"Killing TurboTax" is essentially a meme until we meaningfully simplify the tax code.
There is no software development team on earth who could catch up with the full capabilities of TurboTax without some sort of fundamental shift in the business. I really hate to say this as someone who makes a living out of it, but dealing with the current amount of complexity in the tax code with a piece of software that a non-expert could use is virtually impossible.
For the happy path (i.e. single individual, no dependents, no investments, no retirement, rents home), you could certainly build an application that handles these scenarios. The moment you factor in individuals who are bringing stock sales, multiple investment properties, ownerships/K1s and other complex scenarios to bear, its a different hellscape altogether.
Also don't forget that most states have their own independent tax codes as well, which further complicate matters. There's difficulty multipliers all over this problem domain, and you can be certain that the lobbyists employed by Intuit, et. al. are encouraging this.
> There is no software development team on earth who could catch up with the full capabilities of TurboTax
This is obviously false. The IRS software handles everything TurboTax does and more. As does the software that professional accountants use, such as ATX
Also: TurboTax's many retail competitors like HR Block.
> The IRS themselves need to provide this "auto tax" service.
Interestingly, they now can: under the Free File program, tax prep companies would offer free filing (for taxpayers below 72k AGI) and the IRS would not compete with their service.
After a ProPublica investigation in their dark pattern shenanigans (leading to about 3.5% of taxpayers to use the program when 70% are eligible) confirmed by the HSGA Senate Committee and NYS DFS, the IRS both updated its rule to preclude e.g. hiding Free File programs for search engine, and removed the rule which prevented them from competing.
Sadly the IRS has been hamstrung time and again by the GOP, both financially and politically. They can't even do their core jobs of collecting tax and auditing the taxpayers they need to, so it's unlikely they'll have the clout and funds to set up a free filing program any time soon, let alone one properly integrated with their likely antiquated and in dire need of updates computer systems.
That might be a notion too drenched in game theory.
The filibuster itself is not some sort of switch that gets flipped. The parties need to be careful how often they use it and for which reasons. It's just a part of the procedural possibilities and its effectiveness is not some sort of set-in-stone rule.
In our particular case right now, the reason the Senate does not allow us single-party rule is due to the makeup of the senators themselves. It only takes a few to not vote down the party line to negate single-party rule. We've seen this a few times already since the start of the new administration.
This is incredibly naive of the current way the filibuster is employed. There is no care in how it's used because the line in the sand has gone from "did you vote on bill" to "did you block bill from being voted on" for attack ads. How can you say we're "careful" when it's tripled in usage.
The current reason we care about a few senators is because we are looking at budget reconciliation where you only need 50 votes. Outside of that you need 60 votes or you get filibustered.
> Note that, in some cases, filibustered bills were eventually passed but with substantial concessions to the senators blocking the original bill.
We have clearly seen over the past many decades an evolution in the kinds of bills we pass, and I think it's quite easy to observe that controversial bills are front-loaded specifically to combat this. The negotiations have changed to meet the needs of the new battlefield.
Perhaps this is "naive," of me but the kinds of bills the Senate has passed recently have me surprised its use has only gone up 3x.
I can find no way to read this comment generously.
Your original point was that use of the fillibuster was judicious. The article goes on, at length, about exactly how the use of the fillibuster has only substantially increased over time.
And then here you plucked out a single sentence from the article used as a good-faith caveat before presenting data to say the article "proved your point."
It might look that way to you but it's not that way. Two Democrats in the Senate are against almost every progressive idea (IMHO). Even if all of the Democrats except for those two want something they have to convince a couple of Republicans to go their way. Those 2 sensare basically the most powerful people in the Senate.
That part of the Senate is working as it was designed.*
Those two Senators are from more conservative states and they know if they don't toe the line their constituents will likely throw them out for GOP alternatives.
*In fact, the Senate was originally appointed by each state's legislators and the House was the only Congress elected by popular vote.
> I love it when people still have faith in either party cleaning up the tax code (aka reducing the size of government).
“Cleaning up the tax code” and “reducing the size of government" aren't really the same thing; the former could very easily serve the opposite purpose of the latter.
But it would put some people in the tax department out of work, so even if hypothetically a more efficient tax scheme would let you grow the government as a whole, the current people in the tax department have an incentive to not let that happen.
> But it would put some people in the tax department out of work
Or, not; alternatively, it would allow the IRS to be more responsive in its supportive activities and more effective in its enforcement activities.
Cutting staff is a separate decision from streamlining the rules; the IRS hasn't had staffing expanded to keep workload constant when we weren't simplifying, there is no inherent reason it would ha r to cut staff and keep workload constant if we were simplifying.
Ah yes, the Democrats, who will do nothing because:
- Many of them will virtue signal on Twitter but are uninterested in actually challenging oppressive power structures as they exist.
- They have the slimmest of majorities, requiring either bipartisan support (lol) or the support of “moderate Democrats” whose positions are at best center-right. Republicans were in this position for the first two years of Trump, and they couldn’t get any signature legislative achievements but their tax bill passed. The same is likely to be true for Democrats this time around (a watered down stimulus bill passed through budget reconciliation).
- The American system of government is a vetocracy that leads to resentment over government’s inability to govern/keep promises made when campaigning.
- The complication of being beholden to corporate cash. Great ROI for Intuit and every other company that benefits from nothing substantially changing in America. Being beholden to corporate cash is the strongest form of bipartisanship in America.
Would the time until October 2022 be a conclusive test? There are many priorities and limited amount of legislative time. It’s very possible that no laws are passed with respect to the IRS, not because of a lack of desire or unwillingness to change, but because of lack of time and competing issues.
except the power the D's have in the senate is more about setting agenda since the vast majority of things they need to pass requires more than just a simple majority that they have.
We have this in South Africa. It was always easy to do your taxes before, but since last year they do what they call an "Auto assessment". The South African Revenue Service collects all the documents they need (payslips, medical aid, pension etc.) from the respective organizations, fills out the tax form for you, and lets you know it's ready.
I logged in to check that they did it correctly, which they did, and approved it. Literally took ten minutes. Nine of which were just reviewing all the fields on the form.
Obviously this does not work for people who have very complex/unusual tax situations, but for your average person it's great.
Same here in mexico. Its wonderful to file my taxes because i only login into SAT website, check the prefilled data, click accept and I get my tax refunds due to my mortgage credit.
It blows my mind that The USA doesn't have something like this. It's basically taxes at work
They don't simply collect all "documents" they need. They hoover up the data directly from various institutions. Your employer being one, your bank another, your medical aid, etc. Not only that, but they're getting involved with the IRS now via FATCA. It's actually awesome that they're probably doing a better job than the government itself when it comes to having an all-encompassing view of the tax-cattle that they oversee.
Oh, I am under no illusions that this was not a pursuit of excellence, but rather a way to make sure they get as much tax money as possible. Considering how 90% of all other government services are complete garbage.
But I still believe that paying taxes is the right thing to do (how else do you keep a country running, even a corrupt one?). And as someone who really hates doing any kind of admin, this was a breath of fresh air, and highly appreciated, even if their motives are not perfect.
The tax prep industry lobbied Congress to prevent the IRS from auto-tax filing. The compromise was "free filing" for those with median incomes and below. For a majority, W2s, 1099s and the previous years return can provide an auto-filing framework. The IRS would send your their draft and you agree or modify. Other countries do this.
If I saw a proposal to make tax codes simpler, have people file taxes with a good app provided by the IRS etc and then I saw a politician vote against it, while being funded by companies benefiting from the status quo...
Such a proposal can be killed at various steps before it gets to a floor vote.
It’s part of why Mitch McConnell was majority leader; he isn’t necessarily well liked, but he is willing to take the heat for not taking up a bill and letting his colleagues avoid awkward votes.
While many people are "single issue voters" [1] it's not too often that someone would vote for an otherwise worse candidate over $50-100/yr tax prep bill.
[1] I hate this term but it's the one that caught on. Almost no one votes positively based on a single issue but many people have disqualifying issues which people treat as the same thing. "Sure they're pro baby eating but their stance on taxes is really quite progressive."
Voters get the politicians they deserve. In some systems it's easier to be corrupt. IIif there are only 2 major parties so you don't need to good just better than the other guy, or if politicians are funding their own campaigns so you are indebted to sponsors and companies before you are even elected.
But voters are also responsible for those systems being in place.
Having the IRS make a tax estimate that you may then contest is very different than making your own tax estimate that the IRS could then contest. Proposals such as this dramatically shifts power towards the IRS.
Ideally there would be a "tax dashboard" on the IRS site where you could log in and see your (YTD):
- Income reported
- Taxes paid
- Tax credits and deductions
- Expected balance (+/-)
Then at the end of the year, you'd log in and click one button to verify the numbers and either pay or get a check.
That is essentially how we file our taxes in Norway. You don't really have to login to verify the numbers, only if the numbers (that the government calculates for you) needs revision
My employer didn’t send me a W2 this year which caused me to seek another method to access this information. I created an account on irs.gov and was surprised to find a single PDF for each tax year containing W2’s, 1099Ints, 1099Divs that I assume were given to the IRS on my employers/bankers behalf.
Now it would be great for a tax program to ingest this PDF and auto-populate your tax return. Unfortunately no PDF for 2020 exists yet and it says it might not be available until October? I don’t know if generating this PDF is a slow process or if this information is intentionally withheld until after the tax filing date to make sure you are “honest” on your taxes.
you made me curious and I logged into the IRS to find those "transcripts". I really cannot tell if they generate that information from your own tax report or if they generate it from what they already got in their own databases.
> Wage and Income Transcript - shows data from information returns we receive such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. Current tax year information may not be complete until July. This transcript is available for up to 10 prior years using Get Transcript Online or Form 4506-T.
I grew up in France, our bureaucracy is pretty intense and old school. But they send you a nice little note with your W2 and how much you own them. If they missed anything you can amend their draft. Usually it take 15min to complete the whole yearly process. Even with some midly complicated situation like renting and being landlord, living between two countries, cryptos.
As noted in other comments here, an "auto tax" service only really works on the happy path. There are parts of the tax code which are highly subjective in more complex situations and require explicit elections on part of the filing party. These elections can have consequences far beyond the immediate tax filing transaction.
No, it can work with the complicated path too, they present you with what they already know about you and give you the opportunity to add more information that they don't yet know. They then calculate what you owe and tell you.
At some point they are going to calculate what you owe based on what you provide them and what is reported to them, no matter what.
Laws that authorize "auto tax" can also come with extra reporting requirements.
There is a much greater depth of detail that I provide to my tax preparer than I'd be willing to share with the IRS. I tell my tax preparer everything and have perfect confidence that my taxes will be prepared correctly and in accordance with the tax code and that nothing which is not required to be disclosed will be disclosed. Much of what I provide to my preparer is irrelevant to my tax obligations and anything that's irrelevant I would prefer not be disclosed.
I'm mostly a W-2 schmo without any particularly complex business arrangements and with a spouse who employs themself in a consulting capacity, puts the statutory maximum into tax-deferred accounts every year, and we have minor kids who are required to file returns due to kiddie tax laws.
I can imagine many people would rather pay a high three or low four-figure per year bill for tax prep and representation rather than give the IRS full access to their financial lives.
I do support (and strongly so) the idea that the IRS could provide simple, default tax prep based on the information they receive. Where I break is what escalation path should exist; I think there must remain an effective and private escalation path for more complex scenarios. (In many ways, that makes it even easier to implement. Make the simple case automated-by-default. Punt all the complex cases to the current system.)
May I ask examples of things that you are not confident sharing with the IRS, that you do not have the obligation to share with the IRS, and that can affect the taxes you owe? In my (foreign) mind, whatever might affect your obligation final number you are legally required to do so (either preemptively or when asked), so I don't fully understand.
Many things that I tell my preparer are needed later, but not now. (Tax basis for RSUs that vested. Value of capital improvements to my property.)
Other things are needed only if we elect to method A of calculation, but not if we use method B of calculation. So I give him all the data; he computes my obligations using method A and method B, chooses the better option, and reports only the data needed to support that method's calculations.
I pay my preparer to be an expert in tax code, to represent me in any audits, and incidentally to prepare my return correctly.
Part of that expertise is that I don't have to be an expert, so I tell him everything and he politely rolls his eyes and smiles when I dump irrelevant things on his desk.
You are making an argument for a simplified tax code and reporting system.
The not needed now but maybe later financials should already be reported by the financial institution to the tax agencies.
There should not exist a system where there is a method A, B or C and if you have thousands of dollars a tax accountant can find all the loop holes to make you pay the least. You should just pay what is owed, not more or less.
You wouldn't pay for tax preparation if the potential savings weren't more than what you pay him. With a simplified system there also wouldn't be much need for the audit help you are usually offered when using their assistant
Then let the government distribute this hypothetical preparation software as free software. It could therefore be verified that you're not telling the state more than you want them to know.
A tax preparer could presumably still help you make the decision about what information to share with the IRS. I guess they would be something else, but you get the point.
But if it is irrelevant why do you fear that you will need to provide it? I’m honestly at a loss. Do you mean something such as to whom do you send wire transfers, or which specific companies you have on your portfolio? Or more like having an account together with someone? Something else?
Why would I want to give private data which is irrelevant to the IRS to the IRS? I'm honestly at a loss as to why you think that position is unreasonable.
My data is my data. I truthfully and completely provide to people, companies, and government agencies who have a need to hold or process only that data is required.
I also have a group of advisors whom I trust entirely and I share data more openly so they can help me plan and execute better.
What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes. My advisors on the other hand I willingly give that information so they can give me better advice/guidance.
My tax preparer knows what is required for the IRS and ensures they get that correctl, completely, and precisely nothing more. There's no way the IRS could find all the data that's relevant to my taxes without getting any not relevant data without some expert actor doing that filtering (and from a comparative advantage perspective, I want to pay someone more expert than me to do that)
> What specific positions (or even total account value) I hold in my various accounts is not required for the IRS to compute my taxes.
How can they compute your financial gains without knowing your portfolio changes? (sorry I'm not american and thus my preconceptions of how do you do taxes are weird for you).
I have always been troubled ever since I started receiving RSUs that the IRS doesn't already have access to the cost basis for vested RSUs, and I'm baffled that you wouldn't want them to have that information.
Fair point. I'd be somewhat comfortable with sharing that information earlier than they strictly require it.
But I think a better solution to the very real problem you've identified would be for your stock plan administrator to hold that information and transmit it to the IRS as basis information just like your retail broker now transmits basis for closed positions on a 1099-B, but only transmit it in the year the closing transaction happens.
If I vest RSUs this year and sell them in 2026, the IRS needs to know that basis in 2026, but they don't need to know it now (other than as it is already included in W-2 boxes 1 and 14, but that's only a dollar figure, not a per-share basis figure).
I don't think anyone here is advocating for a system where you cannot prepare your tax return privately. The problem is that private tax preparation corporations have lobbied to make an IRS system illegal.
> There is a much greater depth of detail that I provide to my tax preparer than I'd be willing to share with the IRS. I tell my tax preparer everything and have perfect confidence that my taxes will be prepared correctly and in accordance with the tax code and that nothing which is not required to be disclosed will be disclosed. Much of what I provide to my preparer is irrelevant to my tax obligations and anything that's irrelevant I would prefer not be disclosed.
Cool beans. Literally nothing preclude you using a tax prep service but using the IRS's tax declaration system, which would double up as a simple tax prep system.
That's what happens just about everywhere in Europe: you log in a dedicated government service, and you do your tax declaration. All the stuff the government knows about (salary, loan deductions, dependents, …) is already input, but nothing precludes drilling down and updating details. Nothing is lost compared to a paper declaration.
What is an example of something legal that you would be afraid of the IRS seeing?
I can't imagine any scenario that most people (anywhere close to fifty percent of tax payers) would be willing to lose a significant portion to all of their refund check by needing to pay a tax preparer potentially thousands of dollars.
You do realize that $1k is about 10% of the median household income tax liability?
I can't imagine the majority of people happily accept a 10% (more for half of households) tax hike, when companies already CC the IRS on all the forms they're regurgitating.
This statistic I think is with respect to those that owe tax rather than for all households (it excludes 1/3rd of those that file returns):
"The most recent IRS data revealed that Americans who filed taxable returns paid an average income tax payment of $15,322 in 2018. This number was calculated based on the returns of over 153 million American households who filed during that period, which included just over 100 million taxable returns."
I'm actually fairly shocked that $10K is the median income tax liability given that a substantial percentage of households pay no net federal income tax.
Also, don't forget the IRS has a quasi-adversarial relationship with you. You're trying to pay as little tax as legally allowed, they want you to pay more. They're not motivated to show you ways to pay less tax.
This is false. The IRS wants you to pay the amount calculated as due under the information they have available about your income.
The IRS is not motivated to collect more income or to deprive taxpayers of refunds. They're motivated to do their jobs, whether that means issuing a notice of amount due, or paying out a refund check (which they do for millions of taxpayers without issue, every year).
If I donate to a charity, it may reduce the tax I have to pay, especially my income is at the boundary between two tax brackets. Would IRS suggest such a donation in order to reduce the tax amount? Tax advisors do that all the time.
That's not how taxes work. Unless you would have donated to a charity anyway in a subsequent year, you never gain money on net from donating since your tax rate is marginal.
Even if you have super low income and you are on the border for benefits (EITC, Medicare), donating to a charity will not make you eligible for those benefits because that eligibility is determined by AGI, which is income before deductions.
The only situation which this makes sense on net is if you tell your tax advisor that you want to donate some amount of money over the next few years. Then the advisor might tell you to donate in high-earning years to offset a higher marginal rate. In the above proposed scheme, the IRS would only get one year's worth of data, so it cannot recommend you this type of tax avoidance.
There are scenarios in tax planning where expert advice can change the tax you owe by getting you to do something slightly different.
If you bunch deductions, you might alternate between the standard deduction and itemizing deductions, meaning if you want to support charities with $10K per year, you're better off to donate in Jan and Dec of the same year (itemizing), then skip 13 months (taking the standard deduction), then donate twice in the year after that (itemizing), etc. With the increased standard deduction, this may be needed to allow your donations to become deductible at all.
There are other planning strategies that a combined advisor and preparer can help with. (Using your HSA optimally as a retirement account. Optimizing your Roth conversions over the years. Modeling whether Backdoor Roth contributions make sense (or "what would you have to believe is true to have them make sense?") For business owners, setting the balance between your salary and distributions of profits.) Those are advice activities that overlap with a detailed understanding of your financial and tax situation and often mean that you have to change something about the structure or timing of your activity to accomplish your goal.
The IRS is in an OK position to look back and judge "based on what actually happened, here's what you owe", but in a terrible position to offer optimization advice.
$10 for the first bracket. The remaining untaxed income is $1, taxed at 90% = $0.90 tax.
But the Republican Party has spent a lot of money to make people think that the tax would be $90.90 (i.e,. a flat rate), which is why so many people are opposed to increasing the tax bracket rates...even though the actual affect is marginal to most people (even those affected).
No, because the IRS is not in the business of advising taxpayers about their spending or earning, only about how to calculate the amount due based on what the taxpayers earned or spent over the previous year.
For example, if you fill out your form by hand and say that you owe X, using the single-filer rates but you're married and should have used the married-filer rates, the IRS will notice your error when they process your return and send you a refund check for the difference.
A tax advisor will advise you to possibly make a donation...if it makes sense to do so (i.e., if you itemize). Because you're specifically paying them a lot of money to minimize the amount of tax that you owe.
This always made the most sense to me. You get your return and review it; sign off if it's good, modify and return it if you have more claims, something is wrong / missing.
I'd wager the majority of people wouldn't have a reason to submit a revised return. And if the federal government generated your return, hopefully that would give them reason to automatically exclude you from audit, (ideally) reducing the burden of auditors.
Most folks don't have taxes that are that complicated: most of those are businesses.
Most people file somewhat simple returns. We can get most people using "Auto-tax", where basically the IRS sends you some information to check over, including what you are going to get back or owe. We can do this for all of the commonly used forms, not just the EZ forms. Most folks aren't subject to "subjective" taxes.
Other places do it, after all. The IRS has the information. And it would probably increase tax revenue since it is easier to collect taxes that are easy to pay. (Sales tax is collected at purchase since few people self-report: Sales tax is even easier on the average person if included in price instead of added at the register).
You can require that the IRS err on behalf of the taxpayer and require it to give the maximum refund (or pay the least tax). And it isn't like the auto-file would be final: You still get the option for corrections (because mistakes happen) and can still self file.
There is a big gap between what tax software companies charge $$$ for and what is actually complex and subjective. Like, if you have an HSA, that instantly boots you into the Deluxe Edition of H&R Block (about $100 federal+state), even if your HSA situation is very straightforward.
Tax prep software is worth every penny IMO, but they do nickel-and-dime you for many pretty simple situations.
Most US federal and state taxes can be computed by a rules engine. The big annual challenges are: updating the interviews, QA-ing the rules/engine, fed/state rule-making delays/defects, and ensuring that required printable forms are pixel-perfect replicas of their government-published sources.
For tax year 2017 (a pretty typical year), there were over 5000 Federal/state forms/interview scripts to be updated. This requires a seasonal army of tax accountant/developers to update the app "content." It's not uncommon for providers to be updating forms/interviews well into March (when filing opens in January).
Here's my dream for a simpler tax code: The only tax is a Sales tax/VAT/GST.
Pros:
- Individuals never have to think about tax. It would completely eliminate tax returns. That alone is worth it's weight in gold since tax returns are such a time and money burden.
- It would close all the loopholes megacorps/wealthy individuals use to pay less tax. You cannot avoid spending money in the place where you operate.
- To add to that, if every country implemented this system we would be able to move freely between countries, spending as much time as we desired, without having to worry about tax implications. Obviously that's a much much longer term vision.
Cons:
- Won't this disproportionately tax the poor?
- Firstly, the existing tax code already does. Poor people don't have the time to understand the tax code enough to get everything they can out of their tax return. The also don't have the money to hire an accountant to do it for them. They also don't have the tax avoidance opportunities available to them that come with the scale of being a wealthy individual.
- Secondly, many countries already discount or eliminate the ST/VAT/GST on essential items. You could even have a higher tax on luxury goods. You could even have a negative tax (subsidy) on essential items if you desired. The point is it changes the framing of tax discussions to "where does this good/service fall in the scale of essential item to luxury item" which is much much simpler for people to understand.
- Won't prices have to rise for the same tax revenue to be collected?
- Yes, but now you have all this leftover money that used to just go to income taxes which you can use. Plus prices might not rise as much as you think now that the tax loopholes used by megacorps are closed.
Look, I know it's pretty radical, but I think this is the only sensible taxation in the future.
> - It would close all the loopholes megacorps/wealthy individuals use to pay less tax. You cannot avoid spending money in the place where you operate.
Yeah, it would "fix" this situation by just having them pay _less_ tax without needing a loophole. The percentage of income/wealth that someone spends decreases as wealth increases, so in other words the poor pay proportionally more under your tax scheme.
I think this is fundamentally a regressive idea. Currently the very poor pay zero (or effectively zero) income taxes. No matter how you structure the sales tax, you cannot go below zero. (I think negative sales tax is not actually realistic, nor particularly progressive.)
A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.
It could be coupled with a hefty UBI. No need for means-testing. If everyone got e.g. $10,000/yr, that would completely offset VAT for people who don't buy much. People who spend millions every year wouldn't even notice it.
I'm not opposed to the idea of UBI, but it doesn't really solve any problems here, it just adds massive political and logistical complexity that would essentially doom any possibility of reforming the tax code.
In this thread, we're discussing how to ameliorate the regressive aspects of sales taxes. Poor people spend most of what they have, so they are subject to proportionally more sales taxes than rich people who spend very little of their vast accumulated wealth on goods subject to those taxes.
The initial, flawed response to this issue would be to construct some "massive political and logistical complexity" in order to track everyone's income and spending and family situation and lots of other stuff too and calculate their VAT refunds based on some formula. The much simpler solution is to just give everyone the same amount of money. Poor people will spend some portion of it on sales taxes, and they'll use the rest for other purposes of their choosing. Slightly richer people will spend all of the UBI on sales taxes but will come out even. Slightly richer people will be able to offset some portion of their sales taxes. Really rich people won't even notice they got a UBI.
Perhaps you really meant that "massive political and logistical complexity" is required to get anything through the legislative process? After all, the more complicated it gets, the more places lobbyists can hide loot for their employers.
One of the things that worries me with UBI is that the somewhat-better-off people without a moral compass- for instance, slumlords- will raise rent and eat really far into other people's UBI because they know everyone gets it and needs a place to live, thus keeping them from being able to save up to afford even a modest "starter home". Like GPU scalpers, they provide very little value and charge a lot for their services. There's a small group of people in my town that really do the poor in via rent already without so much as a care about the quality of housing they provide, and I fear that one of the unintended effects of UBI is that the slumlord class will get a ton more money without doing anything to improve other people's lives.
TL;DR: my fear with UBI is that unscrupulous people will do unfair things like significantly raise rent to eat into other people's free money thus leaving the poor in the same spot, more or less.
It's true that the spending of the poor tends to be concentrated on the "basics": food, housing, transportation, childcare, utilities. Such a situation is inherently subject to more pricing risk. Relatively wealthier people might forego cable TV for six months in order to pay for unexpected car repairs, but that wouldn't be an option for someone who doesn't have cable TV in the first place. Still, your objection has it backwards. Yes, the poor face a relatively limited range of choices in how they can live in an arbitrarily unfair society like ours. However, increasing the income of the poor increases their choices, period. We don't know in advance how exactly they will react to this increased choice, but it's extremely unlikely that their reaction will be to give all the extra money to the same asshole landlord. A more reliable car might allow a family to live in a completely different neighborhood. Working a single job instead of two might allow a parent to spend less on childcare. And so on. Poor people are humans with imagination, not rent-payment-maximizing automatons.
I don't claim to know anything about your town, but I've lived lots of places and in general, in order to really fuck people over the bastards first have to limit their freedom somehow. Are there only certain parts of town in which the poor are allowed to live? Has public transportation been limited in arbitrary ways? Do zoning regs or HOAs enforce impractical restrictions on housing? Would it be OK if your neighbor parked a mobile home and camper behind her house for her recently-divorced sister-in-law plus five kids? What if her nephew and his girlfriend also moved out back?
Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage.
> A system that only taxes spending fundamentally has problems in that the richer people can afford to save and invest.
That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.
> Could you explain a bit more how negative sales tax is unrealistic? We already subsidize things we want to encourage.
Lets say apples have a -5% tax rate, and cost $1. Every time I buy an apple from the store, I pay $0.95 (the government pays the rest, which is a problem in and of itself). I can sell that apple for $1, and the government basically just paid me $0.05 for selling an apple.
The problem with the government paying that $0.05 is that sales tax is assessed at time of purchase, but the government isn't there to pay their part. The grocery store basically has an IOU from the government. 5% may be higher than the grocery store's margins, which means the customer payment is actually less than the good is worth, so the grocery store's ledger actually goes down for that sale until the government pays back their part.
And then you have to deal with fraud. Nobody wants to overreport their sales tax, it costs them money. If you can make money off sales tax, people will filing fraudulent tax reports, and I really don't want the IRS having to track how many apples the grocery store actually sold. I'm sure money launderers would also find a way to use it to buffer their costs.
Subsidies probably still have fraud, but it's a smaller number of entities to work with. We can also budget for it because we determine the amount. I can give a budget to the subsidy, but I can't tell people to only buy 10,000 apples next year.
An instance of that fraud is that re-selling would generate money. I buy that apple for 95ct. Sell it to the next supermarket for 98ct. They sell it to a customer for 100ct of which the customer pays 95ct. Goes to the next supermarket etc etc. Today you'd just accumulate more and more tax so nobody does that. With negative VAT this loop is now generating money.
One problem is that it encourages using items with negative sales tax for other purposes with value lower than the true cost (i.e. it can induce inefficient demand).
There are similar issues in agriculture subsidies and price regulation. E.g. High fructose corn syrup is probably as popular as it is because corn has been subsidized and cane sugar has a regulated (high) price. It's kind of like an inefficient arbitrage between physical goods to avoid taxes.
>That is an existing problem inherent to any tax system. It's just saying "Rich people can afford to not spend all of their money". I don't see how that's fundamental to taxing only spending.
If you taxed only assets it wouldn't be a problem. Mo money mo taxes.
Whether you want to tax predominantly assets or spending usually reflects which side of the capital divide you see yourself identifying with - predominantly a recipient of unearned income (e.g. landlord/FIRE) or a payer (e.g. renter).
Fair tax, a proposal for replacing current taxes with a federal sales tax, has already come up with a solution for this. Under its plan every person receives a check to cover the sales tax on spending up to the poverty level.
How do those plans tackle the problem of heterogenious tax systems internationally? No tourist is going to visit you if the restaurant visit costs 3x as much as in their home country (assuming similar living standards in both countries). Those tourists would effectively be taxed twice. Income tax at home and then again full charge on the steak on vacation.
Here in NZ we have a GST plus income tax - there are 3 tax steps, there are NO exemptions. Most people don't need to file a tax return, if you have only 1 job your employer will pay exactly the correct PAYE. If you have multiple jobs (or if you want to anyway) you can file online, it's 2-3 pages. If you don't do anything the IRD will run your taxes and if necessary send you a bill, or a refund (with interest).
I run a small business, I do my monthly PAYE in a simple spreads sheet - one line, type in the gross income out comes the numbers to include in the online filing web page including PAYE, and 401K equivalent. Doing the same in California was a nightmare.
> Here's my dream [...] The only tax is a Sales tax/VAT/GST.
Ok, I'll share mine: the only tax is on pollution and/or scare resource usage.
It's weird that we tax anything that's considered "good" in my opinion. Taxing housing, income from labour, consumption -- who came up with these shit ideas? Tax only, ONLY, what is considered bad (or should be reduced to a minimum), mainly: pollution. And the market will organize itself accordingly; optimize for all of us to survive a little longer on this planet (instead of exploiting it ASAP).
You can eliminate tax returns for most people by getting their employer to do it for them, which is effectively how the UK PAYE system works. Only those paid more than 100k, the self employed or others who want to claim certain tax incentives have to file what's known as a self assessment.
In the US our employers also submit our taxes to the govt. But because they don’t have enough information about our lives (mortgage payments, donations, savings incentives) they send the wrong amount. In April we “file our tax return” and pay/have returned the difference.
Interesting. Mortgage payments wouldn't attract tax relief in the UK, and everything else has a nil rate band, so only those with large savings have to declare. Charity donations are dealt with through a scheme called Gift Aid - essentially, the charity claims the tax back.
A wealth tax. All assets and cash need to be properly valued and then that value taxed. I agree with the sibling comment and also with past discussions where a wealth tax is the only non-regressive (not-keep the poor down) tax code.
One benefit of markets is price-discovery. But if you're not participating in a market, determining price is akin to shaking a magic 8 ball. It assumes a Just Price, which is a heuristic and a fiction.
Also, quality of living is determined by income, not wealth. Fresh retirees are generally wealthier than other age-groups because they've saved for retirement. But that doesn't mean they consume more. Also, consider the citizens of the Netherlands. They enjoy a comfortable existence while servicing an enormous amount of debt. If wealth were the primary determinant of quality of life, you'd think the Netherlands were as as destitute as Somalia.
The retiree example is intended to demonstrate that a wealth tax is inherently perverse, regardless of who is targeted. Savings are just deferred expenditure and debt is just expedited expenditure. When you tax wealth, you expedite consumption.
Another way of thinking about this: A wealth tax is like inflation, except assets are also devalued alongside your savings. Which means the wisest strategy is to consume now, save nothing, invest nothing.
50 dollars tomorrow may be more useful to you than 100 dollars today if today you'd only buy useless crap for it but tomorrow there is a brilliant investment opportunity.
Things still get complicated there. What is the value of a car? I'm not planning on selling mine, so I have no idea. Do I just Blue Book it? If I key the shit out of it every Christmas and then have it repainted in January, can I knock 40% of the value off? It might be cheaper to just have it repainted.
What's the value of a painting? You could use the price I bought it for, but what if we just swap paintings instead? You know, I give you this fancy painting, you give me some Goodwill shit and you pay me a $100k "finders fee".
What's a yacht worth? What are super fancy houses worth? One of Mike Tyson's old mansions is still abandoned, so I assume it was worth nothing since they couldn't sell it.
Properly valuing things is hard. Wealth taxes are also regressive, in a way, because poor people are much less likely to have access to financial instruments that will return greater than the wealth tax rate. The poor and the middle class are far more likely to have their money in functional investments (homes, cars, etc) than they are to have them in something that generates profit.
So you'd still have to just not assess the tax on assets under the value of a reasonable home and car, at which point we're basically just back to what we have now, which is carving out a loophole for the poor.
I'm not sure that would work as simply as that. Imagine buying a volatile stock, say, TSLA at $100. This then skyrockets to $1000. You're now taxed on your wealth at that price point.
Then it immediately crashes down to $120.
All this while, you're just holding the stock but paid taxes on a non existent value.
I highly recommend that people look into Islam's Zakat laws. Zakat is a form of "tax" if you will, but is much superior and has been proven to work historically. Money that has been sitting in your account unused for a year is "taxed" at 2.5%. Things like livestock and produce have their own rates.
> Won't this disproportionately tax the poor? - Firstly, the existing tax code already does.
I used to think this because it's often said, but learned it's not true. This sums it up:
The top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent.
The top 1 percent paid a greater share of individual income taxes (38.5 percent) than the bottom 90 percent combined (29.9 percent).
The top 1 percent of taxpayers paid a 26.8 percent average individual income tax rate, which is more than six times higher than taxpayers in the bottom 50 percent (4.0 percent).
Counterpoint (note that this is tax relative to wealth, not income):
> The big picture: The very richest Americans pay much less tax, as a proportion of their total net worth, than the rest of us.
> By the numbers: The bottom 99% of Americans pay about 7.2% of their net worth every year in taxes, per Warren. The top 0.1%, by contrast, pay about 3.2%.
Agree - there are different ways to slice this, but at the end of the day, should we?
Let's say you and I start off with zero wealth, but we both graduate with a good degree, both get high-paying jobs and both make the same amount of money.
We also pay the same amount of taxes - which sounds fair, right?
Lets say we both make 150K a year, but I spend it all on my living expenses/fun while you are able to live on 50K and save 100K every year.
In 10 years, you will have over a million dollars in savings/investments while I lets say managed to save 10K.
We still make the same salary and pay the same tax but our wealth is grossly unequal. I pay 100X tax-per-wealth than you do. That sounds horrible but in the above example is totally reasonable.
Obviously the Warren Buffet example is a bit different than that but - he pays a ton of absolute $$$s compared to you, me, and anyone else, why is his total wealth an absolute necessity to look at?
This type of example pervades online discussion about taxes but is based on a ridiculous hypothetical and is close to victim blaming people for being poor.
In reality, factors outside of someone's control (ex: parent's education and wealth) are greater predictors of their wealth than _any_ decisions they make. I am ok with allowing some people who make irresponsible life choices to get away with lower taxes if it makes the system as a whole fairer.
> why is his total wealth an absolute necessity to look at?
Your claim was that the poor aren't disproportionately taxed. "Poor" is a statement about wealth, not income, and income is an inaccurate substitute for wealth.
How do any of those statistics refute that statement without supplementary data on income/wealth (or whatever else you're using to measure the proportionality of tax)?
I don't understand your question about proportionality of tax, because there are two ways to think about proportionality and the stats I cite cover both.
Take another look at the last point I cite, I THINK it goes to what you're asking: the richest 1% paid 26.8% of they income in taxes. The poorest 50% paid only 4% of their income in taxes.
Let me know if your question is something different.
Sorry, I must have completely blanked and missed that statement. Regardless, it is compared to AGI, which is possibly one of the worst possible metrics to use.
Firstly, AGI is post-deductions, so people who play games with their taxes show up as paying more.
Secondarily, and more importantly, income is a trash metric anyways. Poor does not mean low income, it means low wealth. In your data somebody who inherits a ton of money but has 0 income counts as "bottom 50%". Rich people have a disproportionally lower income vs wealth.
I am not sure these percentages include indirect taxes or are just direct. Regardless, the top 1% wealthiest accumulate wealth which is not declared as income and therefore that percentage is on their declared income and not on wealth. For poor people their income is their wealth. Finally, for the 1% even basic things that would require income for the majority of the population, such as travel, food, accommodation are routinely not funded by income, making the comparison even worse as they have extremely more flexibility in optimising their income vs investments and their exposure to indirect taxes even if they are immaterial to them.
Also something I thought based on the statement above. Poor people have at best a converging to 100% tax on their wealth, assuming that taxes collected would be savings. If they were to be consumed it’s even worse as taxes eat into their survival. Edited to make it converging with the assumption they might still be saving a little.
Income tax itself isn't the complicated part of taxes. I encourage everyone to do their own taxes by hand sometime. There are like 4 boxes for wage income and income tax, and 100s of boxes for everything else. And besides the boxes you do fill out, there is all the reading and calculating required to figure out you don't have to fill in even more boxes (e.g. in order to know if you have to fill in the AMT form, you potentially have to do all the AMT calculations).
I think the biggest single thing that would simplify the tax code is removing the separate capital gains tax and just counting it all as income. There is significant complexity in the tax return to calculate everything independently and to show that your capital gains aren't really income. You could eliminate Schedule D, Form 8949 (which you have to up to 4 times), and the Capital Gains/Schedule D worksheets to figure income.
HSAs are also super painful. E.g. CA doesn't respect the tax-exempt status of HSAs, so you have to add the HSA back into your income so they can tax it. There are also a lot of bookkeeping requirements for relatively low amounts of money. In practice, they aren't very useful since the fees are high, the returns are low, and their function is redundant with insurance (i.e. paying premiums now to cover large future expenses).
In general, there are a ton of random little exemptions and extra taxes that you might qualify for and it just takes time to figure out if they apply to you. E.g. Form 8959 (Additional Medicare Tax) is a 0.9% tax for income over a certain amount. They should have just adjusted the income tax graduations in an equivalent way. Form 8960 (Net Investment Income Tax) has a similar problem. CA gives a $60 renter's credit if you make under certain amounts, which is just too insignificant to matter (e.g. 0.3% of $1500/month annualized).
> biggest single thing that would simplify the tax code is removing the separate capital gains tax and just counting it all as income
That's okay during times like ~1990-2020, a time of wonderfully low dollar inflation. The justification behind the long-term capital gains rate is this: during times of high dollar inflation, taxation on capital asset values turns into an outright tax on investment.
If the dollar is inflating rapidly then an investment which simply maintains its value in real terms -- neither gaining nor losing real value -- will see its value in dollars increase and will therefore be taxed, heavily. The lower rate for capital gains tax was in recognition that not all of that gain in nominal value was real income. All of the major reductions in the long-term capital gains rate (i.e. reduction of the rate, shortening of timespan for "long term", and increase/removal of cap) occurred after highly dollar-inflationary periods (1934, 1942, 1978-1981).
Without a lower capital gains rate, during times of high dollar inflation the wealthy will shift all their money into non-fungible assets (real estate, artwork, patents, Persian rugs, domain names, antiques) which aren't fungible commodities with liquid markets and therefore can't be marked-to-market or taxed until sold. This kind of economy-wide, sudden, and simultaneous disinvestment would be a catastrophe for the economy.
Not to mention the resulting real estate boom would make the homelessness problem an order of magnitude worse in a matter of months. When your money is losing value every day, buying up every apartment in sight, jacking the rent to the moon, and evicting the tenants (so it can sit empty and maintain value without any management effort) is, unfortunately, a great strategy.
Note that the 1990's were a boom time for the US (Cold War peace dividend), and from ~2000-2020 we had a massive onlining of cheap Chinese labor providing a deflationary counterpressure to our outrageous money-printing escapades. All the cheap Chinese labor is now fully online and "Fed go Brrr" is in permanent COVID-hyperdrive, so the party will end real soon now.
> This kind of economy-wide, sudden, and simultaneous disinvestment would be a catastrophe for the economy.
I don't know, it sounds like a great opportunity for the non-super-wealthy to buy shares in productive assets at a discount. Haven't all the prudent people in the room spent the past 8 years grousing about how poor the P/E ratio of the S&P is?
In the long run, you, as a human being who works, retires, and dies, are better off owning a larger share of productive assets, even if you have to pay more taxes on them, than owing fewer productive assets, because the price to buy them is too damn high.
Not to mention that as I get older, I expect my income tax bracket to drop. I'd rather buy productive assets cheaply now, and deal with the tax consequences, than be cut out of buying productive assets, period.
It also creates a problem where you have countries who are close together people crossing the border to shop where taxes are cheaper and then the country where they live not getting those tax dollars (example Canada USA)
another con is: It's very hard to figure out how high your personal tax rate is if you don't track all your spending. I guess it's less of a problem for you guys over the pond, but at least in countries like Japan and Germany where at least 60-80% of all payments are done with cash it's near impossible to know unless you track your spending by hand.
I agree with you that VAT would be cool to have as the sole tax, though.
> I agree with you that VAT would be cool to have as the sole tax, though.
I’m sure it’s cool if you’re worth a few millions or above. VATs are highly regressive taxes, though they are also consumption disincentives (essentially luxury taxes on a number of non-luxury, which is why essentials like food tend to be low-rated).
The reason that Taxes are complicated, is that the government wants them to be complicated. You can do without taxes (the government prints money, which is a tax on economic activity); or at a maximum print money + tax on big wealth accumulation which shouldn't affect the average guy.
The tax code is being used as a tool to funnel money through industries and as kickbacks to bureaucrats. A non-communist government can't force the population to do something (invest in this, build this, do that), but they can encourage/discourage it through taxes.
Do we really use that much time and money on tax prep? Sure, it seems like it during this time of year, but for the other 10 months I dont think about it.
And just forcing the bureaucracy into the businesses collecting a sales tax doesn’t reduce the burden, it just puts it out of sight for consumers.
Agreed. This is primarily not a "software" problem. Unless we simplify our tax codes in the US, tools like turbotax will stay. In fact, to be honest, turbotax was great when I used it last in 2009ish (I know they got acquired by Intuit and have gone downhill due to Intuit ) but the point is that it is overall an excellent software that really makes it easy to calculate and file things based on current tax codes. I would love to not have that dependency but that's not possible only when the tax codes are simplified.
> Unless we simplify our tax codes in the US, tools like turbotax will stay.
The two are linked because a lot for he lobbying comes from the same place, so its unlikely that one would get changed without the other, but there's less essential link other than shared lobbying interest than you seem to think: even with the complexity of the system quite a lot of the information is already in the IRS’s hands.
It's still excellent. I just did my taxes in FreeTaxUSA this year for the first time and it's not nearly as good as TT last year. FTU is like manually filling in the IRS PDF's except as webforms, whereas TT imports PDF's and parses everything correctly, leaving you to do a quick scan. FTU is free because it's just a light GUI layer over the 1040 and various Schedule forms.
Simplifying the tax code will require removing special exemptions for certain interest groups. This is often rephrased as "raising the taxes on [group]" which gets a lot of pushback. For example, raising the taxes on teachers, native americans, certain small businesses, public servants, antarctica scientists, students at for-profits, etc. It's hard to fight against that message.
One proposal here is to eliminate the ordinary income tax, and keep only the AMT, which is much simpler. The political advantage is that nobody gets a tax increase, and nobody's taxes get harder. And the revenue loss is surprisingly small - estimated at $63 billion annually in 2010 (though perhaps higher now due to the lower SALT limits).
I am in camp-AMT-only and it seems like both parties could get on board.
Oh my bad then. I guess I got confused because for some reason, I always they were acquired after I initially used them. You are correct though. So I guess the software has always been good.
The reason the tax code is so complicated is BECAUSE OF TurboTax. They lobby heavily to keep things complex and have brought down potential competitors through legal means.
As such, "killing TurboTax" is the correct first step.
I know it's nice to have a corporate bogeyman to rail against but it's not that simple. For example, there have been all sorts of tax deductions over the years to incentivize things like home energy efficiency improvements, EVs, solar power, charitable contributions, etc. And the mortgage deduction was/is intended to promote home ownership. I could go on. Someone can disagree with some of the choices around tax rates and certain weirdly specific deductions. But most people wouldn't argue that, for example, encouraging people to donate to charities is a bad thing.
> all sorts of tax deductions over the years to incentivize things like [...]
But plenty of other countries have those too and manage to not have an insanely complex tax-filling regime?
> but it's not that simple
I think if the main difference between the US and other countries is the aforementioned "corporate bogeyman", it probably does boil down to being that simple.
> But plenty of other countries have those too and manage to not have an insanely complex tax-filling regime?
Citation needed. How can you have a non-complex tax filing regime when you have so many deductions and credits that only the taxpayer knows about or has documentation of?
When I donate to a charity, they don’t report my donations directly to the IRS (nor should they - we don’t want the government to be collecting data on everyone’s charity giving). I have to collect the letters they send me at the end of the year and total my donations in order to deduct my charitable contributions. The government never even knows what charities I donated to unless I’m audited and they ask for proof.
> that only the taxpayer knows about or has documentation of?
Therein lies the rub, I suspect; other countries do know about what you're doing with the deductions and credits which means the tax office can handle all that for you - and, indeed, they are much more suited to be handling this - rather than pushing it onto each individual to try and scrabble together once a year.
I suppose we can add "incoherent fear of the government" to "corporate bogeyman" to the list of reasons the US has a messed up tax situation.
> (nor should they - we don’t want the government to be collecting data on everyone’s charity giving)
You do if there's specific tax breaks for doing that.
Thread drift, but my objection to encouraging charitable giving is that the more you rely on charity to fund the public good, the more you rely on (largely) millionaires and billionaires to decide what counts as a public good. In other words the average citizen doesn’t get to vote on what good gets funded. This means givers’ pet causes get funded rather than projects that are democratically chosen.
It is possible (even likely) that I've misunderstood people who were just being hyperbolic and didn't mean to be taken literally, but my impression was that some were saying that literally no charity organizations should be necessary?
I (somewhat..) understand the "but then the wealthy are determining what gets done" thing, as a reason to not rely too much on it, but it seems clear to me that there are also major inefficiencies in having to go through a consensus process of government democracy, rather than people simply acting in smaller groups, independent of a larger consensus, to further charitable causes.
It seems clear that there are cases where charities work better than govt programs alone, and it is a clear error to think that all charities would be better handled as a govt service, even if some would be better handled by one.
Hmm, if the government were to run a quadratic funding of charities thing, with only rather limited requirements for eligibility, perhaps that would somewhat alleviate the "undemocratic" complaint? (It would have to make it illegal to pay someone else to participate in your stead though.)
The rest of your post is based on the implicit assumpion that anything government run is inherently bureaucratic and slow and charities are instead simple and fast. But that's an orthogonal issue. Some level of bureaucracy is needed to prevent misuse, otherwise you have a rich guy pay their fines from their charity. Beyond that, there is no inherent reason for charities to be more efficient. You could make those governmnent-charities have local oversight, they could be organized very efficiently too and have the advantage of democratic legitimacy.
I don't think it's enough reason to not give to charities because people need help right now but the fact that food pantries exist makes my blood boil. It is beyond ridiculous that feeding our most vulnerable people requires a charity to take would be thrown out food from grocery stores and inefficiently spread them around a network of churches staffed by volunteers.
If only there was a massive logistics network for getting food everywhere we could use.
there are many who think others should pay for what they themselves consider important and even get some glee out of forcing people they don't like to pay for something they otherwise would not.
then you run into those who think , why should I give to charity because its the government's job to fix that...
and finally those who just don't care
charity exist for those want to focus their person effort to fix their world and should be encourage but never be required
Which can be a good thing. If there's an activity with negative (positive) externalities, then there's a deadweight loss, which can be corrected by taxing (subsidizing) that activity.
Depends on whether you agree with what the people in charge define as a 'good thing'.
In a democratic government, you might like how a powerful tool is being wielded when your people are in charge, and be terrified when the 'other' is in charge.
I didn’t see evidence in the linked article and the cited article therein that Intuit tried to prevent a simplification of the tax code. They just tried to stop the government from trying to build competitor software (partially paid for by Intuit and others in the tax accounting industry). Frankly, it sounds like a PITA to have IRS calculate your taxes with poorly written software, and then have to challenge it.
I think it’s unlikely that Intuit has the power to steer the complexity of the tax code. States like NY and CA, for example, oppose a standardization of tax law for “road warriors” because they make so much money from non-resident workers who step foot in their state.
US tax policy is about 70,000 pages (mostly regulations, bulletins, and case law). And that doesn’t include state and local taxes.
If you stop being an easy case, for example you want to claim FEIE within 5 years of spending > 30 days in the US, then the IRS tells you to get a lawyer to pay for a private letter ruling. This is because, where other countries don’t tax their citizens income worldwide, the US does and then gives a moderate exemption. AFAIK, US tax code complexity dwarfs that of any other country.
I find it hard to believe that it’s TurboTax’s fault, a day after reading about Sen. Warren’s plan for a wealth tax and a $100B to the IRS to help them calculate and enforce it...
> Frankly, it sounds like a PITA to have IRS calculate your taxes with poorly written software, and then have to challenge it.
That's not how the proposed systems work. The proposed system is: gov sends you a notice "here is your filled out tax return based on everything we know about you" and then you look over the return, make any modifications you believe are correct, and send it to them. You're not "challenging" something.
> and then you look over the return, make any modifications you believe are correct, and send it to them
Or more likely, they send you their estimate, based on a tiny fraction of the tax code, you recalculate it from scratch, send it to them, and then they audit you.
Civil disagreements with the IRS start under the assumption that the IRS is correct (e.g., “your cost basis is zero,” or “that wasn’t a valid deduction”), and then you must prove to them that they are wrong.
Again you're describing something very different from what is being suggested - and this is not a weird experimental theory - MANY countries have deeply complex tax codes and have also implemented an auto-file system where LARGE portions of the population can file in minutes due to a pre-filled return.
I've yet to hear any stories where anything like your nightmare scenario has actually happened. Perhaps you would not be part of the group who could rely on a pre-filled return - and you would still have to file manually, but nobody is proposing taking that option away or even making it harder than it already is.
Can you give an example of any country whose tax code is more than 70k pages long?
Or a country where it requires, by default, taxes paid on money earned while living oversees, depending on a large number of international treaties, case law, and expensive private letter rulings? Or a country that requires you to file a different tax return in almost every state you step your foot in while working remotely? Or a country that requires you to essentially recalculate taxes on a quarterly basis to determine if you should be fined for underpaying estimated taxes?
> nightmare scenario
That’s not a nightmare scenario. That’s just a standard audit. They assume, e.g., zero coat basis, or residency, or it wasn’t used for business, or ... and you have to prove otherwise.
> As of 2014, the tax code was only about 2,600 pages long
The usa hardly has a monopoly on tax code complexity. We're talking about personal income tax right now and I can't find a complexity index for that, but for business taxes the usa ranks fairly low on https://www.taxcomplexity.org/
> That’s not a nightmare scenario. That’s just a standard audit.
The "nightmare" scenario was "you recalculate it from scratch, send it to them, and then they audit you." - a scenario you put forward where this improvement to the tax code (auto-filled returns) results in a world where any time your return isn't what they auto-filled you get audited. That sounds bad, but has not happened anywhere where auto-filled returns have been implemented.
Intuit has so little real effect. However it makes for sensationalist reporting and attracts eyes and easily picks up people who want to believe tax law is all the result of corporate greed. Simply put, its too complex for one company to have a significant effect.
Nearly every bill out of Congress can effect tax law and this includes even special appropriation bills; all the covid bills have had tax law changes.
there are some three thousand pages comprising Federal tax law however much of this is additionally subject to various regulations that can affect when and when not a tax takes affect. then throw in every state, city, and more.
To be honest I don't know of a good fix. there are too many forms of income and taxation that Congress would have to reduce the number of definitions for what is income into much simpler categories, say employer paid income, interest, capital gains, money transfers from others, and such, and then macro the rest into miscellaneous subject to a permanent fixed rate.
As in, account for the most common forms of income at a lower rate and they get all those that don't fit that definition and charge it at a higher rate as likely none of these would ever be claimed by the average tax payer.
when it comes to deductions, simply do what the Trump tax change did in 2016 but do it again, raise the standard deduction so that if you are under 250k you never need to itemize.
I don't think that's true. The US has used tax laws as a way to effect policies since before Turbotax existed. I think the mortgage interest deduction goes back 100+ years
The mortgage interest deduction was an accidental side-effect of pro-business regulation, and it doesn’t advance any reasonable societal goals. It’s effectively a regressive tax break, the richer the beneficiary the larger the tax break, up to ordinary 7-digit millionaire.
I've been using freetaxusa.com for years as an alternative, it only costs maybe 10-20$ to file state taxes if I remember correctly, and federal is free. It is much cheaper than Turbotax and the UI is essentially the same.
Not Turbox, but Congress. They promise new credits and deductions every election cycle. Every couple decades there are weak attempts to weed out some of these such as for the Reagan and Trump tax reforms.
> "Killing TurboTax" is essentially a meme until we meaningfully simplify the tax code. [...] There is no software development team on earth who could catch up with the full capabilities of TurboTax without some sort of fundamental shift in the business.
That would a) never happen in the current US political climate and b) provide enough ammunition to those against such a mode as to be extremely counter-productive towards other social programs that could deal with more government support.
In other words, think back on all the talk of Democrat being "socialists" over the recent years and imagine the field day conservatives would have if any national figure mentioned this as an idea out loud, and how that might be used to shift the balance of power such that other meaningful programs that could deal with additional governmental support and regulation (healthcare) get set back.
Thanks for your reply. I hear you 100%, and a few years ago your objections would've appeared in my own head were I to have even considered writing what I wrote. I simply wouldn't have written it.
But it's really interesting to me that what you wrote is about the feasibility of the idea and not the idea itself. Of course, you may think it's a shitty idea - and it may indeed be! But I'd claim that it says something really fucked up about America that your first response was what it was: "couldn't ever happen, plus it would hurt what we do have if this were 'mentioned out loud'" instead of "here's why that's a bad idea".
> imagine the field day conservatives would have if any national figure mentioned this as an idea out loud, and how that might be used to shift the balance of power such that other meaningful programs that could deal with additional governmental support and regulation (healthcare) get set back.
"Shhh! Don't say that too loud -- they'll hear you and then take away our nice things!"
My reply to this is that "other meaningful programs" are already being set back with or without talk of currently-insane ideas like nationalizing a ghoulish company like Intuit/TurboTax. They've been getting set back since the 70's at least, and so-called "conservatives" are coming for more! Let's ask George W. Bush, who at the end of what he deemed a successful presidency only regretted that he wasn't able to kill Social Security!! These peoples' mission is to ensure that any vestige of a welfare state in the US is not only erased, but that merely talking about such a thing becomes so ludicrous-sounding that people dismiss it as impossible. It's working!
The other part of this is just this: love him or hate him - and yes, he's not the president - Bernie friggin' Sanders has walked around this country extremely visibly for the past half-decade calling himself a "socialist" in public, advocating for a complete "political revolution" and millions upon millions of Americans heard him and went "actually that doesn't sound so bad".
I believe that the world we live in is one we made. That's scary, because look at this fuckin' place, but it's hopeful too: we can make a different one. If there are obstacles to doing so, so be it -- but our silence, no matter how rational, doesn't need to be one of them.
Rather than nationalize Intuit, if we take for granted that TurboTax is indeed too complicated a product to efficiently replicate, couldn't the government simply strike a deal to acquire the TurboTax IP?
From there, we'd just shut down or deprecate the original TurboTax service, and launch our rebranded fork as a free government-provided service like healthcare.gov (could call it taxes.gov). That would work as a short-term solution to make taxes easier for everyone, and it would remove lobbyist pressure against implementing long-term improvements like simplifying the tax code and automating everyone's taxes by default.
It would work for a few years. Then more laws pass, court cases get decided, and the tax code would get more complicated. Now even TurboTax is a pain to use, and (as it ends up) the bureaucrats in charge of improving it are just as incapable as the ones rolling out healthcare.gov and similar disasters.
And then to deal with that, a new company emerges with a service that makes even TurboTax easy to use!
The idea that bureaucrats would competently manage it this time is difficult to believe.
To give an example of complexity that can hit "normal" people, something I just learned yesterday. If you are between 18 and 24, and a student, then if you had received unemployment income that income is considered "unearned income". Therefore it is subject to the highest marginal tax rate (tax bracket) that your parents fall into (which is 22% - 24% for quite a few people).
To me, that is kind of nuts, and not something that follows from normal logic (i.e., it isn't something that you will "get right" by just filling out a standard 1040 form).
I disagree that it's nonsensical for it to work this way since that unemployment benefit is being granted after your parents are claiming that they are supporting you - so essentially they're getting a big tax deduction on their income for your costs but then the unemployment benefit is being claimed to make sure for a lack of them covering costs - in a simple world one might make the other ineligible but that could result in some folks being put through unreasonable financial hardships due to poor planned or ill-intended returns from their parents so this allows that benefit to be given while also recognizing that something going on here is double dipping.
If you are financially independent then you should make sure your parents aren't claiming you as a dependent, if you aren't then you should be receiving those covering funds from your parents since that's the sort of dependency the dependent class is all about.
The overall law had a good reason, to keep parents from transferring appreciating assets to their children (who wouldn't have any other income), in order to lessen the tax burden of those assets. So the tax code references any unearned income.
It just isn't logical for most people to know that their unemployment income is also unearned income, and that you could be underpaying your taxes even after filling out the 1040 completely (and following the instructions in the 1040 instruction book).
Maybe this case is called out specifically, it doesn't apply to me so I haven't looked for it in the instructions, however it was just something that I ran across that made me scratch my head.
This also happens with some PhD stipends - depends on the school/funding source, but I know a few people who started PhD straight out of college and got screwed by still being dependents. I honestly don't understand why getting a stipend for doing research would be considered unearned.
From what I can tell, the system in the US is significantly more complicated for individuals (mortgage interest deductions, 43 different state income taxes, “alternative minimum tax,” gift tax, estate tax...)
As someone who has to file both, I found that the federal taxes to be comparable, perhaps I'd even say the Australian was more complex. The games played with real estate can be rather complex. But what I also saw was software doing most of the number crunching for me, and even fetching the numbers from my various employers and assets.
But your point about the state income tax is well taken, this does make it a much harder problem here than in Australia.
To be fair: Filing your taxes in the US is free. No one is going to force you to pay someone to do them for you, which is what TurboTax and the like are doing, usually through software.
If you don't understand the tax forms, though, or can't figure out the codes, you are stuck paying someone. The IRS won't give definitive answers if you call them.
I think if there was a basic extensible system, that could grow into a full product. Start with 1040EZ in year 1, then grow with your customers' needs as they age and need more.
TT has a large moat but behind it must be a ton of technical debt.
I assume a huge quantity of TurboTax users are in the simplest scenarios. As others have said, once there's any level of complexity, there's likely an accountant involved anyway.
I don't think this is much at all a technical problem. I suspect most people use TT because it's convenient--it files for you, they'll even pay themselves from your refund. And TT knows well this is a huge user base, as you'll see them hide away little features like education credits into the premium version.
I agree though that state taxes are part of the moat here, let alone municipal. In the few states I have experience though, state taxes are vastly simpler than federal. Still it'd be great to see some kind of centralized digital infrastructure that states could all normalize around instead of each building their janky web portals.
No rule changes needed. Apple is at the point where they are really pushing up against the limits of consumer spending. Spending $140 on TurboTax is a prime target. Thats $140 where a fraction can get funneled back to Apple purchases. It is now worth it for them to make sure iPhone users never reach a TurboTax checkout flow.
Apple is just getting started with finances built right into the iPhone. The credit card is already rolled out, and now comes a built-in bank account that can accept your payroll. This is just too valuable for Apple to pass up. The next step is push-button tax filing. Classic innovator dilemma where you start with basic returns. Think Uber driver.
I use TurboTax and I can't wait to get off it. They nag you to upgrade. The web app UX is really bad. I would certainly use whatever solution Apple provided if it was easy and supported my use case. I have complex tax situations.
With Apple it's like anything else, if you are fully bought into the ecosystem it's going to be the best. I think there is a reason Apple Card isn't compatible with Intuit Mint right now. From a privacy and business model standpoint, Apple thinks they can do better. What I think we'll see soon is a budgeting tool similar to Mint built into the iPhone, with the Apple Card supported and a way to link 3rd party credit cards, with a pro-privacy data sharing model. Apple spins up a bank account for you via Goldman Sachs new platform. Apple encourages/incentivizes payroll deposits. Tax filing gets added to this product.
And the full capabilities of TurboTax still aren't that great. I never felt confident that I was interpreting every question properly.
As soon as my tax situation got even the slightest bit complex I started using an accountant. They use TurboTax, I'm pretty sure, but they also know all the questions and what they really mean and can answer my questions on what the tax impact of various situations I encounter might be. They also go to bat for me if I have an audit.
Not only do I consider that far more valuable than the $500/year it costs, but I'm also confident my tax savings more than cancel the expense.
Just my experience, but I recommend a tax accountant to all adults.
Most of the US is W2'd with a house, limited investments, with some dependents sprinkled in utilizing the standard deduction... it wouldn't be that hard. For everyone else there is a justification for tax professionals.
Is there some software solution that may make things easier. For example if rules are written in a language like prolog could you have the system ask you the relevant questions? Would the set of rules be easier to maintain?
Yep. As a Hong Konger, it boggles my mind that tax codes in other 1st-world countries are so complex.
In Hong Kong, you literally get about 3.5 pages of A4 to fill for your annual income tax returns, the vast majority of which you can leave blank unless you are one of the richer people and do rich people things.
And then we have taxes on very few other things, which you simply pay at the time of purchase:
- Alcohol
- Motor vehicles
- Real estate
- Stocks
I don't think I'm missing anything important.
We have no other sales taxes otherwise. And look at us, we are a 1st-world economy, despite being such a small city.
Hong Kong's top bracket is 17%. Of course it's simple because the gov't doesn't collect much tax so doesn't need a bunch of exceptions and rules for tax relief.
The tax code is complex because the economic realities we want to assess taxes on are complex. A naive treatment would be both trivial to bypass and ruinous to unlucky innocent people.
Hmmm, how does the IRS check? Purely manually? Surely there are some alternatives out there. Worst case scenario, the government buys a turbo tax competitor
What if we rewrote the tax code with code? There are many high level languages (especially functional ones) which could address this problem domain really well if we had the courage to start completely over.
Imagine a legal document that is written using terminology that is ultimately just a series of higher-order functions. A human could make sense of it with some training, and a computer could directly execute it with determinism.
Legal documents are already a combination of data values and custom rules, they just also reference external rule sets such as legislation, regulation or case law. I work at a company where we use the same data points to generate the legal documents for a funding round as well as the cap table before and after the round is closed. Term sheets are just a very verbose data file lol.
The tax code is relatively straightforward for a programmer. It’s a bunch of conditional statements and simple math. Even the cases you mention are straightforward compared to the usual ambiguity that comes with engineering a product.
TurboTax is awful software. One question at a time, their user flow is AWFUL. Truly abysmal design for even the simplest of tax situations.
The IRS’s free file fillable form site is similarly awful; their asynchronous, background xml validation of forms after they’ve been submitted to notify you that their system let you input something invalid is a laughable system design.
This market is ripe for disruption. I do feel that should come from the government itself, but that seems unlikely for political reasons.
You mean for free file forms you don't like getting an email with some incomprehensible language? Oh, don't worry they provide a tool. Just copy the _entire_ email they send you and paste in some tool.
Genuinely it is a horrible experience, but I suppose it is better filing by paper and waiting a few weeks for a small correction.
Well, I thought so too. Until I realized six months later that I hadn't gotten my refund. Turns out that I'd gotten an email shortly after submission that had gone unnoticed saying that my return had failed xml validation, just like you. What was the point of the frontend validation before submission? Why isn't the full validation done before submission properly? Total nonsense.
I re-filed with paper... still hasn't showed up on the IRS website.
In that same thread someone mentioned OpenFisca [0], which is used to codify tax law. Have you considering utilising it instead of re-inventing the wheel?
These projects seems to come at tax policy from very different directions. US Taxes helps you fill out the specific form needed to file your taxes in the United States. OpenFisca helps you model a country's tax policy overall.
It would certainly be interesting to connect the two, but I suspect that you'd do that after finishing US Taxes. Specifically, you could take a completed return from US Taxes and transform it into an input for an OpenFisca model of the USA tax code.
As it stands, nobody has developed a USA model on OpenFisca. Perhaps that could be a next step, pursued in parallel with the US Taxes effort.
> please don't use this software to file your taxes for the 2020 / 2021 tax season.
I wonder if there is a PR that Intuit filed to add this to the readme.
Seriously, I wonder how much money Intuit has spent to terrify people into using their software. Each year, I look around for alternatives so I can avoid giving them money, and each year I find some reason to grow fearful of an IRS audit and go with the company that has convinced me they are less risky than anything else. I wonder if that is truth, or if I've been programmed to think that.
Unless you really screw up[1], or are intentionally trying to screw the IRS[2], you don't have to worry about an audit. The IRS's goal isn't to bring down their wrath upon you, their goal is to accurately collect the taxes they are due. If you pay too little, they'll ask you to pay the difference. If you pay too much, they'll refund it. Really: I once used the single-payer tax table instead of the filing-jointly tax table, and they sent me a nice letter explaining my error alongside a big check.
I agree with the basic premise that the IRS is nothing to be afraid of if you make a simple mistake. Though if you make a $5,000 error (which is getting out of "simple mistake" territory), they'll tack on a 20% penalty.
That being said, audits are incredibly annoying if you didn't make a mistake, especially if children are involved. The Examinations department of the IRS is hard-headed, to say the least, and they will often make any excuse to deny you credits that you are actually entitled to. In order to get a fair hearing, you have to appeal the case to court. (The U.S. has made the appeal and court processes pretty doable even for taxpayers without an attorney, though.)
Even besides the risk of pecuniary damage, the problem with an audit is that it can take a long time. It's a time sink for you where the best outcome is usually nothing different happens.
I made an error like that one year. It was as simple as me (personally) not receiving one of the 1099s from a few months of work my wife had done for a non-profit.
For those unaware: You get a 1099 when you're paid as a contractor, which means taxes haven't been taken out yet. It's fairly common for temp work and similar oddjobs that don't warrant a dedicated employee.
There was no audit in my case. They just sent me a letter that boiled down to that I had missed that 1099, and they were correct. I was just a little miffed that they waited almost a year to send that letter, which by then had higher interest / penalties than if I had been notified sooner. Still way better than an audit would be, though.
This is my experience too. I was audited and they do send you a "shock" letter or at least they did in my case claiming I owed roughly $15,000 USD. After fixing my mistakes (and submitting an updated filing), they sent me a check for a bit more than $1,500 USD. Plus I learned about my mistakes so it was a win-win (as I learned with just enough time to not repeat the same mistake for the next year's taxes).
I had an A+ experience being audited after my initial shock. They even have a secure message system where you can communicate via a website with the IRS including uploading files instead of having to mail letters back and forth. Definitely some clunkiness but overall it was solid and worked.
Not sure I'd recommend the experience but I definitely found it nothing to fear. I also found I didn't need professional assistance with being audited (I did seek it out but due to the time of year being so close to the next year's tax due date, I couldn't find someone right then so I decided to try fixing it myself).
It sounds like you got a letter from the IRS's automated underreporter program. I believe these are more common (and less painful) than an actual audit.
Any code authored by or for (exclusively) the government is default open. Usually all it takes is a FOIA request; if you're lucky they're publishing it on github already. However there are carve-outs for areas where making the code public could impede the law-enforcement mission of the entity that uses it, that is, FOIA exemption 7E. Since the IRS knows that if you knew how the audit worked*, then you'd do your taxes "just so" to avoid the thresholds by running the logic yourself, which is not something they'd want to encourage. And it would definitely increase their audit casework load.
There's also the issue that if the code wasn't bespoke but also sold to non-government entities for similar missions (i.e. government does not hold exclusive rights), then it can be protected as the contractors IP. But for the IRS this would be rare, they are pretty unique and often do things their own way.
* You can sort of do this without the code. The IRS is not allowed by legislation to base an audit decision on any information that is not covered by eFile, so contents of forms 1041QFT and 990T, or any attachments to what could have been an electronically submitted form, is out of scope. As long as what you submit in the core set of forms aren't statistical outliers, then you're good.
Unless it was written by a contractor who then gave the copyright to the IRS. This is a very common situation. The federal government is not barred from having copyrights.
It really isn't - the point is freedom access, not free use. Information acquired this way doesn't magically become public domain, it may (or may not) have other constraints on it.
Which begs the question if they essentially already know how much tax they think you should owe (for most people) why don't they present that number to get first and let you either agree or disagree?
If we view it as an error checking process, it's better to come up with the two numbers independently. Whether the improvement is worth the costs, I don't know.
IANAL, or an accountant, etc, but if I’ve learned anything from ravenously consuming Trump family news the past few years, it’s that ignorance of the law actually is a defense in cases around taxes, and the IRS has to satisfy a standard of proving bad intent in order to really screw you.
Again, IANAL, do your taxes, please. But it does seem like the system is legitimately designed with an ethos of just making sure taxes get collected and isn’t about being vindictive.
Having dealt with tax authorities in several countries, it's a recurring theme that they have no interest in coming down on you hard if you seem to be trying to do the right thing and make actual efforts at compliance, as they have their hands full putting actual effort into dealing with people actually trying to evade tax.
What I always do if in doubt is to attach a letter setting out my assumptions. I've outright had to tell the tax authorities I didn't know the real numbers one year, because I realised shortly before filing that I'd lost documentation in a move, and so a whole bunch of details were estimates. Even that was accepted without additional documentation.
Of course I'm sure there are countries that are worse.
There is no way that would work with the IRS. Anything you estimated and can't provide documentation for will automatically be considered void and non-existent by the IRS if that thing reduces your tax bill.
If you think you have about $5k in valid deductions, but you can't provide any documentation upon an audit, then that $5k will be reduced to exactly $0 and you will owe all additional taxes plus interest and penalties.
Paying for stuff like roads, highways, snowplows, schools, government workers, the military, that kind of thing. If you'd like a detailed response, you can look up the federal budget, and the state and city budgets relevant to your area.
I apologize - I am just so upset on how things are going and I am livid at the inability to make meaningful change for the positive while we all watch ourselves being robbed.
The fact that there is a "vote" on a 1.9 TRILLION additional stimulus, on top of the ~6 TRILLION previous thefts - the fact that in 2008, many senators and congress folk had their spouses create LLCs - then get stimulus and bailout funds just illustrates the corruption.
The situation is bananas right now.
And people are defending the system.
This is like if you have major outages to prod and instead of doing a proper post mortem to get to root cause on the failures, you re-up your contracts with the vendors who failed you and pay bonuses to execs and ops people who left the system in a position to fail, then have all the other employees yell at anyone who questions what the hell is going on.
I get emotional - isolation for the last year has made emotions bottle up...
But seriously this situation sucks.
Again, I apologize for certain things - but not my indignant opinion of the current political and technical climate we are forced to live in.
Most people without businesses don't need to worry about audits. IRS, of course, still audit a small percentage of the most simple and honest-looking returns. But that is mostly for how factories spot check products to ensure quality, not because they suspect you did something wrong.
On other hand, if you are audited, it is not a big deal as long as you were not intentionally defrauding IRS. My boss used to get audited almost every year for his business. IRS would ask for receipts, and once he provided those, it was end of story.
I've been using TaxAct for years, but I'm not sure they are better. They have every incentive to lobby with TurboTax to make sure it is hard to file taxes without help.
I'm tempted to go back to paper forms. It wasn't hard, just annoying the one time I forgot to copy line 13 of form 1234 to line 43d of form 5678 and then had to amend my state filings.
Yeah, truthfully I would rather not have to use TaxAct either. Since the IRS already knows what I owe, what's the point of filling out forms by hand?
Every year when I manually copy information from my W2 onto an online form, I think that tax season must be the biggest data entry clusterfuck in the world.
> Since the IRS already knows what I owe, what's the point of filling out forms by hand?
Complete agreement, though there will in some cases be a need to file forms to supply information that they don't already have. Additional deductions, for instance: charitable contributions, deductible expenses, etc. But those forms should be "here's the information", not "here's the information and a pile of careful calculations implementing an algorithm".
It holds your hand a lot less than taxcut or turbotax though. Its basically a very thin shim on top of the IRS forms and instructions. Other than the electronic filing and a couple pretty basic hints, once you have some history and are vaguely aware of tax credits for various things, its barely easier than the IRS instructions in the old paper tax forms.
I tend to use taxcut, which is a bit closer to turbotax, but frankly its messed up things that I only found by reading a paper copy of the return before filing and noticing numbers that didn't make sense (doubling values by adding imported values with hand entered ones, that kind of thing). I had problems like that with turbotax in the 1990's but haven't used it since the bootloader fiasco.
I have used TurboTax pretty much my entire working life and never have been audited. The one time I decided to use a professional due to "complex" tax issues that year, I was audited, which became a huge pain in the ass.
That software looks to be worked on primarily by two people in their spare time, spread out over a year, with most of the activity happening within the last couple months if I'm reading this correctly. Understandable that they still consider it to be in an early stage, and not ready for use by the public.
> Each year, I look around for alternatives so I can avoid giving them money
Why not pay an accountant? Why is everyone trying to do their own taxes? By the time you've spent a couple of hours looking for alternatives... you might as well have just paid a professional to do it!
It’s pretty simple to do your own taxes unless you have your own business and partnerships and whatnot.
Spend a couple hours reading the instructions, use the IRS free fillable forms website, and you do it once and every year after it’s quick and easy. Things don’t change much year to year. If you don’t understand, post a question a personal finance forum and someone will pipe in with an answer.
> It’s pretty simple to do your own taxes unless you have your own business and partnerships and whatnot.
IDK about that. As a non-resident alien for tax purposes for a couple of years I couldn't use any of the existing software (TurboTax, etc). I even tried to contact a tax accounting firm like HRBlock and they had no idea about things I needed to file that I discovered on my own reading the IRS publications. So I did the taxes on my own and every time it was the most painful thing happening that year (yes, that likely means I lead an otherwise stress-free life), it took 3 weeks at least spending most evenings a few hours making little progress on it each day. And at the end of it I never felt very confident about it and I likely left on the table possible deductions.
But if there's one thing doing that helped with is appreciate how easy and painless is to do it as a resident alien with something like TurboTax (takes a few hours instead of weeks) and it helped me understand the terms and instructions of some of the more complex issues that you may have to deal with even with TurboTax.
HRBlock is not a tax accounting firm. They are a service firm who hire people to sit in retail storefronts and key your info into TurboTax (or their internal equivalent).
You need a real CPA with a tax focus if you have "complicated" taxes.
It seems like you are (were) a good candidate for a more comprehensive service for sure. Perhaps a better wording would have been "it's pretty simple as a resident and (W-2) employee," which encompasses the majority of those filing, and who probably don't need a service like TurboTax or an accountant.
Actually IMHO, the difficulty with any of these things are tracking the right metrics. Particularly for "hobby" style businesses. You find out at the end of the year trying to avoid paying a bunch of taxes on something that didn't really make any money, that you mixed up or failed to compute your vehicle mileage correctly (or whatever).
So, having an accountant handling all the details, in the en puts the information at your fingertips that otherwise you have to scrape out of the box of receipts/etc. The tax filing parts are easy.
Mostly because it's an unpleasant task that can involve large sums of money if you put things in the wrong boxes. And even relatively straightforward brokerage accounts and second income sources start cranking up the complexity in a hurry.
I don’t know. But if you’ve opened up the IRS free fillable forms website, and put up the accompanying instructions on your second monitor, and know how to read English, I don’t see how it’s difficult, if you’re income is from a W-2. Everything is kind of labeled and laid out for you.
When I was in middle school (1980s) we did a tax return on paper, I think it was part of a Social Studies class? We were given a fictitious W2, number of dependents, etc. and had to fill out a 1040 and a State return (on paper of course, no computers then). This permanently demystified the process. I think a lot of people who pay HRBlock or similar to do their taxes have never tried to do their taxes manually and are just afraid to try.
I have always done my taxes myself, on paper, even years when I had capital gains, education credits, 1099s, and small business (single member LLC) income. It's a bit time consuming but not difficult per se.
I believe that's only for filing a federal tax return, and for filing your state tax return you still have to either use a tax preparation website or do it on paper.
Because everyone (for certain values of everyone) has a niche issue that current software doesn't address or addresses poorly, or they just don't want to pay for something that the government should provide. It's their damn tax code, the least they could do is make it as simple as possible to PAY THEM MONEY.
I used to do it myself when I was a W-2 employee, and I remember spending a few hours on it the first or second year, but after that it’s pretty quick since the process and forms don’t change much. Kids are just a couple credits and maybe a form for dependent care deductions.
But I also had a few hours to burn. I understand preferring to spend that time with kids instead. But it is worth noting that it’s a much smaller time commitment after the first couple years.
Why not just pay the nice mafia boss the protection money, and stop complaining?
First and foremost, it's a matter of principle. It's just not right to have the tax code written in the way it is written. It is written by special interests. If we all just said "complexity is no problem, we'll all just pay a small fee to accountants", not only will that "small fee" keep going up, but it will get more complex, and special interests will be better served to the detriment of everyone else.
Pragmatically I do hire a CPA, and in general like paying for the high level strategic advice. But the tax compliance services should be unnecessary. My tax returns should be a single text document that I can keep in git and copy/paste/update each year.
I 100% agree with you. I think it creates lots of weird artefacts. I really like the continuous nature of the crypto world and smart contracts, and think the world will slowly pay off the technical debt of wierd arbitrary schedules and move to a smoother, simple, more transparent system.
Mine sends me a tax planner every year. Yes, there are a bunch of questions up front but that's mostly to discover if I've had a change of status, some large transaction, a deduction I'm due, etc. Yes, I still have to round up my info but I don't need to figure out the right schedules, where to put the various data, etc. I get a pretty big sheaf of paper back.
I've never really been fearful of an audit. I just assume that if I DIY, I'm likely missing out on refunds I should have gotten because I didn't know where to look.
It wasn’t FOIAd, etalab is a government department (they’ve done a few cool things, there’s also an interactive map of property transactions with surface and price
How useful is the computation code though? The computations themselves for the cells on a 1040 form are not that complicated and well documented in the instructions. The hard part is getting all the right numbers into the source boxes.
Somehow, the IRS compares the tax return I submit with what they expected. It is that entire machinery that is in the public interest to be visible and audited by the public.
The IRS does have income information, but they do not have deduction information. Deductions are mainly where any form of complexity comes in. Without deductions taxes are super easy.
Agreed, but one ought to be able to FOIA the entire pipeline that handles the data. This is especially so given that the results of the pipeline are used for tax enforcement and litigation.
However, that doesn't necessarily mean they're public domain. Trademark law still applies, for example.
Additionally, not everything the government uses, even exclusively, was produced or is owned by the government. Often, government contracts allow the contractor to retain control and ownership of the intellectual property. The government may also have copyright transferred to it and retain that copyright. A legal issue I haven't researched is the line between a work that is a government work under work-for-hire principles, and therefore is ineligible for copyright protection, and a work for which the government contracts and for which copyright is subsequently transferred.
Before attempting to FOIA the source code of a piece of government-exclusive software, I would first FOIA all government contracts for the creation of that software. Then you'll have something to go on when crafting the FOIA request you really want.
lots of vague stuff, but looking at the Google result, I noticed some differences. Ah, the meta description of the page reads:
Open source software, while it can be useful in many instances and appear to be cost effective, may present a security risk because open source developers don’t typically follow security best practices when developing their software.
It is an unclassified federally-funded document -- as I understand things, it is therefore in the public domain.
Because many eyes often make bugs shallow, there is a pretty good chance that a public release of the code will find errors that both find funds that are owed to the government and exonerate people who have been incorrectly billed.
This can’t possibly be true, in general. Work products produced by a contractor from a federally-funded project are not automatically in the public domain. Government-held, unclassified data can be sensitive, proprietary, confidential, or contain private information about citizens. None of this is public domain.
The lobbying push from companies that would rather it wasn't (because it could erode their market position by lowering the entry bar for competitors) is stronger than any current push in the other direction, would be my guess.
If the government wanted to help people do taxes more easily, they would just simplify taxes. Lobbies (from TurbTax and competitors) are standing in the way.
In the UK you can file electronically with the HMRC using their website. It guides you through several forms, tells you what numbers to input from your P60 (end of year notice from employer of salary and tax paid) P11D (end of year notice of taxable benefits) and a few other sources then produces a downloadable PDF copy, and submits them electronically.
It's not for everyone, e.g. Lloyds Names can't use it, but for 99% of people it's fine.
Why is it better in the UK? I don't think we have quite the level of regulatory capture, and still somewhat believe in public services, and spending money to make things better for everyone.
Cool to see more open software in this space. Curious to know if there are any plans/efforts in leveraging the work done in http://opentaxsolver.sourceforge.net/ to handle more use cases. Maybe ustaxes can be a nice frontend to some of the tax logic in opentaxsolver?
This has already been done successfully in Canada.
A small team from Vancouver built a pay-what-you-want web-based tax-filing system from scratch. It's called SimpleTax and it's already a major competitor to the Canadian version of TurboTax.
In fact, it was so successful that it was recently acquired by Canadian investment group WealthSimple.
Unfortunately, the "we promise not to sell your personal data" disappeared from the privacy policy during the acquisition, so we know why they remain donationware post-acquisition.
Used to be a plain Firefox extension back in the days.
It was really simple, something like:
- You clicked a button in the toolbar or right clicked and chose menu option
- a dialog showed up, you chose how often it should check the page and how big differences it should tolerate and clicked OK.
- once every hour or 4 times a day or twice a day depending on your choice Firefox would download the page locally, compare it and tell me if there were changes.
Yes, we oldtimers mostly complain about TST, but there were an entire ecosystem of brilliant extensions - so brilliant I figure it would habe been hard for me to believe today if I hadn't experienced it back then.
That's what you can have when you have brilliant people making brilliant software to empower you :-/
Edit: seriously, I would pay $20 a month for someone who would fix the new Firefox. If someone made a realistic Kickstarter I'd support it right away and then monthly if necessary.
For people who haven't used it: SimpleTax just absolutely nails UI quality, it's so nice and smooth that every year I've used them I've been done in under 15 minutes (other than time spent double-checking because it can't have possible been that easy) and come away so grateful for their existence that I gladly throw money at them. One year the Canadian Revenue Agency even introduced a new API that lets SimpleTax pre-fill most of the information like employment income from the stuff the CRA has on file.
I've since moved to the US and I'm dreading doing my taxes using probably TurboTax for the first time this year. At least it probably won't be as bad as previous years when I had to file non-resident US taxes for internships, where you can't even use TurboTax and have to use Glacier or TaxAct, which were terrible compared to SimpleTax.
I can honestly say that SimpleTax has been life changing for me, and is a great example of just how important UX can be. My partner used to have literal panic attacks trying to file taxes, even with TurboTax/UFile/etc. Since we've started using SimpleTax, it's done in one sitting and is not even a source of stress anymore.
No wonder I've been seeing so much ads about WealthSimple tax. It's literally every other ad on TikTok for the past 2 months. That and every other WealthSimple app (trade, invest, etc).
This discussion feels incomplete without mentioning "return-free filing". A lot of countries you don't even need to send a return because the government already has all the info you need.
The fact that this isn't in the conversation has always surprised me. Both Regan and Obama supported it. The Republicans did that whole "taxes on a postcard" skit, but we don't even need a postcard. We're talking about TurboTax, well how many of you also log in and all the information is already there? I don't see why we can't replace the 1040 with return free filing, or at least the 1040Ez
Grover Norquist has had Republicans sign "the Pledge" opposing tax increase since 1986. Reportedly, he also wants filing taxes to be painful so you hate the government and he opposes these measures.
In 2005, California had a pilot program called ReadyReturn where they mailed you prefilled forms. It was popular. TurboTax lobbied against it and it died.
I do mortage deductions etc. and I filed my taxes some years back by responding to a text message. "If this looks right and you don't want to change anything, just reply YES and you are done for this year", basically.
In recent years it's just a smartphone app or website. Typically you cclick "next" 3 times to review and then submit.
It's around as simple as your average online retail experience.
Turbotax et al. lobby heavily to prevent this. Given that much of the relevant information--W2s, 1099s, etc., are already reported, you'd think that this would be easier for a very large percentage of taxpayers. But it would effectively kill TurboTax's business.
Legislators are basically doing triage, responding to perceived consensus. Kinda like a product manager. Think attention economy. There's 10,000s of bills filed every year. No one has the resources or bandwidth to handle that.
Any given legislator has 1 maybe 2 issues that they care about, for which they will advocate an agenda. The rest, they rely on what they're hearing.
Intuit's lobbying effectively drowns out alternative view points. Assuming that anyone anywhere is consistently advocating for something like free auto-filing.
Source: Have lobbied. Know legislators and their staff. Also read many books about legislation. Most legislators would LOVE to hear from their constituents; will bounce out pro lobbyists to give their own people an audience.
Ahh... that makes sense why this is one of the more reasonable descriptions of how lobbying works. HN seems to think it works by guys in $3,000 suits handing over bags of cash to Congressmen.
Your point about legislators loving to hear from constituents is true - one reason why lobbyists are so effective is because there is often few or no other voices in the room. If voters actually organized around some of these topics they'd be surprised how much power they have.
when something doesn't provide a reliable return on investment, they stop spending that money. that's how much you know something works, whether it's buying advertising or congressmen.
With the caveat that the ability to measure ROI exists and is also reliable. See for example advertising, and especially online programmatic targeted advertising: https://hbr.org/2013/03/did-ebay-just-prove-that-paid
They can ignore the lobbyists, but they like the money, and they like not having to campaign against the lobbyist's marketing. Enough to make it difficult to pass reforms.
You can't actually use the word "corrupt" to describe what the legislators are doing, that's painting them unfairly.
All they're doing is lining their own pockets with millions from TurboTax et. al to make sure laws are favourable for those big companies. But because it's perfectly legal, and there are no thugs with guns or drugs or "bad members of society", it's absolutely not corruption.
They usually claim that if people didn’t have to file their own taxes, they would not be aware of how much they are getting taxed. In their view, this would eventually make it very easy for the government to increase taxes without significant protests from the public.
That's what they're system would be in essence, you'd get a piece of mail saying this is what you'd pay taking what we know and using the standard deduction. If you want you could calculate any itemized deductions and resumbit.
That's actually exactly what happened when I failed to file for over a year one time. They sent me all the forms prefilled and asked me to review them and just send them back if correct. Sadly, they weren't.
The IRS can simplify the process, sure. And if you are living alone, have no children, and don't care about taking advantage of any special credits or deductions, then a "file for me" button would be fine. (Though the process for those taxpayers is already in a good place--I filed my taxes for free in about 30 minutes this year.)
But if you, say, have children, the IRS will not be able to "file for you" in any meaningful sense. Whether you are allowed to claim dependents on tax returns is a complicated question that is highly fact-specific. Happily, the IRS does not have cameras in my house checking to see if my children are living with me. I have to report that information to the IRS myself.
Drive for Uber? Your taxes are also gonna be pretty complicated, and there's no way the IRS can do them for you. After all, they don't have any information on how many miles you drove for Uber and what other business expenses you might have had.
Right now, the system we have is pretty good. Most people qualify for free filing, and free-file tools get better every year. At worst, there is an issue of consumer education (psst, you might be able to find a better/cheaper tax filing option than Turbotax).
Maybe it's "bull pucky" to you, but I have vivid memories of my parents agonizing over taxes as a child. The agony they went through is much ameliorated now due to advances in technology.
And thank you for the link, but this news segment basically is big on opinion, low on specifics. Feel free to link me to a detailed article on how non-U.S. countries handle self-employment or dependent tax issues and whether/how those things are easier elsewhere.
Most importantly, most countries do it by simply having much higher thresholds for complicated tax rules applying to you.
In the UK quite a few people don't pay any tax at all, and the vast majority don't pay enough tax to have to file any return.
What impact does a dependent have on your tax that needs to make it so complicated? I have relatively complicated taxes due to two jobs and some unusual deductions, but having a child doesn't really have any impact on my tax return in the UK.
Well, if you are a simple family where everyone is biologically related and living together, then things are pretty simple in the end. The issues come up with mixed families, divorced parents, etc.
As for the dollar values, if you make $30,000 and have 2 kids, you can usually get a $6,000 tax credit or more. The U.S.'s support for working low-income families is carried out through the tax system. Put another way, tax credits are one of the U.S.'s most important social safety nets.
Not a problem, you enter dependents into the wizard, and take them out when/if they move out.
No matter the situation, they accept your word for it. If an audit occurs you will have to prove things with documentation and be held liable for mistakes or fraud.
It's basically a five-minute task that you appear to believe should make tax filing take hours?
I did taxes once in NZ, you go to a website where they have all the data ready. Then you go next, next, finish, adding a deduction or dependent here and there. Takes 15-30 mins.
Children are hard if the parents are separated. You get child support to figure out. And who gets what share of the tax credit is tricky as well. (This is one way for one parent to abuse the other - file fast and claim all the credits, whoever files second now has to prove the first did the wrong thing at their expense)
A task being easier than it used to be doesn't mean that task's process shouldn't be improved or that its existence shouldn't be questioned altogether as a matter of course.
True. But I think progress over the years is a better metric for whether things are in a good place, policy-wise, than "some other country does things better." So I'm not grumpy about the state of the U.S.'s internet infrastructure, but I am grumpy about the state of the U.S. health care system (for example).
> Right now, the system we have is pretty good.
> I have vivid memories...
Sounds like the whole discussion is rife with opinion.
BTW, you have my sympathy, but your story doesn't shore up your argument. It only sounds like tax filing in the States has gotten better. And better locally is not best globally, by a long shot.
In general the States has been shot through for so long with so much corruption (aka special interests and campaign contributions and lobbying) that the citizenry has a perversely skewed idea of what is normal. /rant
True that the US tax system used to be a lot worse and a lot more vindictive. See the hearings during the nineties that led to IRS reform. Horror story after horror story.
But that doesn’t mean it’s a great system now. I would favor dropping exemptions and moving to a lower flat tax, for instance - taxes by postcard. Probably never that way for businesses, but for 9-5ers, it should be way more straight forward than it is now.
A large part of it has been. The standard deduction is high enough now that most people can't take advantage of the deduction based approach. Of course most tax people will tell you to save all receipts, they will happily charge you to look through them and calculate that they are not big enough to matter. If people knew how simple their taxes really were most people wouldn't be willing to pay as much for it.
That ignores the effect of wealth inequality in the US. You may not know a lot of people who itemize, but our elite / political class does at almost a 100% rate.
So long as they want / use it, it will 'trickle down' to others.
I've itemized the past couple of years for various reasons and I have some other complexities. But, yeah, most people--especially if they don't have a mortgage--are just going to take the standard deduction.
Most countries have their version of the IRS "file for you" without any of those difficulties. Everyone reports tax information to the central authority which determines how much you owe. Even complex things like 1099-B, 1099-Div etc. Which is how the current system works anyways, it just eliminates the hassle.
There's almost no scenario where the IRS cannot do this stuff. Think about this fact: your W-2, 1099 investments and most other financial information is already reported to the IRS. They have it already. Absolutely bonkers that people accept anything less than just being sent a bill or check once a year.
> Right now, the system we have is pretty good.
Yeah, big disagree there. If you've ever done taxes in another country you will realize how idiotic taxes are in the US. Australia is literally, 10 minutes per year, and even complex things like investments, stocks...
Yes, those docs are filed with the IRS, but charitable contributions, child status (are they dependents or not this year?), expenses (home office, side hustle, property management etc), and many other things aren't.
If all your tax returns reference are the handful of items you mention, your tax return can be done in a matter of minutes on a short form.
Yes, it could be better, but it's a fantasy to think it should be as simple as getting a bill from the IRS at the end of the year.
These are easily done and in other countries, are fairly simple. Sure it turns your 10 minute tax affair into a 25 minute one. Declaring child status is just a simple form box. Declaring "side hustle" money is a similar affair. Charitable contributions just register with the IRS instead of it going directly to you like a 1099 or W2.
It's still a far cry from the "entire Saturday morning" affair, even using online tax software.
If you think the IRS aren't able to work out how much tax you need to pay... how do you think they're catching people who don't pay enough tax? They must already know!
They don't already know. Sometimes they have suspicions, and then perform an audit, or request more information about a particular detail, by which they get the information they might need.
Only then do they actually know.
For example, you yourself may have filed with the status, "Married, filing separately", but the other person in your relationship may have filed with the status, "Single".
The IRS has no idea who is right without actually talking to the two of you. And because they don't know which status is correct, they don't know how much each of you owe.
They do know almost everything and learning more every day. Of course there are extenuating circumstances, which you will list and have to prove if a question comes up. This is not an excuse for tax filing being more difficult than it needs to be.
The great-grandparent's claim is that they already know. They don't already know. I can list two dozen things off the top of my head that they don't already know.
Should tax filing be easier? Sure. But, "They already know how much you owe." is patently false.
I came here to write something along these lines. For the simplest cases, filing is free and really easy now. Everyone who needs TurboTax now would need something roughly as complicated until our entire tax regime is overhauled.
Adding to the types of really common situations where you do have to provide context the IRS doesn't already have:
- side-hustle contracting (IRS doesn't know what expenditures are for the business)
- stock sales (your broker may not know your basis)
- home improvements eligible for tax deductions
- sold a home (IRS won't know your basis or selling price)
- did you move for a job? IRS won't know whether you are eligible for tax deductions.
- crypto gains/losses
- inheritances (basis again)
I'm curious whether other countries have simpler tax codes that permit simpler filing?
>- stock sales (your broker may not know your basis)
This used to be a real nightmare especially when there were acquisitions in stock, splits, etc. There were a couple times over the years when I just said F' it and put down a reasonable number.
But these days, unless you have some pretty old investments, the brokerages generally track your basis.
Yes, but IIRC if you transfer investments between brokers you are back to tracking basis yourself (if you're lucky, the new broker will allow you to enter the basis after the transfer).
But agree in the general case that it's not a problem for younger people. (Gen X and older may indeed have some of those pretty old investments lurking in their portfolios.)
That's not universally the case at least. I transferred some shares a month or so ago (in a horribly manual process I might add) and the cost basis was transferred over.
I fall into the older bucket but I guess my old 401(K) must have had basis added when it merged with an IRA and none of my other investments lack basis information.
Adding a perspective from Germany, where the tax code is definitely not simple, a major difference I see is that filing is optional for the simple cases because you can only ever get money back. There are some default deductibles already applied to your payroll tax so the tax office doesn't have to deal with super small cases. The big advantage is that Joe Average won't risk getting into a lot of trouble for not filing.
Just to illustrate, let's go through your examples and how it'd work in Germany:
> side-hustle contracting (IRS doesn't know what expenditures are for the business)
You'll have to mandatory file income taxes since the income from contracting is not salary and there are no payroll taxes deducted from it. Not sure how common it is in the US but in Germany the vast majority of people don't have side hustles like this (for a variety of reasons; certainly a bad thing)
> stock sales (your broker may not know your basis)
There's a default tax rate on capital gains (25%) with a 800€ allowance. You assign how you want to split the allowance between your various banks and other capital gains generating accounts (you're responsibility to not exceed them) and the banks will report your cap gains with your tax ID to the tax office. If you did pay taxes it's often worth filing to make sure the allowance evens out. Also, if you want to carry forward a loss you have to file (but you got 5 years to do so)
> home improvements eligible for tax deductions
You'll probably want to file but you don't _have to_. You just won't get the deduction.
> sold a home (IRS won't know your basis or selling price)
If it was the home you lived in, you don't have to file (it's tax free). If it was a house you rented you'll have to file but you'll have to do that anyway for the rental income.
> did you move for a job? IRS won't know whether you are eligible for tax deductions.
Same as with the other deductions, it's in your best interest to file but you don't have to. No (legal) consequences if you don't.
> crypto gains/losses
This gets tricky but if you owned the coins for more than a year (to the day) they're tax free and you don't have to report them. But you better have documentation on this if you ever get audited.
> inheritances (basis again)
This one is actually interesting as it's a completely separate tax and thus separate process from income tax.
There's an allowance based on your relationship to the deceased (500k€ for spouses, 400k€ for children, etc.), if the inheritance exceeds that you'll get a letter from the tax office asking you to file a declaration for inheritance tax. At that point there's not much software that'll help you and you'll better hire a tax advisor :)
It seems the major difference derives from our (American) punitive approach to those who use our meager social safety net.
For example a large swath of Americans earn an income that entitles them to assistance in the form of the Earned Income Tax Credit (EITC). This is (roughly, it depends) available to people who earn < 85% of the median income. But they have to file taxes to get the money they are owed (because we hate the poor in America and this will dissuade them from getting their money). So that's going to be a large set of the country that has to apply or leave money on the table.
For a large set in the middle class, you have to file because you leave money on the table by not claiming deductions.
So even if we weren't all more or less required by law to file, we would mostly have a financial incentives to file anyway.
Oh and anecdotally, side-hustles and second jobs are very common in the US. Poor social safety net, no employment contracts, very low minimum wage, high healthcare costs all doom most Americans to perpetually precarious financial circumstances. So everybody is trying to get a little more so they don't get wiped out.
For that matter, everyone qualifies for free filing--although in practice it gets too complicated for most past some point. I know it sounds like something savages would do but it's actually possible to just fill out the forms by hand if your taxes are fairly simple.
I use an accountant who I've been using for years but if you just have a W-2, a 1099 or two, and just use the standard deduction, it'ls likely pretty simple to just fill out a 1040 form and a state tax form.
I don’t understand the argument. You go from stating that in some cases, the ziRS can’t prefill your taxes correctly - sure, we all agree here, that’s the same in every other country. And then you go on to say that’s why you need TurboTax. Huh? Why not just have the same input boxes as TurboTax, but on irs.gov? That’s what pretty much every other developed country has
This. You can't kill TurboTax with tech, it has to be done with policy. TurboTax is in this position because they lobbied their way to it. Any tech solution will just be further lobbied into oblivion.
This is the solution. We can already do this. A pilot program was run. The problem is that the anti tax wing of the Republican party and Turbotax are actively opposed.
Instead of developing software, we should be writing our representatives.
Because of Grover Norquist and his organization (ironically named Americans for Tax Reform). Their "Taxpayer Protection Pledge" taken by most Republican lawmakers (95% before 2012), locks them into supporting his policies. The problem is that he views any attempt to simplify tax filing just like a tax increase (presumably since people will be less upset about paying their taxes), and uses his influence to lobby against reforms like this.
It's true that the Democratic caucuses, both federal and state level, are much harder to hold together. Every year there's a bill in my state to reign in pay day lenders. Basically banning usury level interest rates on loans. Overwhelming popular support (~80%) and editorial support.
And every year there's a "blue dog" Democrat living in a purple district which bends to the pro pay day loan lobbyists.
Vetocracy is a tough problem. Our civic legacy is to fear the mob, tyranny of the majority. (Thanks Plato.) So it's rare that mere popular support ( >60%) is sufficient to attain progress.
So, to your point, mere 50% + 1 vote ain't ever enough.
Making payday lending illegal will push poor people who desperately need the cash to seek it from organized crime instead.
There’s a reason those bills get stopped and killed. They sound good on their face, but when you dig into the details they harm the people they’re supposed to help.
>Democrats had filibuster proof majority when Obama was president.
For 2 years. And spent basically the entire time barely getting ACA through. Not a lot of "political capital" leftover for battling to have free tax filing.
An Australian friend of mine showed me his tax receipt once and it made me yearn for this. It’s ridiculous what the US has created for its citizens, or rather not created.
The intent of certain lawmakers is to make sure that the filing and reporting of taxes is onerous as a lesson about the illegitimacy of government taxation.
I don't suppose those lawmakers are voting to reduce their pay to $0, eliminating their government-provided pensions, or reducing the need for taxes by giving up any of their other benefits, are they?
Otherwise, legitimate or not, that money is going to have to come from taxes somewhere.....
Also, what does onerous have to do with legitimacy? It's like there's two orthogonal axes and they're trying to make taxes painful to convince the populace to dislike taxes, whether the taxation process is legitimate or not.
I don't know where this idea came from (I've seen it on reddit a LOT), but it's the same here in Switzerland: you do it yourself because the tax department has no idea how much you made precisely, what you can deduce from it (expenses you had to do in order to acquire your income), etc. It just makes more sense to have everyone manage their own taxes.
The IRS already has most of your income information and much of your deduction information. They already use this to validate if your return makes sense.
In effect, the IRS already does most of a taxpayer's paperwork. Since they do this, it might be nice to provide it to taxpayers for review and correction, rather than making us all start from zero each time.
Depends how intricate your taxes are. Perhaps 30 million people file Schedule C, which covers freelance income, gig income, etc.
The IRS will (mostly) know your gross income, but it won't know the exact details about claimable deductions such as business travel, business meals, supplies, etc.
The only way it could know that would be to peer inside your credit-card statements, bank statements, etc. and make judgments about what was work related and what wasn't.
I'd rather do the tallying myself -- which is a chore -- rather than have IRS software make guesses that are a) awfully nosy and b) bound to disadvantage me.
You're right. The IRS emphatically does not have everything. Please accept my deepest and humblest apologies for implying in any way, shape, or form that they do.
In addition to hundreds of millions of W-2s, the also IRS has 1099s and 1098s of various sorts. For the majority of Americans, the IRS already has the majority of their tax data. And the infrastructure already in place to provide this to them. Why not present it along with the opportunity to amend it? Or tally from zero yourself, if you prefer. This is what I intended to communicate earlier, and I can see I failed to be clear.
You're absolutely right. The IRS in no way has everything! Do you think it's maybe worth considering that it might be possible to make many people's lives easier for a very small marginal cost by letting people see what data the IRS already has about them? It might not work for every single person every single time, but it might work for a lot of people a lot of the time.
No, no they don't. At most they have your mortgage interest deduction - side hustle expenses, charitable contributions, etc. are not reported to the IRS automatically.
The IRS already has a web portal that lets you retrieve your data. This could be executed by adding more info to that. The higher cost of administration on that shouldn't make anyone bug-eyed, no matter how wonderful your idea of auto-filing and simplification is.
The IRS doesn’t have your deductions, but at the same time most people don’t have enough to itemize anyway, especially since Trump increased the standard deduction for individuals and families.
I think simplifying the tax code first requires trading in our deduction system for a flat tax or lower taxes across the board. Then you could get to a simple postcard bill every year. Too many special interests to let that happen though.
In the UK vast majority of people don't do their own taxes. Your employer pays the tax on your behalf directly from your salary and updates the tax office as to how much you make. In turn, the tax office tells your employer how much tax to pay from your salary, without any input required from yourself.
In fact most people I work with don't even know there is such a thing as a tax deadline every year or anything like that, because....why would they? if you are a normal full time employee there is absolutely no need to file your own taxes. HMRC has all the information it needs to tax you year on year.
>>what you can deduce from it (expenses you had to do in order to acquire your income)
Well, at least here in UK there's practically nothing you can deduct from your taxes if you are a "regular" full time worker, so that solves that issue.
> Your employer pays the tax on your behalf directly from your salary and updates the tax office as to how much you make. In turn, the tax office tells your employer how much tax to pay from your salary, without any input required from yourself.
Same thing happens in the US. When most people file their taxes here, they get money back because they already overpaid.
For example I spent a few thousand trying to launch a business this year, and that is all tax deductible. So I'll file that with my tax form that my employer sends me (with the salary info prefilled), and I'll end up getting some money back because my taxable income is lower than what the gov't expected.
The government automatically doing it doesn't preclude from letting taxpayers be able to amend it. The vast majority of people have simple tax returns, and all that information is already electronically flying around with unique identifiers (social security number).
It's trivial for government to be able to automatically produce a tax return that's basically almost all done for everyone.
This is exactly how South Korea does the taxation. Employeers are required to report employees' incomes and also deduct the tentative tax. The final tax is set by the year-end settlement where you can put documents for income deduction and tax credit to the National Tax Service. Common documents (e.g. credit card expenses count towards income deduction) are electronically available in one place and it is not very hard to get hold of other documents if you are an employee. In the end you pay or get the delta between the tentative tax and the settled tax.
From what I remember in Switzerland, the forms were prefilled, just like neighboring countries. Your salary was automatically takes from your employer, any declared children are carried over year to year etc. Then all you have to do is correct and add any complex stuff
The usual proposed method would be the IRS calculates what you owe based on the standard deduction because they don't know about most donations or possible deductions.
They'd just assume you want to take the standard deduction--which isn't a bad assumption for a lot of people these days.
My taxes are admittedly at least somewhat complex but, even if I did them myself, I'm not sure how much effort it would save if I had to do a bunch of additions and corrections. Pre-filling would mostly be useful if you could just check your W2, maybe a 1099, some things like dependents, sign it, and file it.
TurboTax's offering is not just about literally filing my taxes. It's about managing risk that I'm not botching my filing in the form of missing something entirely, mis-filing, or leaving deductions on the table.
Even if submitting forms online is entirely free, I'm willing to pay SOMETHING to make sure SOMEONE ELSE is responsible for making sure it goes well. I pay accountants for this for this exact reason. I'm sure I could figure out what boxes to copy where, but I'm not paying an accountant or TurboTax for copying values.
edit: I did not mean this to sound like an apology for TurboTax being despicable for other reasons.
It's a racket. Government already knows how much you owe them. So how about US government, like most modern countries, send you a form which says: "we think you owe us xxx$ (because of this and that), if not - provide extra information"?
The US tax system is another one of those things about the US that looks utterly baffling to an outside observer from Europe. How on earth did it get into this state? How is this 'free'?
In the early 2000s the US noticed most other countries started having an e-file option. President Bush thought the best way to "catch up" was to have a public/private partnership and created a system where "blessed" companies could e-file with the government. They must offer a free version for low-income people and the government couldn't offer a competing product.
That being said, it seems "freer" to me to tell the IRS what my financial situation is rather than let it dictate to me what I owe, and then have to fight the government in order to take a deduction for donating to GoodWill or the Salvation Army. I'm splitting hairs trying to play devil's advocate here.
That's very similar to what's described in other countries. The government provides you with prefilled forms. In the basic scenario you sign and return. In a more complex scenario you amend it, sign it and return.
As a bonus, they could make it software and offer a way to file/check online--but I'd be happy if they at least did it via the mail with paper.
It's your money, you can do what you want with it, so sure, give it away to charity if you want — but WTF does that have to do with taxes? You pay taxes on your income, and then you can give away some of what's left; it's not the IRS that wants you to give it away, so why should their cut be affected by that?
I'm pretty sure the US is alone in this weirdness too, as in so many others.
Yea, possibly (I agree with you). It is as much a racket as lots of other things. Doesn't excuse it being a racket, but TurboTax is not an anomaly.
> Government already knows how much you owe them.
This is false. If you aren't taking advantage of deductions, sophisticated tax-deferred vehicles for retirement or tax-advantaged accounts for other investments, you're giving the IRS more than you have to. If that doesn't bother you, that's fine too!
> So how about US government, like most modern countries, send you a form which says: "we think you owe us xxx$ (because of this and that), if not - provide extra information"?
Cool, sounds great. However, you're over-simplifying things and ignoring the complicated parts. For a lot of people, a simple approach like the above would be totally adequate and I personally completely support a system like that.
> If you aren't taking advantage of deductions, sophisticated tax-deferred vehicles for retirement or tax-advantaged accounts for other investment, you're giving the IRS more than you have to.
I do take advantage and do not lift a finger to achieve it, because the tax man knows about this already.
> However, you're over-simplifying things and ignoring the complicated parts.
IMHO, you are overcomplicating things. If tax laws are as complex as you wish them to be, if the tax-man cannot know what you owe to it - then it's just a very good environment for the wealthy not to pay anything, while screwing over other 99% with over complicating things.
I do not pay taxes in the US and unless you have a company, I guess 99% of individuals do not need to do any taxes at all, i.e. just confirm what the tax agency already knows about them.
> I do take advantage and do not lift a finger to achieve it, because the tax man knows about this already.
I think you're mistaken. The tax man does not already know what charitable donations I've made, or depreciation I would like to claim, or ....
> IMHO, you are overcomplicating things. If tax laws are as complex as you wish them to be, if the tax-man cannot know what you owe to it - then it's just a very good environment for the wealthy not to pay anything, while screwing over other 99% with over complicating things.
As an aside, I do not have any wishes regarding the tax system one way or the other. I'm only subject to the tax laws, I don't really care what they are.
The Tax Man® knows what you owe based on income that has been reported to it by places like your job, but only if your work does withholding and reports it to the IRS. It could report it without withholding (I think?), or you could be getting a 1099. If all the income from your 1099s is reported accurately and timely, this would be similar to a place that gives you a W2. This doesn't always happen, or there could be disputes.
> I do not pay taxes in the US and unless you have a company, I guess 99% of individuals do not need to do any taxes at all, i.e. just confirm what the tax agency already knows about them.
I doubt it's anywhere close to 99% :)
Optional things that the government might not know about: kids, charities, investments, depreciation, rebate programs (like solar, cash for clunkers, etc), inheritance, mileage deductions, moving across state lines, getting divorced, getting married, becoming a widow, losing a child, etc. There's a ton of stuff that the government doesn't know about _unless you tell it_.
If I make a bunch of money mowing lawns, my neighbors probably aren't sending me 1099s, but I really probably should report that income and pay taxes on it. The government wouldn't know about it unless I reported it (which is why a lot of folks don't bother reporting income like that, especially if it's a small enough amount).
Agreed, it sounds insane but I much prefer US system. It is easy to say "simpler == better". I'd much prefer the gov not do things for me and leave the control over my taxes by default. I understand people in other countries can do the same, but the default is big gov giving you a number upfront.
This haggling, suspicious, negative, even hostile mindset towards your own government is a big reason why the US is so generally fucked up. "Negotiation process"?!? That's how shirkers and tax criminals think about it.
They don't. They request some documentation, verify some facts that they can correlate other sources, but mostly they rely on the fact that intentionally lying in the declarations is a crime - they can trust most reports, audit some, and penalize those violators they caught as a deterrent to make it not worth the risk to lie.
Seems like a really easy first step would be for Democrats to pass a bill allocating money for the IRS to build a What You Owe API that banks and companies can access. Then every bank on the planet can implement a "Click to pay your taxes" button.
Even CPAs aren't responsible for leaving you exposed to an audit, unless it was through gross incompetence, or if otherwise specified in a contract. TurboTax gives you some feeling that you have exhausted most of the straightforward avenues for reducing your tax liability, but offers no guarantees. Tax preparers are really only liable if they start telling their clients to do grossly illegal things on a regular basis, or if they do shady things to cheat them out of their refund. For example, receiving the refund in their own account and paying the client half.
The good news is that messing up your taxes because you didn't know what you were doing will not land you in prison. The danger is that you made a bad guess that requires you to pay a lot of tax you thought you avoided. For example, you wrote off something big using Section 179 that you shouldn't have. So your tax liability increases by $15,000 or something that you've already spent. Now you need a payment plan.
Most calculation or categorization errors aren't "prima facie" evidence of tax fraud. In general they need to show intent to deceive. Most of the cases where I have seen someone being fraudulent they are going somewhat out of their way to do it. For example, not reporting cash receipts, just checks and credit cards. Paying their children as contractors even though they do not do any work. Recording only half of the haircuts they do and none of the tips. Claiming to have an unsuccessful business that doesn't exist yet loses money. People have to go out of their way to make their illegitimate books look legitimate and they usually fail to take into account that the IRS has seen it all before. Unfortunately for everyone, the IRS doesn't catch these things for several years if at all, so some get rewarded, some think they're fine when they're not, and some get hit by a huge tax bill.
For the average person, if they make a bona fide attempt at doing their taxes correctly, and they make mistakes because they are not a seasoned tax accountant, the penalty will be back taxes, interest, late fees, and representation costs.
I get what you're saying, and I use it for the same reason, but as far as "SOMEONE ELSE is responsible" they do a really great job in the ToS making sure they legally really aren't responsible in any way. It's a great racket.
I don't know if I can answer that first question - it seems like if they position themselves as providing expert advice and competent filing, and then I pay for it, I should be guaranteed something. But the world does not really operate on SHOULDs.
If I used TurboTax, I would expect to find out they messed up by getting some notification from the IRS, or accidentally discovering later that I missed a deduction. If the IRS was reaching out, I'd engage a real accountant ASAP. If TurboTax missed a deduction, I'd vote with my wallet and use an accountant the following year :)
disclaimer: I use an accountant because my tax situation is complicated.
Something I never understood about us taxes - from reading discussions online, it seems like everyone needs to file taxes at the end of every year? Here it's only self employed, or people with rental or investment income. In a normal employer-employee relationship, the employer has to take care of it for you, they deduct taxes before sending the money to your account. This seems to be the way it works in most places, but not the us?
The USA has payroll deduction, but the tax code is complicated enough that that's only a rough estimate of what you actually owe. What you actually owe cannot be determined and deducted ahead of time, because a person's true tax obligation depends on information and events that may not be available until up to ~105 days after the end of the tax year.
So, every year, you have to do a bunch of paperwork (it took me over 4 hours this year) to calculate your actual tax obligation, and then either you send the government a check or they send you a check to settle the difference.
It's not quite that simple. There's a lot of popular political support for things that make a simpler tax season impossible, too.
For example, the existence of tax-advantaged savings vehicles such as IRAs and HSAs mean that the taxable portion of your income isn't settled until the deadline for making contributions for that tax year. Which is April 15. But I imagine there would be a lot of popular political backlash if Congress were to abolish IRAs in the name of sticking it to Intuit.
There's also that whole mess of expenditures that you can deduct from your taxable income, which doesn't kick in until the total of your deductible expenses exceeds the standard deduction. And a lot of people were worried when the standard deduction got increased a few years ago. It made a lot of people's taxes nominally easier to calculate, but people were worried that it might remove an incentive for charitable donations, or reduce the largess that the government gives to homeowners relative to renters, or alter the impact of tax incentives for people who put solar panels on their roofs, or whatever.
Long story short, we love to blame Intuit, and it is true that Intuit generally wants a nasty complicated tax code, but it's also true that, in the aggregate, so does America.
Yes, but for things where all you have is a W-2, the IRS could easily do your taxes for you. They could send everyone a letter saying, “based on what we have, these are your numbers. If you want to change what we know, feel free to file yourself or with something like TurboTax.” Then you get the best of both worlds: people with simple taxes don’t have to deal with it, and people with complex situations can keep doing what they’re doing.
The (previous) existence of the 1040EZ showed that a lot of people have simple returns that the IRS could do for them.
This is making mountains out of mole hills though: these types of problems can be solved without abolishing tax-deductible accounts.
For example, one could tweak the deadline for contributions to those accounts to be say March 1, make the financial institutions report to the IRS by March 15th, send everyone their estimate on April 1st and have a deadline of April 15th to confirm or adjust their tax filing.
Most of the big things that involve deductions are already tied to a financial institution that already report to the IRS.
It's not like Turbo Tax is the only thing standing between you and not having to do your own taxes. The entire system top down would need to be redesigned and the withholdings concept done away with. That'd be such a sweeping piece of legislation it will most assuredly never happen.
The US's system of tax deductions makes it impossible for your employer to know how much to remove from your paycheck except in the simplest of scenarios. They may not know how many children you have or how much money your spouse makes if you file jointly or how much you pay in rent or whether you're a first-time home buyer or what your deductible medical expenses were for the year or whether you had education expenses and so on...
There is literally a form you fill out for your employer to tell them this information so they how to much withhold from your paycheck: https://www.irs.gov/pub/irs-pdf/fw4.pdf
A W-4 is an input into a formula that tells the employer how much you want deducted. So a couple with 3 dependent children and a mortgage will put down more deductions than a childless couple with no mortgage. But it's just to get you in the ballpark so you don't seriously overpay or underpay.
Employers do withhold some income for federal and state taxes, and for social-security and some other odds and ends.
But the tax system is very complicated, with multiple tax brackets (income above a threshold is taxed at a higher rate), deductions, exemptions, exceptions, alternative-minimum, and more. There are deductions and exceptions for things like mortgage payments that go to interest (on only one residential property), donations to certified charities up to a limit, green energy incentives, travel to start a new job, who knows what.
So, we have to settle-up with lots of complicated forms each year, and I've tried alternatives to Turbo Tax, but didn't have enough confidence with the alternative's handling of all the complexity, they just were noticeably worse at handling all the complex details. Not that I like Turbo Tax or the overall situation, but for me it's either Turbo Tax or pay a more expensive accountant.
The employer tax withholding does not account for any other source of income you may have (sell stocks, rental income, make money on Twitch/Youtube/ebay/etc, withdrawal from tax free investment, interest, etc) so you may need to pay more taxes than they withheld and at the same time it doesn't account for all the possible deductions you may have that year so it may withhold more than you need to pay (usually that's the "desired" case).
So at the end of each year you need to go through all the income sources of that year, subtract all deductions and compute how much actual tax you own. And pay or receive the difference to/from IRS.
Even if you have an extremely simple income situation (only one wage, no other income), depending on the state you live in you may still qualify for deductions that the employer is not aware of so it can be in your advantage to do the taxes.
Employers do witholding the US. Filing at the end of the year is doing a calculation to determine if the withholding is correct and if you owe extra or are due a refund. The factors determining total liability aren't simple enough that paycheck withholding can be entirely accurate.
A swedish guy I go to school had to file taxes...while not generating any income or allowed to generate income. He almost got in trouble with whatever US dept handles immigrants cause his advisor in the foreign affairs office didn't tell him this.
Technically you only need to file if you owe the government money. If you have money deducted from your paycheck, you will want to file in order to get a refund, but technically you don’t have to.
This is incorrect. You have to file a federal tax return if your income is above the standard deduction, and there are other rules [1]. Anyone can use this IRS page [2] to determine if they are required to file a tax return.
This is not entirely true. You have to file if your income is above a certain amount for your age and filing status. If you owe or get a refund from the federal or state government is entirely dependent on your tax obligation and the amount withheld from your paychecks throughout the year.
Most Americans are simply unaware that other countries have dramatically simplified this problem. It's amazing how many have magically assumed this was because this was some socialist concept and the immediately launch into "oh, but how much more in taxes are you paying? pfff."
I just tried it. It has a good interface, but a massive downside in that it doesn't have any automated importing/parsing of W-2's, 1099's, and other forms, unlike TurboTax. You have to type in every single number, leaving room for fat finger errors that TurboTax largely eliminates. This removes much of the advantage of doing your taxes online in the first place. TurboTax will smoothly import these, sometimes directly from your bank's website (you don't have to download and upload the PDF). If FreeTaxUSA built a robust tax form PDF parser it would be a real TurboTax competitor. Right now, it's just a cleaner interface to filling out the IRS PDF's on your own. It's good if you don't mind a more manual approach to your taxes.
I had a lovely experience with freetaxusa this year.
They're not entirely free, but they're still very cheap and transparent about their pricing. They don't do the login thing where you hook into your banks and pull in documents automatically, but... honestly those aren't that useful and I'm not sure I trust those on turbotax.
Another vote for FreeTaxUSA. They are totally free for federal returns but I happily pay the $6 for the ‘Deluxe’ service level to support its development.
Been using them for years now after getting tired of TurboTax’s $60-100 fear racket.
I don't mind paying for a service, but with a URL that includes the word "free" I was surprised to see at the top of the page "State Returns $14.99 $12.95 — 12 more days to save on state filing"
I just want to point out that this article is using a really bad definition of monopoly. There are about a dozen if not more ways to file taxes, and just because one is the most most popular and gets a bigger slice on the bell curve doesn't mean it has a monopoly.
It bugs me a little because I keep seeing the definition of monopoly becoming less and less meaningful.
I think the argument, if anything is the opposite: there are dozens of tax filing software, they all more or less do the same thing, and all the resources get wasted on marketing against each other. So I think I would prefer an actual monopoly! And if the government won't make it, why not make an open source one that can drive the for-profit ones out of business!
I'm not sure I understand how monopolies acquiring their competitors early on in order to be able to maintain their monopoly price works in practice. Wouldn't the eager gaze of startup founders looking to strike their first big score turn like the Eye of Sauron on any such industry? And all the monopoly profits that the monopolist stands to extract would in the medium run hit an equilibrium of zero when balanced against the extractions of the people it's forced to acquire?
How would an eager startup person get funded to build something that competes with TurboTax? How will you bring novel value to the industry at this point?
A monopolized industry is also intentionally difficult to enter. It’s not just about buying existing competitors it’s about also making it as hard as possible to enter.
So even when some startup manages to get funding and deploy a viable product, they’re immediately on the radar for acquisition for monopolists if they weren’t before going to production.
TurboTax has also lobbied to affect US law in their favor. They’re a scumbag organization who makes an excellent product.
It's an OK product. The interesting thing about TurboTax lobbying is that they oppose most attempts to simplify the law because the value of their product is for people who have tax situations that are too complex for an individual but not complex enough to make hiring a full-time tax accountant worthwhile.
I just don't understand why a guaranteed payday if you're even modestly successful doesn't draw competition like flies. I would think that once you're known to be willing to pay a bribe to someone who threatens you even a little you would be bankrupted in short time.
Intuit doesn't exactly buyout direct competitors, they buy companies that try to move into niches that Intuit doesn't cover. If you tried to compete directly, they wouldn't spend money and time buying you out, they'd put their resources into other ways of bumping you out of the market. Lawsuits over patents are a good one, and Intuit as around 1600 patents.
I think you could ask a similar question about how profits work in practice. In a hypothetical perfectly efficient market, all profit margins should be zero. But in practice the world is full of transaction costs, imperfect information, and scarcity. Maybe something similar applies to reasoning about the "acquire your competitors" strategy. In a perfectly efficient market it shouldn't work, but in practice the number of startups willing to take this approach is limited (because the number of available engineers investors is limited, and in competition with other sectors), plus you only have bother acquiring the ones that manage to succeed as a company first, which is somewhat difficult. Maybe we should expect the "acquire your competitors" strategy to be partially effective, if you combine it with a relatively good underlying business and relatively high barriers to entry. Not something that necessarily always works, but a piece of the puzzle?
this is why it's important to build an open-source tax calculation engine, as @breck and others have done, so that the creation of tax startups are not disadvantaged (they start from step 19 rather than step 1). this is (fairness in) market competition driving the market to efficiency, the exact opposite of monopoly/oligarchy (e.g., turbotax, taxact & hr block) extracting economic rents while languishing under lobbied regulatory protection.
But it has been acquiring companies, as mentioned in the article. Why didn't those companies face a barrier to entry? Or if they did and it wasn't binding why is it apparently binding to other up and comers?
Did you read the article? None of them ever seriously threatened TurboTax as a whole, they were just trying to carve out tiny niches that weren't already under the Borg. They were assimilated.
I'm Chilean. Chile doesn't have the best system by far, but the SII (IRS equivalent) has made a push to modernize for several years now. Filing taxes for 90% of the people is as easy as going to the website, check that everything is pre-filled correctly (and add anything that needs to be done manually, if for instance you didn't do electronic invoices). Submit. Takes about 10 min.
I've been living in the US for about 10 years now, I really wish we had a simpler system. Today, I just pay a tax consultant because I don't want this to be an extra thing in my head.
I use an accountant. It has worked for me for many years.
I'm grateful to be able to do that.
On another note, I used TurboTax, like, no exaggeration, over 20 years ago, for the last time.
They kept my email, and migrated me to one of their current accounts, and, on a regular basis, I get spammed by them to "reactivate my account."
The problem is that there is absolutely no way to respond, and ask them to remove me from their spam list. They try to get me to log in, instead, and the login attempts are always rejected. I have tried to contact their support, a couple of times, and received auto-bot responses that are basically repeats of the worthless footer in the spam they send me.
It's annoying. Not "jump off a cliff" annoying. More like "persistent mosquito" annoying.
Except they also send it by snail mail, so you can read that and if it looks correct you don't even have to go online to click "OK". (Though I think I saw somewhere they may be phasing that out; saves on trees and postage.)
“What if we could give customers a button. They’d press it at the end of the year and it would automagically file their taxes for them.”
Literally is like this where I live. It's done through a government website.
I gotta say I have a love-hate thing with Turbotax. I hate the company and its influence peddling, lobbying, and near monopoly status, but Turbotax itself is a very well designed product with a great intuitive experience that has done a great job filing taxes.
So it's a rare case of a sleazy state-sanctioned (via refusal to simplify the tax code) monopoly with a decent product. Usually such monopolies have complete shit products because they don't need to care.
Hard disagree, I've had numerous problems with their app and they constantly try to upsell you even after extracting their egregious yearly fees. There has been no innovation or even noticeable change to their product in years.
I've been using TurboTax desktop version (the Premium edition) for 10+ years and never ran into any issues (and I have relatively complex income situation) except for one bug they have always had about incorrectly summing up the mortgage loan amounts of the same loan that you refinance or transfer in the same year (so it ends up looking as if you had 2 loans that year and consequently can miss out on large deductions). But this is relatively easy to observe and workaround. Compared to spending weeks doing my own taxes (I did them for 3 years) it's a total bliss.
I feel that a lot of people complaining about TurboTax upselling or anything like that are attempting to use the online version. I am very much opposed to giving some online site all my tax information so I will always keep using the desktop version for as long as I can. It includes 5 free federal e-filins and have to pay extra (about $30) for state filing (but can always just print out the filled forms and mail them in if you don't want to). And when I did the taxes on my own I had to print and mail them anyways.
Turbotax’s website commits all the web sins we condemn regularly on here. They hijack the back button, change your scrolling, don’t allow tab-spacebar-enter navigation, don’t allow pasting in some fields, and load buttons on a fixed resolution so you can’t see everything if you aren’t on a hires monitor. It’s really not a good product.
Before Turbo Tax I sheepishly headed down to H&R Block and got reamed.
Besides understanding my taxes (and taxes in general) better, I almost enjoy the process using Turbo Tax.
If there is a better Turbo Tax product out there, it would have to be very compelling to get me to switch. Besides familiarity with Turbo Tax, it pulls in last years data and saves me the more tedious steps.
Like you though I feel like I am locked in at this point.
H&R has a similar desktop product. The prices are in the same range and the lockin feels the same. Not sure what I am locked into though both products never find my W2s correctly anyway and import my stock divs wrong.
You don't notice the dark patterns because they are dark. Are you sure you haven't paid TurboTax for an upsell when they have a free or cheaper alternative they never mention?
That's odd, I consistently have problems with it. It's fine if you add some W2s and work straight through to filing. But navigating back and forth through different sections never behaves the way I'd expect.
Things like brokerage transaction imports were simply broken while I was trying to file last year (which, incidentally, is the only reason I pay for it).
And their "UIs" for dealing with forms like K1s are often more confusing (to me at least) than the underlying IRS form.
TurboTax works great, until things get a little too complicated, and it quickly becomes terrible. What is needed is a strongly typed DSL where you can copy and paste your entire tax return as a single text document/spreadsheet.
I pay for a stand-alone and the only upsell I can recall seeing over and over again is "audit protection" for ~$59 or so. Is the free version filled with add-ons?
And the state efile (but since there's the "free" alternative to print out forms and mail in that's not a big deal, and it's relatively cheap anyway). I've also always used the desktop/standalone version, great time saving compared to doing it on my own.
Unfortunately TurboTax falls flat if you have a complex return. They "support" forms 1116 and 2555, but it's clear that they didn't put any real time into making sure they do the calculations correctly. Long story short, I got a check from the IRS for almost $1000 because TurboTax computed what I owed incorrectly.
My wife is a tax accountant. From a software perspective taxes are a nightmare. I made a service BasisCalc (https://basiscalculator.com/) to automate just one little part of the big multi-dimensional elephant that is the tax code and it was terrifically hard to implement. I can't imagine doing the entire tax stack. There's local, state, federal, and international. The code changes all the time. The dates change all the time. There are real substantial penalties for being late. There are so many data sources to integrate. She spends thousands a year and many hours of her time simply on tax code updates. She has serious legal liability for her work. So will your software. I would pick an easier target, like solving world hunger or world peace. Taxes will be simpler when politicians want them to be simpler and there's no profit in that.
This sounds to me like the "invoice problem", or whatever you might call it. Consider business invoices. Tens of thousands of entities have to share the same general flavor of data, and each already has a system for doing it. They all have to receive and process that data regularly, and have their own systems, charts of account, item names, etc. Harmonizing all that is very difficult.
The IRS offers standard forms but there is often more than one way to select them or fill them out. For example, on an 1120S, the accountant might place an expense in one of the standard categories or in a table of other expenses. But even more difficult, every user might have different ways of categorizing their income and expenses, and the people sending them forms might do it one way or another. Such a service would have to be opinionated and convince each reporting entity to adopt the system in place of the home-built one they're already using.
In addition to being very complex, tax codes change yearly. Whoever might take this on would have to take on that a tax code change made in December needs to be interpreted: What questions need to be asked to fill in the new line on one or more IRS forms? And any of the states can likewise make last minute changes. It's nasty time pressure because you have weeks to implement, test, and ship the accommodation to new requirements.
I also observe that the tax code was crazy complex before personal computers became popular in the eighties. Blaming Turbo Tax for the complexity is misplaced blame, though no argument they have a vested interest in keeping them complex, and they pay lobbyists to safeguard their interests.
I really don't get why people want to kill turbotax. I get the following:
1. the tax system in the US is broken
2. It needs to be simpler
...
3. kill turbotax???
For many people, such as myself, turbotax is doing exactly what most people want to kill it for... simplifying US taxes so I don't have to think about it.
Am I missing something? Do people just think oh, if turbotax dies, a free open source version of it is going to be as usable, consistent, bug free, and adopted? Or tax code itself is going to be as easy to use as turbo tax currently is?
I'd bet the cost of killing turbotax is probably greater than the entire net worth of turbotax as a company, with lifetime future revenues discounted to today, 10 times over.
TurboTax is preventing the government from offering a solution and I wouldn't be surprised if they promote complicating the tax code. It's incredibly common for companies to promote additional regulation to prevent competition.
ReadyReturn[1] was a 2005 California Tax prep program. It mailed you a prepopulated tax form. It was incredibly popular during the pilot program and TurboTax spent $1.7 million lobbying against it.
Most people don't have complicated taxes, but I find even collecting all the forms from employers and institutions and filling out the forms a pain. I'm confident it's the most error prone part. I honestly don't think capital gains or HSA complicate things all that much if you're automating things. I don't care how complicated the tax code is. I have personal opinions on what they should incentivize, but don't care how it's calculated. Most countries offer prefilled or tax software to cover basic needs.
The great irony in all this is that TurboTax has become the villain it was trying to fight, aka "adding a tax to filing tax returns". "Tax" not just in monetary terms of purchasing an annual software but also in the time spent in filing.
Why were they allowed to acquire a competitor (CreditKarma) again? Until we have stronger regulatory bodies, better funding for IRS, and just the will to fight corporate encroachment, this "tax on tax" will remain.
(As a side note, I suspect TurboTax software is designed to be complicated and obstruct the filing process so that you feel like you got your moneys worth after spending 2-3 hours using it.)
I 100% agree with the premise: to unseat TT, you need a auto-assembler of tax, like other countries have. I’m not sure why the author didn’t delve into it, but essentially if you have payroll integrated, you can enable this for a LOT of Americans. They work 1 job and take standard deduction. Don’t go after the complex 1% tax filers, do 1 job and do it well.
Imagine you get an email. “Hey it’s tax time. Looks like you’re due a refund of $1000. Click here to confirm and file.” That would be really powerful. For many Americans the tax refund is the biggest paycheck of the year. Anything that makes that easier is going to do well.
Every time this comes up, people seem to be missing the reason tax codes are as complicated and loophole-filled as they are, because they approach the problem from the wrong place. The tax codes of all modern nations are not about revenue. They're about control. The entire purpose of the machinery is to punish some behaviours and incentivise others without having to go through all the trouble and checks and balances of passing specific new laws. The overall income from taxes isn't how the government funds their spending, it's simply a means to control (but never enough to eliminate) inflation.
Seems to me that for a lot of people, maybe the majority, the government already has all your tax data and you shouldn't need to file, only accept the government's numbers. I am in the opposite situation, especially as I have to file in two countries. Not living in the US doesn't give you a pass on filing US taxes. I get to buy two different versions of TurboTax :-( We don't worry much about a US audit (some say the IRS is starved for funding by anti-tax politicos?) whereas in our other country they quickly catch even the smallest error.
The difference is that they're using your data to target financial products at you (just like any other free service). But they don't sell your data at least.
The part you're missing is that as a part of the acquisition, Intuit was required by the Justice Department to divest the "tax" portion of Credit Karma - so no, they're not the same company. Credit Karma, the main app, is Intuit. The tax portion of Credit Karma is not.
This sounds like a great project once the US revises it's tax code. And a lot of wasted of time should it be revised to incorporate digital tools available today (like Mint transaction categorization). It's unlikely to be revised in the near term, but I have hope that throuh some bad economic or social upheaval, we may see some appetite to increase US GDP in a real way and decrease the wealth disparity by simplifying tax filing in a real way.
Are accountants prohibitively expensive in the US? I don't use any tax software myself in the UK - I just pay an accountant $250 once a year and he does it for me (using some software I presume.) It's not really on my radar as things worth trying to automate or use software myself for, let alone building my own software! I'd have to be able to do it in just a few hours to be cost effective.
That's about what those franchise tax prep companies charge (Liberty Tax, Jackson Hewitt, etc).
I found out my parents used one of these places last year, and they charged them about $350 for a SIMPLE tax return. It looked like the goal was to charge about $50 less than the eventual refund, and also push the "get your refund right now!!" scam (i.e. take a high interest loan for the refund amount).
This year, I did their taxes and mine too (separately), using FreeTaxUSA.
You also have to trust the accountant, and the accountant is not liable at the end of the day anyway.
If you are a W-2 employee, even with having to file a Sch 1/2/3/B/D/etc, it shouldn’t take more than a couple hours. And you get to know you did it right.
Of course, if you don’t enjoy reading tax instructions, I highly recommend parting with a couple hundred dollars and letting someone else do it.
> Are accountants prohibitively expensive in the US?
No, they're not. Obviously cost will vary based on complexity (self employment, side-hustles, stock options etc) but for the most part a basic return by an accountant would be in line with what you're paying.
At that price point, your accountant is just charging you to do the data entry into Turbo Tax or equivalent. It's more work to coordinate, and and provide all the info, and costs more.
> At that price point, your accountant is just charging you to do the data entry into Turbo Tax or equivalent. It's more work to coordinate, and and provide all the info, and costs more.
People in this thread are talking about literally writing their own software to do it. Half an hour to collect up my payslips and email them to an accountant for $250 can't possibly be more work and cost more?
The idea of paying someone $250 when the government already has the data is ridiculous. Accountants are accessible to some, but we shouldn't need to pay someone when the government can do the calculations.
The government really doesn't have the data. Do they have cameras in your home detecting whether or not you paid for more than 50% of your child's living expenses?
He'll just have to take your word for it, and send that in to the IRS. He won't be liable for it if it's a lie; you will. So what's the difference to you telling the IRS directly?
And no, checking a box "I did not have any income besides my tax-withheld salary [_]" and filling in an integer "I have [_] dependent children" seems like something most people could do on an IRS web page without having to buy software or pay an accountant every year. (And if you tell them when the kids were born the first time you do this, they could carry them over year to year and age them out automatically when they turn 18, and then you wouldn't even have to do that any more unless and until some exception occurs.)
All these pro-status quo comments sound so weird, like desperate apologetics for the world's most needlessly complicated system. Are you all just finding it impossible to conceive of there being a better way than The American Way, or what's the reason?
It was set up for Hasan Minhaj's show, and the show was cancelled. Since it was set up right before previous "tax season" I'm assuming they'd just paid for a year.
It's in archive.org, though, e.g. [1], and it's just a static site with a bunch of links.
In case you're wondering how they justify keeping the system the way it is, the going line is, "If you allowed auto-filing taxes, the government will sneak in new taxes that you'd never even know about!!"
The other argument I've heard is, "it should be painful to file taxes, to make people support the idea of getting rid of taxes".
TurboTax is disgusting. I used them for a few years in the past due to their great marketing and easy to use website. But they pulled a bait & switch on me last year, at the last minute (after I had done everything) I was required to pay north of $120 to actually file.
The problem isn't that they want money to use their software, it's that they're not upfront about it. Free is thrown in your face about 100 times during the process and then they surprise you right at the end after you've already invested a bunch of your time.
My taxes are dead simple - I just don't trust myself or care enough to file without some software assistance. This year I'm using a different company who appears to be much less shady and will never use TurboTax again. I hope TurboTax making my money once was enough to lose me as a customer for life. In reality I hope the company ceases to exist in the near future, but that seems unlikely.
I'm excited at the prospect of free & open source tax software - for next year maybe.
You basically type your numbers in and it does the math for you. Then you print it out and mail it in. It can't do anything complex, though.
In my experience (Minnesota), state filing is even easier, usually just copying numbers from your federal form and doing one table lookup. No reason to give the shitty companies more money.
Thank you, that actually appears to be much more user friendly than I would have imagined. When I think of government websites I think I'm still stuck in the mindset of government websites 10 years ago (aka absolutely horrible). I've been surprised at how good things have gotten regarding them a few times, so I guess I need to snap out of that mindset.
While looking over the requirements and supported forms I didn't find anything about student loans (form 1098E), would you happen to know if that method is compatible with them?
Free Fillable Forms supports every tax form as far as I'm aware.
It's really no different from doing your taxes by hand on paper, except it does almost all the math for you.
I've been using it for years (with about 15 different various forms) simply because I refuse to support the tax prep software companies out of principle.
And each year I just look at the previous year's which I saved as PDF for reference in case I forget which number goes where.
Thats exactly what I got that I felt like the Article didnt seem to get.
Turbo Tax is required to abide by the FreeFile rules. this means that for some customers their software is required to be free.
By some customers I mean like 60%.
So TurboTax moved to seeing their product as an upsell game, start at free and UHOH! You have to pay us! To that they dont have to be upfront because they 'Didn't know you made too much'.
Now, this is where things get fun. How does TurboTax get you to pay?
Three ways:
1. Have your info on file so you don't need to enter it.
2. Make sure to place the payment step at the VERY end of the process when you are deep into the system and offer ways to pay it via your return.
3. Agressive UI and UI dark patterns to make the software appear to work harder and be more trustworthy and to make you feel as if you put in more involvement. There are numarous animations stating things like 'Verifing your maximum money back' and such that are all false loading screens. It all makes the customer trust it more while it's just wasting their time.
TurboTax is a bait and switch company that for many is free and makes their customer feel like they did the work. You can't compete with that concept by offering an automatic engine with no involvement becasue the customer will think it's wrong or they are being screwed and any upfront cost to cover development will make the customer think your product costs more.
Another way is how they have two "free" sites: One called "IRS Free File Program by Turbotax" and one called "Turbotax Free Edition". The free file version of Turbotax is only accessible from the IRS free file webpage (they block it from search engine results) and has a limit on annual income, but (as far as I know, I file on paper) it does not have as many upsells as "Turbotax Free Edition", which has a different (higher) annual income limit and gets advertised like crazy by Turbotax. This obviously creates customer confusion and people get tricked into using the wrong version.
Intuit (owner of TurboTax) was sued over this because they had some of the darkest patterns imaginable around FreeFile. They blocked search engines from finding it using robots.txt. They would show a page where only 1 tiny link brought you to the free site, while all others switched you back to the paid one.
Pro Publica did some excellent reporting on this in 2019 and they seem to have made it one of their pet projects.
You're not required to pay anything if your taxes are 'dead simple' you can fill out 1040EZ for free. And still can still compare turbo tax for free to see if you got the same numbers, and send it in for free. Nobody forces you to pay. I did that when I was single.
Nowadays, its complicated. Mortgage deductions, rental income and depreciation, independent contractor, children, jointly filing. I could attempt to do that on my own but it would take hours and I likely would leave money on the table. In my use case I am more than happy to pay a hundred bucks. It's actually less if you file early too, and its deductible in your next years tax liability... I don't understand why everyone here wants to kill Turbo Tax. It makes my life easier and less stressful around tax season.
1040-EZ and 1040-A were eliminated in 2018, so pretty much everyone uses 1040 now (which was probably simplified, I haven't compared). There's also 1040-SR for seniors.
> And still can still compare turbo tax for free to see if you got the same numbers, and send it in for free.
That's what I do for state, since my state has a relatively simple tax structure and offers free online e-file. For federal my situation is similar, I'm happy to pay someone < $100 to deal with all the schedules and calculations and make sure things are consistent. An accountant would be much more, and inertia keeps me with TurboTax, for better or worse.
TurboTax Deluxe comes in a version that includes a state filing, and one that doesn't. There is a $10 price difference, but if you get the Federal only one, the price to add a state filing is much more than $10. Last year, the listings on Amazon were very hard to distinguish, and my father, who is pretty tech savvy for his generation, bought the Federal only one by accident, so state filing cost him much more. It seems like the Amazon listings are a bit more clear this year, but the whole thing put a sour taste in my mouth last year, and I switched away from TurboTax.
taxes can be e-filed, and it seems like the government purposefully prevents average citizens from filing basic tax forms -- previous stories showed evidence of Intuit lobbying the IRS for this specific reason.... I think the real reaaon the federal government (IRS) prevents a simple web interface for tax prep is because it would immediately put out of business a whole cottage industry created around this purpose. For business filers, it is important to have a CPA to certify the preparation of the results before submission, and I can understand the need for this industry. However, for the vast majority of people getting paid on W-2 with various allowances, it would have been fairly trivial to design a web interface to handle these submissions. It is strange that the web has been around since 1990 and yet no such web site exists within the IRS....
I actually dont mind TurboTax - they make it easy and they remember what happened last year. Could competition make it even better - sure.
But where near monopolies really exist is with eBay and TicketMaster. Sure there are 1000s of auction sites and ticketing sites - but none have quite the power as these two.
The way to kill turbo tax is by getting rid of the entire industry. If other countries are able to automatically fill out these forms for you and determine your tax liability then that should be done. If you get a refund, then the IRS will send you a check or direct deposit it into your account.
I'm willing to pay TurboTax AND test (with my info) whatever else someone gives me to run locally on my Windows machine, offline, in a virtual machine. I'll do it every year, until the software is good enough to use without paying the TurboTax Tax.
Why people hate TurboTax so much ? Is it because its a monopoly (or) does it uses any predatory practices (or) kill other companies that tries to compete.
Disclosure: I used TurboTax to file this year's taxes and kind of like their UI and ease of use (for top $ of course):|
All of the above. Yeah TurboTax is great because they make it easier to do something nearly everyone hates to do and doesn't understand. So most people don't care about why Intuit is a terrible company because TurboTax is their only option and it works well.
Intuit has excessively lobbied the US government to prevent simplification of the tax code, they struck a deal to offer a free option in return for the IRS not developing their own alternative, and then deceptively hid access to the free option so that users are tricked into purchasing it anyway.
The other comments provided a great overview, but I would really recommend read ProPublica's reporting about them [1]
Some very brief highlights:
- They use dark patterns and other trickery to prevent people from filing for free (the vast majority of Americans can file for free via IRS free-file), instead directing them to the "free" up-sell laden product
- Lobbying against literally anything that would make filing taxes easier or cheaper. It doesn't have to be this way (and it's not in many countries), but it's how they make their money.
Not only do they kill other companies, but they kill the government's ability to compete. As is mentioned in other threads, many countries don't have this tax filling non-sense at all. The government just says: Here's what we're basing your taxes on; let us know if there are any mistakes.
It's absurd to spend ones time and money to file taxes only to have the government punish you because you didn't get the right answer.
People don't like TurboTax becauseof their advertising and lobbying tactics. They target income levels that can file for free online and spend money 'lobbying' the government to allow the practice to continue. That being said, I use Turbo Tax and love it. The clean UI made filing take 90 minutes despite having several property and other transactions this year.
Law of Unintended consequences: I pay an absurd amount of taxes, enough to fund several countries. Making it easier to pay them isn't going to make the fact that we subsidize high ranking government employee's lives and donors any better.
Younger me would say, "Or we could actually simplify and fix the tax system!". Older me unfortunately knows just how corrupt the whole thing is, thus has no hope for such honorable dreams, and is sad.
Note that - Tax business is not scalable if you are looking for a year long activity in business. Tax season is from Jan to April 15th. After Apr 15, your teams & infrastructure have to scale down.
I know, I'm a Brit and my girlfriend doesn't even remember her login to HMRC Gateway - if she pays too much tax she gets a rebate automatically, other than that its not even something we think about.
Taxes are a complex topic, and I believe that "TurboTax sucks" or even "the US tax code is too complex" are insufficiently insightful.
WHY TAXES IN THE US ARE COMPLEX
The US governing mindset accepts that people follow financial incentives and disincentives (capitalism.) Thus the government can encourage or reduce certain activities via tax code treatment.
Some examples of activities that the government encourages via the tax code are: marriage, having children, taking care of aged relatives, donating to charity, driving a low emission vehicle, home ownership, getting an education, and investing for the long term. And these are just the simple ones that most people encounter, there are many others.
Further complexities stem from attempts to make the code fair. For example, if your work requires you to spend money on things like uniforms and certifications, the code has provisions to exclude that from taxable income. Likewise, you don't get double-taxed on foreign income you had already paid taxed on abroad.
Finally, the US is a diverse country with diverse values. Each state and municipality has a different philosophy on taxation and what the tax code encourages and discourages. People to some extent migrate towards tax regimes that align with their values, but of course this is another source of complexity.
The bottom line is that the US tax code is complex because it tries to do more and has to account for more variability than perhaps other tax codes out there.
ARE TAXES HARD?
The answer is: it depends. For the simple person who draws a salary and that's all, they can fill out their taxes in a few minutes, for free online - or even by hand in a form with no problem. I did this when I was a college student and early in my career. I often hear foreigners brag how their tax form is 3 lines - that's great. For many in the US, it's not much more than that. But, as you get into more advanced scenarios and want to take advantage of government incentives (or the government wants to make sure you pay your fair share in some otherwise tricky cases) you have to put in more work.
DOES TURBO TAX SUCK?
It's easy to find faults with most software, but the bottom line at least in my experience is it has scaled very well as my tax situation grew in complexity in different ways. The fact that one can rely heavily on this program for a workflow that has implications of tens of thousands of dollars every year is pretty meaningful.
CAN IT BE REPLACED?
Good luck. For very simple cases I mentioned above, sure - and there are already lots of cheap and easy ways to file in those cases, including trivially on paper. But once people have complex situations and many factors intersecting, your software needs to account for all of those factors well. That takes tremendous work year after year - to understand, encode, and test all of these things. In my opinion that's exactly the kind of project that benefits from commercial investment and wouldn't do well as open source.
What exactly does everyone have against Turbotax? I use it every year and I love it. Sure I could save a hundred bucks and spend hours filling out IRS worksheets, but I don't want to. They have excellent UX, and serve as a reliable secure cloud repository for all of my financial information. What's the big deal?
For one, I don't blame a company for lobbying for their interests. Lobbying is protected by the first amendment. Congress has sole authority to author and vote on legislation at the pleasure of the electorate. The fact that TT (and H&R Block) have impressed upon reps that they will participate in Free File, it mitigates their need to make a government-sponsored program. Which isn't just barricaded by simply force of will, but rather that the IRS would actually have to do it which means likely means a giant appropriation of funds and the risk of them screwing it up.
The issue isn't the lobbying per se, but rather that it's not hard to look at the situation and conclude that Congress is favoring the interests of TurboTax over the interests of their constituents.
It's difficult for me to believe that my representatives actually believe it's in my best interest to pay TurboTax $100 every year, compared to having the IRS automatically file my taxes.
On the other hard, it's easy to believe that my representatives have been cheaply bought with political donations.
Maybe I'm being too generous but the electorate has all the power over elected officials. If a candidate makes a big deal over free file and voters don't care, then the lobbyists are effectively absolved. You'd have to show me that Congress actually had this on their agenda and removed it at the behest of lobbyists to say it's really corruption.
Unless they're actively spreading disinformation or corrupting the vote.
I do blame companies (and people who work at those companies) for spending their time trying to figure out how to waste as much of their fellow countryman's time and money as possible every year. Just like I would blame people for trying to get away with legally polluting waterways or any other public resource.
>The fact that TT (and H&R Block) have impressed upon reps that they will participate in Free File, it mitigates their need to make a government-sponsored program.
It's a half assed solution so they can say they did something and give them political cover.
I'll actually give a response that is not Turbotax specific.
The forms I get every year from the ~10 banks I have accounts with and the ~2 companies I earned a salary from are essentially just copies of forms that they also had to send to the IRS. So in principle the IRS already has the same information I do when it comes to how much tax I paid and on what income.
It is not clear to me why I have to share:
- My name
- My address
- My _social security number_
- My spouse's name
- The names of my children
- All their social security numbers, too
- How much money I made
with a for-profit company. This is information that the IRS already has. To me, this is totally unnecessary. I would much rather the government increase the IRS's budget so that they can implement services that provide any help I might need directly, rather than through a totally unrelated corporation. The IRS's job is to make sure you paid the tax you owed. They don't dictate how much tax you pay. I truly believe that with the right financial resources they can make it easier to make that payment (and correctly) for: 1) us; and 2) them.
For folks with very simple tax situations, this seems like a no-brainer. For folks with complicated situations, you are still more than welcome to talk to a tax professional for advice. But a company _doing your taxes_ for you seems unnecessary.
Wouldn't it be lovely if instead I went to www.irs.gov to file my taxes, and I was presented with a very similar interface to what for-profit companies are providing, but with the information already filled out because they already have it? Essentially, all I'd be doing is sanity-checking the inputs.
You're paying for a service that should be provided for free by the IRS, as happens in many other developed countries. It's unnecessary financial drag on the economy.
>You're paying for a service that should be provided for free by the IRS, as happens in many other developed countries.
But Turbotax is free for 1040EZ filers. It's only in an instance where you would otherwise just hire a tax accountant that they charge you. In terms of SAAS pricing, it comes out to like $15/month annualized. It's a bargain IMO.
It's unacceptable to argue that it should be free for some, but not for everyone. It's not a bargain, it's unnecessary regulatory capture, for what my government should be providing at no cost to all citizens who are required to file returns.
Private electronic tax filing systems (and the fees they charge) should not exist.
> It's only in an instance where you would otherwise just hire a tax accountant that they charge you.
This is false. It's plenty possible to be in neither scenario, and every year millions of Americans are.
Further, the 1040EZ system no longer exists. Tax filers often charge for "tax accountant" services like having a moderate income or filing state taxes.
Not true. If you have any capital markets gains, you have to pay TurboTax. I don't need a tax accountant to report simple capital gains. If you have side hustle income, you have to pay TurboTax. Basically, if you're reporting any income other than your standard day job, you have to pay. And TurboTax has done things like advertising free filing but only offering free federal filing and finding out you have to pay for state filing only after you've filled out your federal forms. It's just a scammy business that relies on lobbying and governmental pressure to stay afloat.
> But Turbotax is free for 1040EZ filers. It's only in an instance where you would otherwise just hire a tax accountant that they charge you.
This is incorrect in practice. Through dark patterns and otherwise, an extremely small minority filing without paying even if they should be “eligible” (which is itself an absurd position).
Because the IRS should do it for you, for free, but doesn't because TurboTax uses the money you pay them to sponsor legislation to prevent the IRS from doing that:
In some countries the government calculates the (simple compared to US) taxes and all you do is approve it. That would be possible here too for most people, but neither politicians (of various stripes) or Intuit wants anything to change. Only the US turns paying taxes into the equivalent of Quantum Mechanics.
Last year turbo tax said I could file for free. Every so often it asked if I wanted to upgrade to a deluxe version for $70. I said no. After a couple hours of filling everything out, it told me that my income, from one of the first steps, was too high so I would need to pay $70. Deeply unethical to tell me that at the end when they had the information necessary to do so at the beginning.
Also, fuck them for charging $70 while lobbying for taxes to remain difficult to file.
That Americans self sabotage (and ignore obvious counter examples) doesn’t change the fact that filing taxes can and should be simplified and made less costly to the average citizen.
Further: I rely on “government services” every day that are essential and delivered reliably. Even on the tech front - my municipal parking app is fast, free, and pretty much flawless.
Who even said it would be software. In Germany I have the option of letting the government do my taxes for me. At the end of the year I can choose to dispute the charges.
In reverse chronological order:
Show HN: ustaxes.org – open-source tax filing webapp - https://news.ycombinator.com/item?id=26138446 - Feb 2021 (219 comments)
TurboTax Tricked You into Paying to File Your Taxes (2019) - https://news.ycombinator.com/item?id=26102695 - Feb 2021 (306 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free (2019) - https://news.ycombinator.com/item?id=26060414 - Feb 2021 (199 comments)
FTC Is Investigating Intuit over TurboTax Practices - https://news.ycombinator.com/item?id=24409093 - Sept 2020 (194 comments)
IRS Reforms Free File Program, Drops Agreement Not to Compete with TurboTax - https://news.ycombinator.com/item?id=21923220 - Dec 2019 (448 comments)
IRS Tried to Hide Emails That Show Tax Industry Influence over Free File Program - https://news.ycombinator.com/item?id=21393758 - Oct 2019 (188 comments)
TurboTax’s 20-Year Fight to Stop Americans from Filing Taxes for Free - https://news.ycombinator.com/item?id=21281411 - Oct 2019 (447 comments)
TurboTax to charge more lower-income customers - https://news.ycombinator.com/item?id=20461169 - July 2019 (81 comments)
Congress Scraps Provision to Restrict IRS from Competing with TurboTax - https://news.ycombinator.com/item?id=20119916 - June 2019 (18 comments)
TurboTax Uses a “Military Discount” to Trick Troops into Paying to File Taxes - https://news.ycombinator.com/item?id=19994118 - May 2019 (42 comments)
Listen to TurboTax Lie to Get Out of Refunding Overcharged Customers - https://news.ycombinator.com/item?id=19870242 - May 2019 (44 comments)
TurboTax and H&R Block Saw Free Tax Filing as a Threat - https://news.ycombinator.com/item?id=19810981 - May 2019 (143 comments)
TurboTax Hides Its Free File Page from Search Engines - https://news.ycombinator.com/item?id=19758126 - April 2019 (262 comments)
TurboTax Uses Dark Patterns to Trick You into Paying to File Your Taxes - https://news.ycombinator.com/item?id=19718284 - April 2019 (274 comments)
Congress Is About to Ban the US Government from Offering Free Online Tax Filing - https://news.ycombinator.com/item?id=19613725 - April 2019 (696 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=19392673 - March 2019 (253 comments)
H&R Block and Intuit Lobby Against Free and Simple Tax Filing (2017) - https://news.ycombinator.com/item?id=18956883 - Jan 2019 (190 comments)
Would You Let the I.R.S. Prepare Your Taxes? (2015) - https://news.ycombinator.com/item?id=17751383 - Aug 2018 (424 comments)
Why I'm boycotting TurboTax this year - https://news.ycombinator.com/item?id=16844458 - April 2018 (23 comments)
H&R Block and Intuit Lobbying Against Simpler Tax Filing (2017) - https://news.ycombinator.com/item?id=16841449 - April 2018 (232 comments)
H&R Block and Intuit Are Lobbying Against Making Tax Filling Free and Easy - https://news.ycombinator.com/item?id=13922482 - March 2017 (234 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing (2013) - https://news.ycombinator.com/item?id=13853150 - March 2017 (439 comments)
TurboTax Takes Aim at Smaller Rival in Fight for Filers - https://news.ycombinator.com/item?id=11150694 - Feb 2016 (87 comments)
Would You Let the I.R.S. Prepare Your Taxes? - https://news.ycombinator.com/item?id=9381437 - April 2015 (150 comments)
Would You Let the I.R.S. Prepare Your Taxes? - https://news.ycombinator.com/item?id=9380232 - April 2015 (124 comments)
Filing taxes: It shouldn't be so hard - https://news.ycombinator.com/item?id=5488084 - April 2013 (56 comments)
How the Maker of TurboTax Fought Free, Simple Tax Filing - https://news.ycombinator.com/item?id=5443203 - March 2013 (330 comments)