want this to happen. Tax code is intentionally made more difficult by tax-prep lobbyists who want to ensure that doing it without them is impossibly difficult.
With a free solution direct from the IRS, there is no incentive to keep the system complicated and maybe we all benefit.
I imagine that the rich will fight tooth and nail against simplicity though. Part of the complexity is around the loopholes which keep companies and the very wealthy from actually paying their fair share. A simple, straightforward tax code would cost them a huge amount of money… more than just buying off politicians.
If the government wants a tax code complicated enough to require professional services to comply with it, then it is on them to provide those professional services. End of story.
Unless the government is going to simplify the tax code (hint, they're not) then they must provide the services necessary for me to comply with it.
And maybe this is politically naive, but you would think that whoever is in power and in charge of running the government, they would want to properly fund the very entity responsible for bringing in the funds that allow them to do what they want to do. If for example, each person you hire to the IRS can bring in 100x (or more?) the cost of having them on the payroll, wouldn't that be a no-brainer?
But as I understand it, some people are more interested in crippling the functions of the government to make it easier to dismantle its functions.
Maybe the goal of having our government be effective and useful (the long and hard won effort of building the institutions we have) has fallen by the wayside to having it be used as a pawn in stupid power games.
> If for example, each person you hire to the IRS can bring in 100x (or more?) the cost of having them on the payroll, wouldn't that be a no-brainer?
IRS audits and enforcement disproportionately target small business owners and lower middle class. People that have just enough money that it is worth trying to shake them down, but not enough that they can afford to fight it.
The average is about $5 returned for $1 spent on enforcement, but that is a finite pool - the sweet spot I mentioned above. Throwing more money at enforcement would just end up lowering the recovery ratio.
We are better off just scrapping the whole enforcement branch and putting that money into extending proactive capture (collect taxes on money before people receive it) and making filing easier to increase compliance.
"What they want to do"? The idea that someone like Pete Buttigieg for example actually cares about the railroad or airplanes or something as the Transport Secretary does sound completely absurd to me, that thought never even crossed my mind.
In this case fixing it would mean this industry would cease to exist, so obviously this is never actually going to be fixed. Don't the people know that politicians have a fiduciary responsibility towards the shareholders of TurboTax?
I'm not even sure why. Even if the IRS prepared an "initial statement" for you given what they have more than half of the US would (still) have to hire someone to come in and fix everything. I did an IRA backdoor this year and accidentally overcontributed my 401k, my previous years state taxes also contained an error that had to be rectified; my taxes were an absolute mess.
Who tax prep should be worried about is people who want taxes to just be a bill with no exemptions or write-offs. They usually fly that flag under "simplify the tax code".
Almost 90% of Americans use the standard deduction rather than itemizing. The vast majority of those could have their tax statements automatically prepared.
That seemed really low to me - I've itemized pretty much whenever I've had a mortgage. So I've always assumed for most people with a mortgage it would make sense.
That is interesting. I didn't know the "simplify taxes" people won. This is why you can't write off moving expenses, etc... No wonder taxes have been so high.
TCJA of 2017 (the big Trump-era tax bill) reduced or eliminated a lot of deductions (personal exemption, mortgage interest, SALT, and a bunch of little ones like moving expenses) in exchange for doubling the standard deduction and child tax credit.
I mean, if you live in a blue state what I said registers: taxes are higher than they used to be. It's because the standard deduction is a joke compared to our state taxes plus life events.
The SALT cap definitely increased federal taxes for some wealthier taxpayers, but the main policy motivation for eliminating it wasn't simplifying the tax code. Republicans like it because it increases the relative tax burden on residents of blue states and (some) Democrats like it because it increases the relative tax burden on the wealthy. (A lot of Democrats are trying to roll back the SALT cap.)
Seems the much bigger threat for Intuit is ChatGPT-like tools. Understanding confusing manuals or rules and then explaining them is exactly what it does best. I'd be very surprised if in two years we aren't all using AI for our taxes as a matter of routine.
Lol - that is way too ambitious, so you will likely be very surprised
Tax filing is the hardest thing to get people to switch. Costs are relatively low but penalties are high. Plus no one wants to short change their refund
AI right is now is unpredictably inaccurate, certainly not enough for tax filing. I think that will take more time than we think to iron out.
But let’s assume it’s perfectly accurate. You still need all the software to support actual filing - accepting forms, validating the input, etc. and that all costs money.
We may see some AI startups to help you do your taxes very soon, but I imagine they will secretly have humans on back end for now to help validate
I suspect that whenever it happens it will involve human validation or adversarial AI systems to validate the result from another one. I hope I'm right!
That's why the plan includes sending a check / refund to every person, to offset the "tax free income amount", IIRC.
Also - rich people don't really pay income and capital taxes because they have ways to avoid them altogether. (All these "charity funds" they make are just tax avoidance schemes).
Sales tax instead of income tax would be a huge time saver, and effectively work exactly like an income tax, without all the waste.
"Taxing the rich" could be achieved via other means if desired. Some wealth tax (let's say over 100M of net worth, .5%/year or something like that).
Hungary has a VAT of 27% and a flat income tax of 15%. VAT doesn't replace income tax, it complements it. Then there are vehicle taxes, property taxes, and so on.
And income taxes hit high income people the hardest. It's not fair that I have to pay 6 figures of taxes when other people get away with paying multitudes less than me.
And the rest of us think it is more than fair. I also pay a shitload of taxes. But I'd rather it come from me than from my sister, who makes 10% of what I make.
Funny, I think she has conveniently recast "the problem" as whether to replace the commercial tax filing industry with something that might be free to the taxpayer. Because yes they doing just fine, thank you, paying us for that convenience, so there is no problem if you look at it that way.
But if the problem is helping people file their taxes easier, then clearly Intuit didn't think that that was a solution in search of a problem, for them to build a whole industry around it...
Funny how entrenched interests will go to great lengths to redefine and recast what the fundamental goal of the government should be. And usually that recasting is some kind of distraction away from the question whether the government should serve the people, or serve specific entrenched interests.