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 isn’t it tax fraud if you consciously withhold information that would negatively impact on your total obligation?

There is a lot of financial information (which is private by default) which is irrelevant to a person’s current tax obligation.

That’s the information that I only want my paid advisor(s) to have; this is a privacy concern, not a cheat-on-taxes concern.

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)

Ok, that's interesting. I don't follow this:

> 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.

Answered a sibling with a similar question: https://news.ycombinator.com/item?id=26333946

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.

It's probably median for households that pay any 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.

>especially my income is at the boundary between two tax brackets

Wait, can you explain how tax brackets work because I think there may be a fundamental misunderstanding here.

If we have two brackets, 10% for <=$100 and 90% for >$100, what do you think the tax bill would be for someone who earned $101?

It would be $10.90.

$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).

The smartest person I know, idolized him since I was a kid, had that same misconception last year when we were discussing top end tax brackets.

I feel like every April news orgs should just run segments with accountants doing this example.

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 is how it is done in Sweden. And after having lived in 2 other countries it is clearly the way to go.

The tax authority sends you a summary and you just approve it.

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.

As a Swedish expat in California I cringe everytime tax season comes. Both because of how annoying it is, and because I know how simple it can be.

Works this way in the Netherlands too, you login on a website and just click through the information they have pre-filled in normal cases.

Not to mention, I'm sure the "happy path" will accommodate a significant number of tax payers.

Currently, probably >85%, given that ~90% percent of households took the standard deduction in 2018.

The standard deduction is pretty high these days. I'll probably be back to not itemizing next year but my taxes are certainly not simple.