> A direct-to-IRS e-file system is wholly redundant and is nothing more than a solution in search of a problem," said Rick Heineman, a spokesman for Intuit, the company behind TurboTax. "That solution will unnecessarily cost taxpayers billions of dollars and especially harm the most vulnerable Americans."
Extraordinary that he could say that sentence with what I assume was a straight face.
"A fence around the chicken coop is wholly redundant and is nothing more than a solution in search of a problem," said Sly the Fox. "It will unnecessarily cost the farmer thousands of dollars and especially harm the most vulnerable chickens."
It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling.
This is a revocation of the license to print money by the tax prep industry.
I am always intensely skeptical of the phrase "cost the taxpayers" when presented as a pure loss. It is almost always the opposite. It's like saying "Exercise costs a person energy and nutrients." Well, no shit, but you get more value out of it than you input in the form of burned calories and muscle strain.
He might be right that it will cost a couple billion dollars.
A one time expense of a couple billion dollars is, like… I mean the public servants working on it should take it very seriously but it is a drop in the bucket, the US budget is measured in trillions. This is one of those “the difference between a millionaire and a billionaire is about a billion dollars” type things, except the billion is the little one.
Edit:
I mean there are like 300 million of us, so even it it was shared equally, it is like… for the price of a particularly fancy latte we can all collectively fuck over these middleman tax processing companies, let’s do it!
For reference, Inuit's revenue was $12.7 billion last year, so they single-handedly cost the taxpayers more each year than this whole free system will.
One way for it not to cost tax payers billions of dollars to drastically simplify the tax code while they are at it. A big part of the cost is directly attributable to the complexity of the rules to be followed to figure out how much to pay based on your circumstances. Throw all that nonsense out and all that should be left is a relatively simple "You made X, so you owe X * rate"
He's probably making the claim that his software, similar software, and tax preparers will find more deductions than the IRS system and cost taxpayers billions in lost refunds they're entitled to. Actually creating this system isn't going to cost billions of dollars.
Of course it will cost the taxpayers, that is the point right? I'm tired of paying out of pocket and would rather pay with my tax dollars which I will be paying regardless.
Why on earth would, or should it cost that much? Unless they go full on "not invented here" and write it running on a IBM Mainframe running COBOL that they then pay an over priced consultant to somehow make web compatible
Exactly. I read that statement and now I think I need to go to the ER because I strained my eyes from rolling them so hard.
I'm curious what he means by this solution harming vulnerable Americans. Are they the same vulnerable Americans that TurboTax tricked into paying for their product after enticing them in with promises of "completely free filing"?
Just a paid shill with no credibility. Reminds me of David Lereah who was the spokesperson for National Association of Realtors during the biggest housing bubble who claimed there was no bubble.
He could do this job poorly from the beach collecting a check until moving on to the next corporate behemoth needing to shovel dreck to the masses. I encourage him to do so while the policy ratchet gets pulled forward and IRS gains this capability. Just look the other way while the lives of 150 million+ taxpayers gets improved ever so slightly.
There are about ~160 million people who need to file taxes each year. TurboTax for each year costs something like $40-150 depending on how complex a version you need. If it costs billions of dollars to role out a free system that's as good as TurboTax, that'll still pay for the cost of TurboTax or similar software within a few years at the longest.
Just for reference sake in this thread, TurboTax has around 40 million users each tax year. Around half of taxpayers use tools to file on their own. So they have around 1/4 of personal filings, and half the do-it-yourself market.
Most of Intuit's business is sheltered from the hit it will take when the IRS completes this system. They'll probably lose a couple billion in sales off the top (out of $13.6 billion the past four quarters).
You could probably take away 3/4 of their entire individual tax prep business and their overall business would still be larger than it was in 2020. I'll be interested to see if it pops the bubbly valuation the stock is carrying (~60 times earnings).
For what it is worth, even with my medium-complex tax return I have had great results with freetaxusa.com for the past few years. The first couple of times we used it we ran the taxes through TurboTax and FreeTax at the same time and due to better UI the FreeTax version was faster and less confusing. That said, at the end of the process after entering all of the same information in the same places the TurboTax one did offer about $50 more in returns for unexplained reasons (The calculated figures were just plain different even with the same inputs, and doing the math by hand we got the FreeTax figures), but would have cost me $60 to use so we went with FreeTax instead. The second year we did the same thing and had a similar result so this year we didn't even bother.
The process is still way too hard and confusing, but at least it feels like I'm feeding one less parasite this way.
There's many nice and cheap options out there. Please, if you value basic democracy, don't give money to Intuit or TurboTax - not a dollar, not a penny. But do click on their paid ads whenever you see them and just close out after the page load. That company needs to be dismantled brick by brick, byte by byte, and deposited in the dustbin of history.
I did OLT again this year. Due in part to how many click throughs they require if you aren't paying or doing state taxes through them, and due in part to significant personal distractions this year, I didn't notice that I actually hadn't filed until after April 17th, despite finishing everything but the final click-throughs in early February.
Fortunately I'm owed so shouldn't be paying any penalties for filing late. But it's still annoying.
I'm looking forward to an IRS free file system that won't require 5+ click-throughs to submit.
My taxes have been getting more complex every year, and after this year I no longer trust TurboTax. There was a situation where Turbotax did not recommend a tax form to me, despite me answering questions in such a way that it was clear the tax form would have been impactful and applicable.
After I filled out all of the tax information my taxes were clearly off many thousands of dollars. I had to review my tax forms, do research, talk to an accountant, and then specifically request a tax form number in the help bar of TurboTax.
I don't trust anyone! TurboTax gives me one number, my accountant gives me another, and my by-hand version is yet another that my accountant comes around to eventually. The sad part is that each party is figuring out something unique that the others didn't because it is all so complex. Each route prompts different questions, which, together, make things more accurate. I hate it.
This year TurboTax apparently made a mistake. The tax calculation showed I owed tax and I submitted payment for the reported amount. IRS sent me back a check later for overpayment based on the reported tax filling by TurboTax. They didn't explain where the error was; it's just that TurboTax made a bad calculation somewhere.
Another vote for freetaxusa.com. The only complexity for my Federal returns is accounting for both refunds and taxes due to filing state returns in two states (as well as some 1099 income), but they handle those exceptions well.
For years I kept a Windows VM around just to run whatever the cheapest tax return software was for that particular year.
I also switched to FreeTaxUSA this year. Same as in your case, TurboTax got the bigger refund (I was able to figure out why, in my case) … but the extra refund was completely eaten away by the higher cost. I.e., I ended up with more money with FreeTaxUSA, even though the initial return was of poorer quality. (We caught the error and it was corrected anyways … so … yeah.)
There was a state tax error, I think, in TurboTax's return. The FreeTaxUSA got that particular item more correct. (It was a bit of a debatable item, though.)
IMO TurboTax can't justify its price, vs. FreeTaxUSA.
I've used freetaxusa for 3 years now and have the same positive experience as the parent poster.
And yeah my scenario includes investments. off the top of my head my return featured:
* income from 2 employers for the same person
* income in 2 states
* kids and the stuff that comes with that (child tax credits etc)
* capital losses (it's that time of the business cycle :< )
* interest (US treasury products)
* dividends
* mortgage stuff
So if tons of americans can just do a 1040-EZ, then I feel like my usage probably covers like 99% of the remaining folks (which I would characterize as "I could do a 1040-EZ but I have kids and stocks").
Yes. And green energy credit rollover. Also children and tax deferred savings accounts. My wife is also a self-employed contractor. FreeTax was able to handle all of that, albeit that some parts are still confusing. Most of the confusion comes from the contract work, but some of that is because she is actually working for a company that classifies her as a contractor to avoid paying benefits and taxes.
> I've paid tax specialists in the past far more with worse results.
This was the year I decided to compare freetaxusa with a paid professional. Maybe it's just that my taxes aren't complicated enough to warrant a pro, but I'm not making the same mistake again next year.
If the federal government really wanted to save money on tax collection, improve the accuracy of tax collection, and drive the tax preparation industry out of business which would save every person and company significant money, then the federal government would just simplify the tax code.
Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane.
For tax incentives such as buying a qualifying electric vehicle, just provide the incentive directly to the car dealership at the time of purchase. Businesses which want to pass along such savings to their customers will need to do some paperwork and it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers.
I agree in concept for sure, but just simplifying our complex tax code is probably near impossible at this point unfortunately. Even for certain things like you mention with electric vehicle incentives, I don't believe you'd be able to pass saving on at purchase time because I believe for those (or maybe I'm think of solar or another green tax break), you need to own it for a period of time and savings come only with a certain amount of ownership. That stuff gets complicated immediately.
If it was simpler then these incentives would also be simpler, which would be great. It is a shame that so many regular W2 Americans will still have to run into some nonsense about an rollover IRA pro-rata rule or something that can cost you thousands of dollars if done wrong.
I guess what I'm trying to say is that it would be great, but not simplifying our existing tax code would be incredibly complex.
For electric cars, I don't believe there's an ownership period required. But for example of the right way to do it, in New York if you buy an electric car then at the time of purchase the state will pay $500 to $2000 to reduce the price of the car for you based on the all-electric range, with no requirement about income levels and nothing to file on your personal income taxes.
I filed my Swedish taxes yesterday. It included private income and investments, my own sole proprietorship as well as dividends from a larger company where I own 10%. It took around 30 minutes including all calculations.
We may have high taxes, but at least they make it easy to pay them...
This a really classically difficult political problem of concentrated benefits with diffuse costs. The complication of the tax code comes from a zillion little exceptions added over the years, and every little exception has a beneficiary who doesn't want the existing system to change.
Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups.
As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party.
When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.
If they're single, have only W-2 income, and have no children, then maybe... Just the child tax credit for 2022 requires filing an additional schedule 8812 (which is somehow referred to in some places as schedule 8) and in order to complete schedule 8812 you have to choose the correct worksheet and fill that in, but not file it. All of that results in a single credit value which is 1 line on the form 1040.
The income bracket stuff is so crazy. It's just another way to redistribute wealth, but that's not palatable to the US public so it takes weird forms like this. It would be much more practical to abandon these piecemeal, market-distorting interventions and instead just do some smallish UBI. The money saved on overhead alone would probably be enormous.
Take a moment to look outside of your borders. In the UK we have a mostly progressive income tax system with various tax brackets, tax free allowances up to 12k GBP, claw backs of said allowance over incomes of a certain amount, national insurance taxation, student loan repayments, etc...
The majority of UK citizens file no paperwork with HMRC (equivalent to the IRS) and never have a reason to contact HMRC.
The majority of UK citizens only interaction with HMRC is when they get a summary letter in the post at most once a year telling them that everything is fine or they over/underpaid through the automated systems. In the latter casen they either are given the money owed or told that they will have to repay what is due through what is effectively an interest free loan over the course of the next 1-2 years (can be negotiated).
The reason why this is possible is because employers report salaries to HMRC and its a deduction in their monthly payslips.
You might say its not possible to do that in the US, but ask yourself how does the IRS actually know that you have misreported/underpaid? Its because they already know exactly how much you owe because the same information has already been reported to them by the banks and your employers.
There is literately no point in tax filing for the majority of US citizen that work as an employee employer except to enable the parasitic tax filing industry to exist.
Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI).
I agree that we should do away with market-distorting interventions in places that aren't strategically critical to the nation as a whole (like food production), but politicians are woefully inadequate to the task of resisting the urge to meddle.
Reducing the burden for those filing their taxes is nice, but an effect of simplifying the tax code that I am more interested in is that it restricts the power of the government (and so the reduces the attractiveness of lobbying politicians). The complexity provides opportunities for lobbyists to design rules that distort markets in their favour.
Even if you simplify, complexity can be gradually built-up again; lobbyists are like waves, they will keep coming and wear out the roughest of rocks. They represent the voice of the wealthy and the highest court of the land has agreed to let it be as loud as they wish.
> Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane.
The tax code is stupid, yes, but on the other hand one-fifth of high school graduates are functionally illiterate, and it would be hard for them to file their own taxes.
The steelman case for opposing "auto-filing" or having the IRS provide tax preparation is that the intention of requiring everyone to file is that all citizens should be directly aware of the amount of taxes being assessed and the complexity of the tax code itself, with the objective of making people oppose legislative increases in the complexity of the tax code, and to make tax increases more intrusive so that legislators cannot increase taxes without people noticing.
I think, though, that this philosophy does not accomplish its ends -- people are mad at the IRS for making them do this work, not at the legislators for creating and maintaining a byzantine tax code. Ideally we would all choose politicians that favored removing complexity and reducing the amount of taxes, but the reality is that this is not usually a politically viable strategy.
> The steelman case for opposing "auto-filing" or having the IRS provide tax preparation is that the intention of requiring everyone to file is that all citizens should be directly aware of the amount of taxes being assessed and the complexity of the tax code itself
That's a very weak case when they could just send me a letter telling me how much they took and why, which would accomplish the same thing but better and without saddling me with a bunch of unnecessary labor and/or expense.
The unnecessary labor and expense is the point in this model. The argument is that taxes are bad and people should be a strong check on the government that is attempting to tax them. The more explicit and painful the process is (the theory goes) the more people will support limitations on taxes, rather than allowing them to expand unchecked.
The theory makes sense, and the ends are laudable, but it doesn't work. Other ways of doing taxes do not even attempt to provide the benefit of this sort of built-in check on government excess, If you're willing to forgo that (or acknowledge that making people feel pain is not an effective policy tool in this case) then auto-filing solutions like the one in the article make a lot more sense.
> That's a very weak case when they could just send me a letter telling me how much they took and why, which would accomplish the same thing but better and without saddling me with a bunch of unnecessary labor and/or expense.
Furthermore, the amount of money that people pay is not very strongly correlated with the time or effort (or frustration) involved in filing the taxes.
In fact, there's often (though not always) a correlation in the other direction: most of the "optional" complexity in the tax code comes from the various tax deductions that people are able to file for, making it more effort and frustration not to overpay - this is essentially the opposite of what GP is saying would be the "steelman" argument.
Opponents of progressive taxes lobby hard against auto-filing. They want the Americans to conflate the complexities of the US tax code with the complexities of filing and so they fight to keep the filing process complex and they tell us it's the tax code that's the problem.
True but the rubber met the road and people are upset about the bullshit work of tax filing and not the taxes themselves. So anyone who is arguing this way really should have given up and moved on to another strategy to make taxes painful.
If you want people to hate taxes end and ban automatic payroll deductions and make them pay it all at once. More than half the country will be unable to pay and the whole system will collapse under crushing tax debt.
Or it won't because of how little the average person actually pays that we could literally just have the top %15 of wage earners pay income tax as "the cost of winning capitalism" and we wouldn't even notice.
Sure, but how often does one look at one's payslip? The money gets deposited in your account. I don't know about the UK, but the amount that gets deposited tends to vary because of small issues, so a different number on my bank statement doesn't trigger alarm bells.
It would be very easy to change my taxes without my knowledge as a result, if the only feedback we had on taxes was what was deducted from our payroll. In the US, there are deductions taken from the paycheck directly, including anticipated federal income tax (called "withholding" here) but also many other miscellaneous taxes.
The withholding, in particular, represent an advance payment on your annual income tax, which you still have to calculate and file. If you withheld more than you owe, then you get a refund, if less than you owe taxes. But regardless you have to compute how much you owe and how much you paid on an annual basis so that you can see it all at once.
Once again, I do not think this method works, but the theory behind it is that this will make it hard to quietly raise taxes, and hard even to maintain current levels of taxation, because it will be a painful process that will make it clear what the current situation is.
I also don't believe the people that say they want a simple tax code. This is the same country that loves coupons, discounts and promo codes. You really think they're gonna give up the tax breaks in the name of elegance and simplicity?
"The Internal Revenue Service has quietly built its own prototype system to allow Americans to file tax returns digitally and free of charge"
I think opening the article this way is misleading, although they explain it better later on. This isn't about filing for free, it's about guided tax preparation. Those automated systems that ask a series of simple questions and magically submit your tax return.
That's why tax complexity is the underlying issue. To do your taxes you "just" have to follow along a 100+ page instruction booklet (plus instruction booklets for any additional forms). Even with the Free Fillable Forms (free government electronic filing for everyone with digital forms and some automated calculations) it's a pain in the butt. By rephrasing the questions, automating the calculations, and checking for errors, fairly complex taxes can be done in under an hour.
So we're playing this stupid game where the government spends the time and money to write complex taxes and all the forms and instructions to go with them, just for us to pay businesses to simplify it all so we can tell the government what our taxes really are. I hope this change takes a big chunk out of the $14 billion tax prep industry (that's more than the IRS's expenditures), because maybe when they're out of the game Congress will be a little more motivated.
What I don't understand about these programs is the added income clause. In California the state provides a free tool to file state income taxes (CalFile), but you can't use it if you make over $230,000 a year. Does it really make sense? It's similar with the federal free file program I believe.
You would think they would want to encourage high income citizens to use their tool so they can control the deductions/credits/process.
If you're curious why, it's because of the California itemized deduction phase-out, line 29 in the instructions below [1].
CalFile only cares about handling "simple" items. Other notable exclusions [2] are capital gains, health savings accounts, Schedule C, Schedule E, and Roth IRA conversions and distributions.
FWIW I've used calfile with capital gains and it worked fine, I was able to file properly and it gave me the same numeric results as TurboTax. HSA gains/dividends can also go in with your regular income, since California doesn't recognize them with any sort of special tax treatment.
One of the calfile devs shows up on HN every once in a while. I got the feeling that the real impediments were more bureaucratic than on the technical or accounting side of things.
Agreed, but I don't see this as a service as much as a tool to perform a mandatory task. I don't WANT to do my taxes, I am forced to. At least don't deny me a tool because I pay the government a higher share of my income.
It's probably more-so that above a certain income threshold, your tax return becomes exponentially more complex.
Free-file is useful when all you have is 1-2 above-board wage earning jobs, maybe with a 1099 contract job where the employer is nice nice enough to pre-fill the form out for you.
Once you start dealing with non-trivial amounts of dividends, interest, securities, partnerships, real-estate, you really do need a professional to keep things organized.
> What I don't understand about these programs is the added income clause.
Lobbying by the "big tax preparers". Higher income individuals are more likely to have more complex returns and/or be more willing to part with $149.99 to TurboTax to do their taxes. TurboTax (and others like them) don't want to miss out on that gravy train by letting the IRS let those folks file for free.
In the UK you don't have to file at if your income is under £100,000 (assuming you are employed by a company that does PAYE (pay as you earn) - i.e. tax is deducted automatically from your payslip - and you don't have any other sources of income which is probably 99% of people) - after 100k you have to file electronically (although someone can do this on your behalf - I don't think postal filing is possible any more).
For what it is worth, the UK online filing is actually pretty good these days. Modern UI, and the process is tailored via a few "wizard" type questions initially so you are only shown the bits you need to fill. It can get a bit confusing at times though just due to the tax laws themselves and the terminology etc, but the system for filing itself is pretty good.
Thanks to onyone on here (and I bet you are on here!) who is working on the gov.uk stuff - it is generally pretty good.
The one thing missing is automatically calculating your tapered pension allowance after rolling over unused, based on your previous tax years - that's why I get an accountant to file mine.
Some notes about the official system in Germany called "Elster"
1. Sign in via chip card or certificate based authentication for which the activation codes come in the post.
2. All forms are neatly laid out and guide you through the process of filing them, the quality of the frontend is really top notch, they even have a dark mode.
3. All insurances (health, life etc.) and wage statements have already been submitted and you just import them to your filing for that year, there's no guessing on what the correct deduction should be etc.
4. You add in your extra deductibles and submit, you'll have a response in the post within 2-4 weeks.
5. If anything is wrong I can call my dedicated guy at the local Finanzamt, I've had the same tax official for the last 10 years.
6. I still use tax advisors for some years because they just know more tricks then I do, and the legalese German is a bit of a pain to grok.
7. Best of all there's no requirement to do a yearly tax statement if you work a normal job.
Australia is very similar to this, with the exception of activation codes in the post. Australia is pretty digital-first for their services, so you just sign in with your government ID and navigate to your taxes.
Everything is pre-filled. If you have no additional deductions to add in, taxes take around 5 minutes total to file. They have a fairly robust banking system as well so any additional tax you have to pay takes around 60s to send through any bank's mobile app.
The US basically has a privatized version of this.
Pretty much all I need to do is upload a 1099 for my bank account interest & cap gains, everything else is autouploaded.
The main difference you have to realize is not that our system is actually super shitty, we just have 4x the number of people to complain about things.
In the US, if you fail to file then you won’t receive your EITC. In practice, in the US poor neighborhoods are littered with scammy tax preparers for this reason. I’d call our systems substantially different.
The (fantastic) Reply All podcast episode #144, "Dark Pattern" covers tax returns.[0] In summary, the US government made a deal with private industry that as long as that industry offered a free tier of tax returns, the government would never create its own tax filing system.
Following controversy about the dark patterns tax preparers engaged in (thanks, ProPublica), the IRS negotiated a new agreement that eliminated the restriction on entering the tax prep software market themselves.
The free tier has never been universally recognized (for most, you can only file half of what you need to file for free), and users still pile into places like H&R Block yearly.
People are less interested in important financial processes happening without their input.
Public sentiment may have shifted far enough by now that the "duty" from that deal could now be considered derelict.
Yes, I remember reading all about the for-profit tax filing scheme/scam on ProPublica years ago. Weirdly, I remember coming away from it thinking that the federal gov't had actually entered a binding agreement, so I thought it was illegal to make the move they're making now. I don't know where I got that idea and I'm so glad it was wrong.
Readit News
Extraordinary that he could say that sentence with what I assume was a straight face.
It will cost taxpayers billions of dollars. Those billions of dollars will be well spent, and may be a net 0 cost for taxpayers after the savings on eFiling.
This is a revocation of the license to print money by the tax prep industry.
A one time expense of a couple billion dollars is, like… I mean the public servants working on it should take it very seriously but it is a drop in the bucket, the US budget is measured in trillions. This is one of those “the difference between a millionaire and a billionaire is about a billion dollars” type things, except the billion is the little one.
Edit: I mean there are like 300 million of us, so even it it was shared equally, it is like… for the price of a particularly fancy latte we can all collectively fuck over these middleman tax processing companies, let’s do it!
It will indeed cost dozens of millions, but billions? Come on.
We're not building the F-35 here.
Why on earth would, or should it cost that much? Unless they go full on "not invented here" and write it running on a IBM Mainframe running COBOL that they then pay an over priced consultant to somehow make web compatible
I'm curious what he means by this solution harming vulnerable Americans. Are they the same vulnerable Americans that TurboTax tricked into paying for their product after enticing them in with promises of "completely free filing"?
Most of Intuit's business is sheltered from the hit it will take when the IRS completes this system. They'll probably lose a couple billion in sales off the top (out of $13.6 billion the past four quarters).
You could probably take away 3/4 of their entire individual tax prep business and their overall business would still be larger than it was in 2020. I'll be interested to see if it pops the bubbly valuation the stock is carrying (~60 times earnings).
https://www.linkedin.com/in/rickheineman/
https://theorg.com/org/intuit/org-chart/rick-heineman
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If you can not lie and twist the facts you will not become politician / spokesman / etc.
The process is still way too hard and confusing, but at least it feels like I'm feeding one less parasite this way.
Everytime this comes up though I post this https://apps.irs.gov/app/freeFile/browse-all-offers/
There's many nice and cheap options out there. Please, if you value basic democracy, don't give money to Intuit or TurboTax - not a dollar, not a penny. But do click on their paid ads whenever you see them and just close out after the page load. That company needs to be dismantled brick by brick, byte by byte, and deposited in the dustbin of history.
Strangely enough that IRS search tool claims there are 0 options for me, even though FreeTax works just fine.
Fortunately I'm owed so shouldn't be paying any penalties for filing late. But it's still annoying.
I'm looking forward to an IRS free file system that won't require 5+ click-throughs to submit.
Might I suggest using AdNauseam instead? It's essentially just automating that in the background.
After I filled out all of the tax information my taxes were clearly off many thousands of dollars. I had to review my tax forms, do research, talk to an accountant, and then specifically request a tax form number in the help bar of TurboTax.
I would've owed $20,000 more in taxes because the software failed to account for the amount that was already withheld.
For years I kept a Windows VM around just to run whatever the cheapest tax return software was for that particular year.
I was flabbergasted that when I was living in Ireland, I could do my taxes by going online, clicking a couple boxes, and hitting submit.
There was a state tax error, I think, in TurboTax's return. The FreeTaxUSA got that particular item more correct. (It was a bit of a debatable item, though.)
IMO TurboTax can't justify its price, vs. FreeTaxUSA.
And yeah my scenario includes investments. off the top of my head my return featured:
* income from 2 employers for the same person
* income in 2 states
* kids and the stuff that comes with that (child tax credits etc)
* capital losses (it's that time of the business cycle :< )
* interest (US treasury products)
* dividends
* mortgage stuff
So if tons of americans can just do a 1040-EZ, then I feel like my usage probably covers like 99% of the remaining folks (which I would characterize as "I could do a 1040-EZ but I have kids and stocks").
This was the year I decided to compare freetaxusa with a paid professional. Maybe it's just that my taxes aren't complicated enough to warrant a pro, but I'm not making the same mistake again next year.
Any high school graduate should be smart enough to file their own taxes. That this is not true today is simply insane.
For tax incentives such as buying a qualifying electric vehicle, just provide the incentive directly to the car dealership at the time of purchase. Businesses which want to pass along such savings to their customers will need to do some paperwork and it'll be much harder to restrict benefits only to specific income brackets, but it would be much simpler and cheaper for taxpayers.
If it was simpler then these incentives would also be simpler, which would be great. It is a shame that so many regular W2 Americans will still have to run into some nonsense about an rollover IRA pro-rata rule or something that can cost you thousands of dollars if done wrong.
I guess what I'm trying to say is that it would be great, but not simplifying our existing tax code would be incredibly complex.
https://www.nyserda.ny.gov/All-Programs/Drive-Clean-Rebate-F...
We may have high taxes, but at least they make it easy to pay them...
Imagine you're a congressperson trying to simplify the tax code. If you want to remove a single little exception, you're going to piss someone off a whole lot for not much benefit. If you want to do a big refactor and lower everyone's rate while cutting a ton of exemptions, you need to fend off zillions of loud, empowered interest groups.
As recently as 2017, congress tried to simplify the tax code with the TCJA. Paul Ryan and co tried very hard to make the tax code simpler while also cutting rates, and the process failed under the enormous pressure from interest groups. They ended up leaving pretty much every exception in place, and only cutting a few high-value tax benefits (like the SALT deduction) that benefited people from the other political party.
When there's no clear path to actually solving the problem, a hack that makes things better in the interim can be a really helpful solution.
This is not simple: https://www.irs.gov/instructions/i1040s8
The majority of UK citizens file no paperwork with HMRC (equivalent to the IRS) and never have a reason to contact HMRC.
The majority of UK citizens only interaction with HMRC is when they get a summary letter in the post at most once a year telling them that everything is fine or they over/underpaid through the automated systems. In the latter casen they either are given the money owed or told that they will have to repay what is due through what is effectively an interest free loan over the course of the next 1-2 years (can be negotiated).
The reason why this is possible is because employers report salaries to HMRC and its a deduction in their monthly payslips.
You might say its not possible to do that in the US, but ask yourself how does the IRS actually know that you have misreported/underpaid? Its because they already know exactly how much you owe because the same information has already been reported to them by the banks and your employers.
There is literately no point in tax filing for the majority of US citizen that work as an employee employer except to enable the parasitic tax filing industry to exist.
Smallish UBI is an oxymoron; I'm assuming by "smallish" you mean something that's insufficient to cover basic living expenses (the B in UBI).
I agree that we should do away with market-distorting interventions in places that aren't strategically critical to the nation as a whole (like food production), but politicians are woefully inadequate to the task of resisting the urge to meddle.
The tax code is stupid, yes, but on the other hand one-fifth of high school graduates are functionally illiterate, and it would be hard for them to file their own taxes.
I think, though, that this philosophy does not accomplish its ends -- people are mad at the IRS for making them do this work, not at the legislators for creating and maintaining a byzantine tax code. Ideally we would all choose politicians that favored removing complexity and reducing the amount of taxes, but the reality is that this is not usually a politically viable strategy.
That's a very weak case when they could just send me a letter telling me how much they took and why, which would accomplish the same thing but better and without saddling me with a bunch of unnecessary labor and/or expense.
The theory makes sense, and the ends are laudable, but it doesn't work. Other ways of doing taxes do not even attempt to provide the benefit of this sort of built-in check on government excess, If you're willing to forgo that (or acknowledge that making people feel pain is not an effective policy tool in this case) then auto-filing solutions like the one in the article make a lot more sense.
Furthermore, the amount of money that people pay is not very strongly correlated with the time or effort (or frustration) involved in filing the taxes.
In fact, there's often (though not always) a correlation in the other direction: most of the "optional" complexity in the tax code comes from the various tax deductions that people are able to file for, making it more effort and frustration not to overpay - this is essentially the opposite of what GP is saying would be the "steelman" argument.
If you want people to hate taxes end and ban automatic payroll deductions and make them pay it all at once. More than half the country will be unable to pay and the whole system will collapse under crushing tax debt.
Or it won't because of how little the average person actually pays that we could literally just have the top %15 of wage earners pay income tax as "the cost of winning capitalism" and we wouldn't even notice.
It would be very easy to change my taxes without my knowledge as a result, if the only feedback we had on taxes was what was deducted from our payroll. In the US, there are deductions taken from the paycheck directly, including anticipated federal income tax (called "withholding" here) but also many other miscellaneous taxes.
The withholding, in particular, represent an advance payment on your annual income tax, which you still have to calculate and file. If you withheld more than you owe, then you get a refund, if less than you owe taxes. But regardless you have to compute how much you owe and how much you paid on an annual basis so that you can see it all at once.
Once again, I do not think this method works, but the theory behind it is that this will make it hard to quietly raise taxes, and hard even to maintain current levels of taxation, because it will be a painful process that will make it clear what the current situation is.
I think opening the article this way is misleading, although they explain it better later on. This isn't about filing for free, it's about guided tax preparation. Those automated systems that ask a series of simple questions and magically submit your tax return.
That's why tax complexity is the underlying issue. To do your taxes you "just" have to follow along a 100+ page instruction booklet (plus instruction booklets for any additional forms). Even with the Free Fillable Forms (free government electronic filing for everyone with digital forms and some automated calculations) it's a pain in the butt. By rephrasing the questions, automating the calculations, and checking for errors, fairly complex taxes can be done in under an hour.
So we're playing this stupid game where the government spends the time and money to write complex taxes and all the forms and instructions to go with them, just for us to pay businesses to simplify it all so we can tell the government what our taxes really are. I hope this change takes a big chunk out of the $14 billion tax prep industry (that's more than the IRS's expenditures), because maybe when they're out of the game Congress will be a little more motivated.
You would think they would want to encourage high income citizens to use their tool so they can control the deductions/credits/process.
CalFile only cares about handling "simple" items. Other notable exclusions [2] are capital gains, health savings accounts, Schedule C, Schedule E, and Roth IRA conversions and distributions.
[1] https://www.ftb.ca.gov/forms/2022/2022-540-ca-instructions.h...
[2] https://www.ftb.ca.gov/file/ways-to-file/online/calfile/calf...
One of the calfile devs shows up on HN every once in a while. I got the feeling that the real impediments were more bureaucratic than on the technical or accounting side of things.
Free-file is useful when all you have is 1-2 above-board wage earning jobs, maybe with a 1099 contract job where the employer is nice nice enough to pre-fill the form out for you.
Once you start dealing with non-trivial amounts of dividends, interest, securities, partnerships, real-estate, you really do need a professional to keep things organized.
Lobbying by the "big tax preparers". Higher income individuals are more likely to have more complex returns and/or be more willing to part with $149.99 to TurboTax to do their taxes. TurboTax (and others like them) don't want to miss out on that gravy train by letting the IRS let those folks file for free.
For what it is worth, the UK online filing is actually pretty good these days. Modern UI, and the process is tailored via a few "wizard" type questions initially so you are only shown the bits you need to fill. It can get a bit confusing at times though just due to the tax laws themselves and the terminology etc, but the system for filing itself is pretty good.
Thanks to onyone on here (and I bet you are on here!) who is working on the gov.uk stuff - it is generally pretty good.
1. Sign in via chip card or certificate based authentication for which the activation codes come in the post.
2. All forms are neatly laid out and guide you through the process of filing them, the quality of the frontend is really top notch, they even have a dark mode.
3. All insurances (health, life etc.) and wage statements have already been submitted and you just import them to your filing for that year, there's no guessing on what the correct deduction should be etc.
4. You add in your extra deductibles and submit, you'll have a response in the post within 2-4 weeks.
5. If anything is wrong I can call my dedicated guy at the local Finanzamt, I've had the same tax official for the last 10 years.
6. I still use tax advisors for some years because they just know more tricks then I do, and the legalese German is a bit of a pain to grok.
7. Best of all there's no requirement to do a yearly tax statement if you work a normal job.
Everything is pre-filled. If you have no additional deductions to add in, taxes take around 5 minutes total to file. They have a fairly robust banking system as well so any additional tax you have to pay takes around 60s to send through any bank's mobile app.
Pretty much all I need to do is upload a 1099 for my bank account interest & cap gains, everything else is autouploaded.
The main difference you have to realize is not that our system is actually super shitty, we just have 4x the number of people to complain about things.
I wonder what has changed!
[0]https://gimletmedia.com/shows/reply-all/6nhgol
https://www.theverge.com/2020/1/1/21045779/irs-turbotax-free...
People are less interested in important financial processes happening without their input.
Public sentiment may have shifted far enough by now that the "duty" from that deal could now be considered derelict.