IRS will look into setting up a free e-filing system
washingtonpost.com
washingtonpost.com
One of my best friends lives in Tokyo and every time I have to think about taxes I get this little pang of jealousy at how sane and un-infested with rent seeking trashcans (intuit etc.) the Japanese system seems.
If you need the government to behave against the best interest of the people in order for your industry to exist maybe your industry shouldn't exist.
That said, I've had to file taxes outside of that scope before and it was fairly straightforward. They have people at the tax office to assist you.
My understanding is that isn't just the case for foreigners, it's the case for everyone. Companies are expected to just take care of things like that for you, and in return you're expected to treat them with utmost loyalty. I imagine things have changed somewhat in the past decade, but this writeup is illuminating:
https://www.kalzumeus.com/2014/11/07/doing-business-in-japan...
Anyway average employee just need to fill a few papers. Employer do most jobs. https://jopus.net/en/column/year-end-tax-adjustment.html
There was a "check cashing" store next to our DMV that solely existed to service people who visited the DMV. Our own government was unable to accept US tender.
This exists all over the place. The amount of servicing and companies that exist basically because of the government is insane.
Edit: Here is the best I can find. It sounds like it was a congressional mandate from 1983:
https://www.latimes.com/archives/la-xpm-1985-02-22-mn-587-st...
And sure: it feels ridiculous that checks aren't accepted, but the reason they're not accepted is because they're not legal tender. Nor are they even cash-equivalent. They're only cash-equivalent by the (sure, contractually regulated but still entirely the) grace of the private issuer, and only for as long as that private issuer remains in business.
And credit/debit cards. At least where I live.
Taxes are complicated because in reality they are actually complicated for many tax payers.
Even for property, the vast majority of the property that people own is the house they live in and sales on home real estate are public information.
- Investors in a local restaurant may receive dividends which are not disclosed to the IRS until the restaurant files taxes.
- Those dividends may reach a person via intermediaries. For example, a person receives her share of dividends from all the investments from an investment company in which she is an investor. That company may also have in turn invested into other investment companies.
- A person inherits stock and migrates it to her brokerage account. Subsequently, she sells it. Neither the original brokerage nor her brokerage knows her cost basis and therefore can't know what portion of the proceeds are taxable.
- Inheritances can get messy, in particular because in some cases the IRS needs to know the size of the estate where the inheritance originated in order to calculate the tax.
- Taxes, tips, and direct crypto sales are all taxable events of which the IRS may have no data.
- Rents: you don't tell the IRS how much rent you pay; the corollary is that the IRS doesn't know how much rent the landlord took in. And even if they did, to calculate the tax they also need to know the sum of expenses for the year. To calculate that, you may need to know the financing of the property.
There are similarly many cases on the deductions side of the ledger where a naive approach will end up over-collecting from taxpayers (people would love that).
(Yes, some of these could change if we changed our tax code. But that's not something the IRS is able to do.)
(Tips are supposed to be in your W2, FYI)
Sale prices of houses are public in some jurisdictions but not in others. Improvements are not reported to the IRS of course, some of which add to the basis.
Schedule C would be entirely impossible for the IRS to calculate for you.
Automated filing is not an impossible task for everyone, but it’s far from perfectly automatible.
1040-Schedule-C feeds into 1040-Schedule-1 (line 3), which feeds into 1040 (line 10).
The problem with these "who says the current law has to stay as it is" discussions is that the more that is proposed to be changed, the lower the likelihood it will ever happen
Only about a third of tax returns have no schedule 1-6 or schedule a, which was very surprising to me. https://www.irs.gov/statistics/filing-season-statistics
I've only had such simple taxes for like a couple adult years. I've had at least 1 other complication every year since. The stats seem to imply a similar pattern broadly too since each schedule is only filed by a minority of returns, but most returns file at least one schedule.
But. The tax code is needlessly and intentionally convoluted. For a large number of tax payers, you get all sorts of choices on how to file things, how to declare things, what years to declare what, etc, etc, etc. Many of these choices will be based on what you expect to occur next quarter, next year, etc. People in these situations can typically afford to pay an accountant several hundred or thousand dollars a year to help them make the optimal decisions.
Only a small percentage of stupidly rich people really need to consult with tax advisors to construct elaborate stories about their complicated and catastrophic investment losses which mean that in spite of ever-growing wealth, they actually have negligible taxable income. The rest of us are suckers for taking a W2 and have really simple taxes.
Really? How?
It’s such BS that these companies cause this tax mess to begin with and then get free goodwill and advertising based on them making it “easier.” It’s so infuriating.
https://www.washingtonpost.com/business/2022/05/04/turbotax-...
Also who the hell is TaxHawk and why should they have my tax filing info lmao. The IRS already has everything. A simple letter, text message, or email from the government I pay taxes to is all it should take for me to get taxes complete. I review what they have, do nothing if it’s correct, and either pay taxes or get a tax return. Anything beyond that is a complete and utter waste of time.
https://www.ftb.ca.gov/file/ways-to-file/online/calfile/inde...
No excuse justifies the current situation.
I have property, investments, multiple incomes, including international stock compensation that involves three countries, dependents... and my UK tax return is trivial.
How come it's possible in the UK but not the US?
And even when you do that, it'll still be easier than the paperwork in the US.
There could easily be a system for updating your dependents with the IRS that doesn't involve doing the whole thing yourself.
https://www.irs.gov/help/ita/whom-may-i-claim-as-a-dependent
Or alternatively: They can directly subsidize high efficiency furnaces, which would actually allow more people to have them than a tax credit will since it would lower the barrier to entry (price).
Taxes are complicated for the average person in the US because the US government makes it that way and so far, has been unwilling to act in your interest.
Behind the scenes, the IRS already has a well informed idea of how much you owe, based on the information submitted to them by your employer and a few select third parties - such as your bank or broker. The challenge is that you personally need to report additional information for things like capital gains tax on asset sales, any credits/deductions you wish to claim, and changes in your living arrangements or life status.
For the majority of people who file using 1040-EZ, you're basically just confirming what the IRS already knows from its own data collection along with some possible adjustments. It would be possible for the IRS to collect even more information, but that does seem rather intrusive and unwelcome to most American's sensibilities.
I think a change in language would go a long way. The average American spends 13 hours and $200 per year to fill and file their taxes. This expense is itself a tax, albeit an indirect one. "This tax season, we want to save you money, and pre-filled tax forms will do just that." "The tax industry and their lobbyists fight tooth and nail to keep our tax code complex, and every year this costs you money. We want to fix that."
All my problems with taxes over the years have amounted to similar mistakes - forgetting to transfer one amount from one form to another, or transposing numbers, etc.
1. People who really should file with pencil and paper (or excel, at most)
2. People who need an accountant
Very few people fall in between these categories. The tax code is so complicated and annoying that even things like employer RSUs, mortgages, side hustles, and doing more than 20 stock trades in a year can be risky and weird.
Turbo tax has spent 44 million dollars on lobbying.
The American Medical Association(Physicians) have spent 500 million dollars on lobbying. (All of medical spent about 2 billion)
Its good that people are angry that lobbyists control the nation, but for some reason we give the biggest lobbyists a pass. I don't see the outrage against the top 20 lobbyists, I do (rightly) see it against turbotax.
The problem is that you speak for others when they hold the opposing view - our medical industry is evidence of the free market working at its best, and providing care for dollars with no hidden or extraneous fees.
I’d love for us to just say “let the market sort it out”, but that generally requires presumptions that aren’t universally true for all goods or services.
GP you should definitely throw in a /s or something because it's not real clear whether you're serious or not
Who are these unicorns which are not paid by this system?
Are they friends with Yeti, Bigfoot, and the mythical hot single living in my area?
Effectively, Yes.
> Who passes bills?
Technically the elected officials, but the bills themselves are usually written by lobbyists.
Pressure from campaign donors, either directly or through lobbyists, or through "party" channels influence votes.
I know there were issues that precipitated the direct election of Senators but I think we would be better if we went back to State Senate control of the Senate, that would force people to focus more on their state and local politics where they have more power rather than ignoring them and shouting how the US Senate is doing nothing.
https://www.armstrongeconomics.com/international-news/north_...
The solution to the tax prep industry isn't to have the IRS do your taxes for you, it's to reduce the size of the tax code.
The US government is obsessed with giving narrowly-targeted groups of people money through the most obtuse mechanism possible, and it is ridiculous. If you were just sent a check when you bought an EV (for example), a lot of the tax stuff would be much simpler.
“Taught my kids about democracy tonight by letting them vote on which movie to rent and what pizza to takeaway.
I then picked the movie and pizza cos I’m the one with the money.”
Yes, lobbyists and intelligence agencies.
https://posey.house.gov/news/documentsingle.aspx?DocumentID=...
Not just industry lobbyists. Another big part is Grover Norquist's "Americans for Tax Reform" and similar groups. They have a lot of influence with about half of Congress.
Here's a PowerPoint presentation [1] Norquist presented to the President's Advisory Panel on Federal Tax Reform in 2005 explaining their opposition to free filing.
It's short so I'll paste the text from each slide here, with the slide titles marked with dashes, so people don't have to find a copy of PowerPoint (or LibreOffice or Keynote, which also can open it fine).
---- Implementing a “Return-Free” Tax Filing Scheme
Presentation to the President’s Advisory Panel on Federal Tax Reform
Grover Norquist
President
Americans for Tax Reform
May 17, 2005
---- The Current System
Tax filing is citizen-based – taxpayers tell the government what they earned and owe
---- Under Return-Free
Tax filing would be government-based – the burden would be on the taxpayer to challenge the government’s findings -- essentially an audit of every single American taxpayer
---- The Fox Would Guard the Henhouse
The same agency that collects taxes would be the tax preparer – the motivation to maximize revenue would dominate both ends of the process
---- Return-Free is a Tax Increase
The true goal is to increase revenue. The government knows few taxpayers will challenge its findings
---- Taxes Should be Visible
Doing taxes keeps citizens aware of the tax burden imposed upon them by the government. A Return-Free scheme would allow the government to raise revenues invisibly
---- The California Example
The State would not guarantee the accuracy of the returns it prepared – the taxpayer was removed from the process, but left with the responsibility
The pilot program achieved 50% less uptake than planned
Comments by CA officials tell us that the true aim was increased revenue
[1] http://govinfo.library.unt.edu/taxreformpanel/meetings/docs/...
The IRS can say "this is not a valid business expense." You can say "it clearly is a valid business expense and should be deducted!"
The IRS can say "this is contractor income." You can say "it clearly is an down payment for subcontractors, you can see the money leaving here!"
These are two obvious problems you could have, and it doesn't even require dishonesty on the IRS' part. Maybe one of your subcontractors is trying to cheat the system and is jamming you up?
That sounds like a big difference to me. The former would require government knowledge of every single transaction you make/receive, while the latter does not.
Further.. it feels like the goalposts have moved on this since it last came up. I don't need the IRS to do my taxes for me, I just need to be able to login to the IRS, pick a form, fill it, and submit it.
E-filing should be free and available to everyone. If you have that, I'm not sure what the value of having it prefilled for me is. In particular, if you just have a single W2 to work from, there could be a 1040-SUPER-EZ where you just enter a serial number from your W2, have it fill from that, and then submit.
You can make this easy without putting everyone under the thumb of the IRS.
How are they at a disadvantage? Before, they had to do all their filing themselves, after, they have to also do all the filing themselves.
You and I don't do that, but rich people and companies do, if a tax increase is going to impact you and I by $100 it's barely worth the email that will be ignored. If a company is going to be hit by $100m, then it's well worth spending $1m to carve out an exception.
> All these are just giant waste of time to majority of the population in the country.
It works too. Tax return day is ingrained in the American Psyche through cultural output (TV), there is a constant undertone in the US that taxes are bad and the government is stealing your money.
Get rid of tax day and make 70% of the country not have to worry about it other than a line on their payslip and as well as making things far more efficient for both the taxpayer and the government (thus reducing government spending), it changes that cultural balance. Few will care about taxes, and that means the pressure to introduce a 0.1 cent drop in tax (which is structured to benefit someone on $150k by say $2 a week, but benefits people like the Koch Brothers by $200k a week) goes away.
Each month I get a payslip saying I've earned £xxxx and £yyyy has been taken in various taxes and other deductions (from pension to [optional] healthcare, some of which comes off pre tax, some post tax), and the balance is transferred into my nominated bank account each month.
At the end of the year I get a summary from my employer called a P60, which shows how much tax I've paid.
If I have complex needs I then have 9 months to go to a gov.uk website, fill in that data, and either get a rebate or a bill. If it's a bill then they adjust my tax code (which defines the deductions) the next year it takes about 10 minutes (or I can just pay straight away), if it's a rebate they pay it direct to my account (or they can adjust next years deductions)
For self employed people then, but you likely have an accountant who handles everything, and pay yourself via dividends, making large enough tax savings to easily pay accountant fees (which for a small business is pretty low)
I don't consider tax a burden, I consider it the cost of living in a western society. I don't have to pay them - I could move to Svalbard or a country that would take me and pay taxes in that country. Even Americans can do this (and get rid of their US citizenship - saying "no I don't want the benefits of American society")
And as far as I see it, everything the Fed needs to file my taxes is information that the Fed already has. I'm pretty sure this is an extremely common circumstance.
I also don't understand why states don't push for return free filing. They can demonstrate it working without the need for the Fed to take action, which in turn would put pressure on the Fed.
Honestly I wouldn't be surprised if the IRS could already have a 90+% success rate for 80+% of people. It seems like the real issues would be in the very rich who can take advantage of many loopholes or the average person when big life events happen (things like death, marriage, and birth, though most of this could be automatically reported as well but easier to fall through the gaps).
Maybe I misunderstand, but it doesn't seem like the IRS needs any additional information than I have presumed it already has. This information is at least all known by the fed, so it doesn't seem like a data leakage. And I'm someone that highly cares about privacy.
I suspect that the real pushback for return free filing is from 1) tax filers like Turbo Tax who would lose a lot of business and 2) the ultra wealthy as RTF would put pressure to simplify the tax code and reduce the number of loopholes.
Let's say you sold your car and deposited the money in your account. The IRS won't have details about the sale and neither will your bank. They will know the amount, but it is incumbent on you to report information if this sale represented a capital gain. In all likelihood it wasn't, but the government doesn't have a way of knowing this. If you get audited, someone will probably ask where the money came from and it would be up to you to furnish receipts in order to prove it.
Capital gains from real estate sales are not automatically reported.
Public securities (stocks, ETFs, crypto, etc) are a small fraction of overall capital gains by $.
What percent of Americans buy and sell a property within a year? I bet it is pretty low.
> stocks
All the major players report this information.
> ETFs, crypto
The vast majority of people use exchanges like Coinbase and Binance. These already report.
So I'm not sure what your point really is. That there are edge cases? No shit. No one is even arguing against that. The argument for return free filing is that the vast majority of people will benefit from the system. Even if there are mistakes it is easier to look over something and correct it than do everything from scratch. The people that won't majorly benefit from this likely already have more than enough wealth to pay someone to do their taxes already and honestly I'm not concerned about them.
Don't let perfection get in the way of massive improvement.
> You can sell your primary residence and be exempt from capital gains taxes on the first $250,000 if you are single and $500,000 if married filing jointly. (once every 2 years)
> You can add your cost basis and costs of any improvements that you made to the home to the $250,000 if single or $500,000 if married filing jointly.
So I'll change my question:
What percentage of home owners are profiting >$250k (single)/ >$500k (married)? What percent of them do that more frequently than a 2 year period?
I'm willing to bet that these numbers are still very low. That's the entire point. I'm sure there's nuance I've missed as I'm not an expert. But my entire point isn't about specifics, it is that your argument against this system is about edge cases. If you can prove that these aren't edge cases, I'll actually side with you. If not, I still see return free filing as an extremely beneficiary policy to the vast majority of Americans, and especially to those with the least income. I already know that 90% of households take the standard deduction, so you're going to have to make some substantial claims.
https://www.investopedia.com/ask/answers/06/capitalgainhomes...
> The Tax Reform Act of 1986 required anyone responsible for closing a real estate transaction, which may include the escrow agent, title company, or attorney, to report a real estate sale or exchange to the IRS on Form 1099-S. In addition, they were required to furnish a statement to the seller of the gross proceeds of the sale. In 1998, with the passage of the Tax Payer Relief Act of 1997, an exception to this reporting requirement was allowed.
> If the sale price of your residence is $250,000 or less ($500,000 or less for married sellers) and you have lived in the property, as your principal residence, for the last two out of the last five years, your closing agent will not be required to file Form 1099-S with the IRS. The gross proceeds of the sale need not be reported to the IRS if these conditions are met.
> Be sure that your closing agent has your written confirmation that your sale is exempt from the IRS reporting rule. Most closing agents have a form, called a “Certification for No Information Reporting on the Sale or Exchange of a Principal Residence” which you will you be asked to sign at closing. The form will ask for your seller information, social security number, address, and certification that you have met the exemption requirements.
https://sandygadow.com/will-my-escrow-agent-have-to-report-m...
Two things:
1. A lot of asset sales should be or are reported by financial institutions, so in the case of me selling stock through Schwab or whatever, it should still be handle-able by the IRS.
2. Okay yes, it's reasonable for me to put in my living status changes or tax deductions I want to claim, but they don't ask just for that, they ask for all the other shit too, all the stuff they already know the answer to. Why?
Besides, as others have pointed out, there are ways to specify at the time of the sale. That's what Schwab does when I sell stock there.
Your financial institution doesn't necessarily know your capital gains. It reports stock sales to the IRS, but often doesn't report the cost basis because it doesn't know. Consider:
You buy 50 shares of ABC on Jan 1 2020. Then you buy 50 more shares on Jan 1 2022. Now you sell 50 shares of ABC on Jul 1 2022. Which bunch of shares did you sell? Was it a short term gain or a long term gain? Was it a loss? It depends. Neither your broker or IRS knows the answer, but you do.
EDIT: The above information is evidently out of date by about 10 years. TIL
Your broker does know because you need to tell them which ones to sell when you sold.
The IRS also knows because that's included in the cost basis reported to them by the broker. (This changed some number of years ago, brokers used to only report the income from the sale but not the cost.)
https://www.spencerlawfirm.com/2011/01/new-cost-basis-report...
For reasons I can't comprehend, ETrade reports the costs basis wrong every single year on all my RSU and ESPP sold shares. They do issue a supplemental report which has all the correct info, but the 1099-B has it wrong. It is maddening. I need to send both the 1099 and the supplemental doc to my CPA so things are accounted correctly, otherwise I'd pay a lot more taxes due to ETrade errors.
All other brokers I deal with do it correctly.
Things get more complicated when you are trading the same security across different brokers because they can’t detect wash sales. The IRS has the information to detect was sales.
Employment compensation related shares get weird, but they will at least track the purchase date or the date it entered their system anyway.
Edit: To pre-empt some replies: yes, centralized exchanges will report sales but they won't always know your cost basis, and a lot of the trades will happen on-chain, which definitely isn't automatically reported.
To be clear, I support the IRS doing as much as the filing as possible, and I agree these issues aren't dealbreakers, but please don't make the situation look different than it really is.
And the tax companies can offer to do that "click further" for you, and you then would see how much they saved you (if any at all). Heck, make it so the IRS always charges a "I dun wanna read anything" fee of $50 that you can get out of by clicking "uh no" like the presidential one. That would satisfy most people, heh.
Complex scenarios can still be handled by hand if the taxpayer wants.
But that's exactly what the parent comment was saying: you'd get a notice from the IRS that says they think you owe $X based on their records. You have until the filing deadline to file any additional income/exemptions/deductions/challenges/etc.
As you say, for the vast majority of people this would make taxes a million times easier. For people with more complex situations, they can then engage in the more complex process of additional filings.
I will corroborate, as I've posted elsewhere in this thread. I've had to interact with IRS employees, and they basically have all the information in their computer system. For simple returns, they could tell you the entire contents of it!
One could argue that a basic principle of liberalism ought to be that if the government wants to tax you they should be responsible for calculating how much you owe according to the law. Or in other words, for every dollar the government doesn't demonstrate that you legally owe, you should not owe that dollar. Kinda like presumption of innocence, but for taxes.
They know what you purchased your asset for + when and what + when you sold it for, don't they?
It shouldn't have to be a game. There shouldn't be fear and antagonism. The current system favors the IRS. It favors other third-parties. And it's devoid of any favor for the taxpayers.
This part annoys me; when I would have RSU's vest, my broker would send me a 1095B(?) which plainly lists stock price at time of acquire and time of sale, and the gains, which for RSU's sold at time of vesting is 0
but for some reason I don't understand, they don't report the cost basis to the IRS, just the sale and price at time of acquire, so if you don't file your taxes to fill in that cost basis information, the IRS will cite you as having earned the entire sell cost of the stock!
This fucks up a lot of people new to tech/taxes, and I still haven't been able to find documentation on why they don't file the cost basis for you if they're reporting the sale anyway.
[1] https://www.irs.gov/instructions/i1099b#idm139900428766768
> ... commenters asked that there be no change to the Form 1099-B to reflect compensation status or, alternatively, that using the indicator be permitted, but not required. These commenters indicated that compensation information is not accessible to most brokers, and extensive reprogramming for both the underlying database and the reporting process would be required. The commenters also expressed concerns that, in many situations, a broker would have to accept customer-provided information in order to track the compensation-related status.
> The lack of a mechanism to communicate whether the basis of stock has been adjusted for the exercise of a compensatory option coupled with a system involving discretionary broker adjustments for compensatory options would, however, be unworkable.
> A broker may not increase initial basis for income recognized upon the exercise of a compensatory option or the vesting or exercise of other equity-based compensation arrangements, granted or acquired on or after January 1, 2014.
https://www.federalregister.gov/documents/2013/04/18/2013-09...
What is crazy about the system is that every one of those years, I have been asked to pay the same amount of money (roughly $2000 extra), but the mistakes change each time. Each time, I have sent a very kind letter to the IRS telling them, "no, I did this correctly," and the IRS agreed. It failed to account for cost basis on RSUs from an employer. It failed to account for long-dated options expiring worthless. It failed to account for long term capital gains being long term.
It's hard to avoid drawing the cynical conclusion here, that the IRS each time attempts to extract a payment that is slightly less than the cost of having a lawyer or accountant deal with them. I don't want this kind of system sending out a tax bill to me that I have to contest, because:
1. It will almost certainly not do the accounting that minimizes each person's burden. The US tax code is long and full of terrors.
2. Most people will just accept the result, regardless of the fact that it will cost them thousands in extra taxation.
3. People that don't accept the result will likely be flagged for future audits, and will likely face a lot more scrutiny. In the previous system where everyone has to file, there are a lot more targets.
This is an utterly self-serving rationale, but I don't want this system.
On the other hand, with our present adversarial system there are a variety of private businesses that do get money when the IRS makes mistakes.
The adversarial process that exists today (between you and the IRS's automated systems and processes, mediated by the humans at the IRS) allows you to generally get the benefit of being on the side that minimizes your tax burden. Usually, the more complicated your tax filing is, the more gray there is, and the more advantage you can take of it.
These seem trivial to find out from other government agencies.
That's not how it works, though. You're telling the government how much you own and how much you paid. They do have a good estimate, and often that estimate is probably correct. However, there are cases when that estimate isn't correct.
Me: How much do I owe?
Gov’t: You have to figure that out.
Me: I just pay what I want?
Gov’t: Oh, no we know exactly how much you owe. But you have to guess that number too.
Me: What if I get it wrong?
Gov’t: You go to prison
Further, that would be true anywhere, since no system is immune to tax fraud or improper communication.
People hate the police but for some reason think ladder climbing IRS agents are fair and rational. They aren’t. They’re bloodthirsty thugs who will make your life a living hell.
If you don’t believe that to be true then consider yourself very, very fortunate.
I used a CPA to generate do my taxes a couple times, not because I have a whole bunch of money or complicated stuff but because I was overseas a couple years then came back and bought a house.
First time it was great, the second(and last)time they screwed up. Badly.
My wife is a foreign national, not a US citizen and no plans to be one. At the time she did not have SSN. For the first filing, the CPA put her down and did not put down a SSN. The last time they put down a SSN, a random one from someone in NJ(How do I know this, my state revenue gave me all the persons details when I contacted them. Yes, that incompetent), I live in the south.
I noticed the issue when I was reviewing my paperwork after I got it back. Since I was filing via post, I crossed out the wrong number and wrote in a note.
3 weeks later I get a check from the state issued to my wife and I, listing the incorrect SSN for her. I call them up and spend several hours trying to contact them(call and no answer, call an hour before close and get closed message, call 30 minutes after open and get closed message) and then a couple hours on the phone where they admit that the paper work was corrected, they see that I corrected and then they want and used the wrong data anyway because...stupidity or something.
The solution is to send the check back to one address and resubmit paperwork to another address.
The IRS has not yet issued me anything, I call them to alert them of the issue and make sure I don't have to go through the same deal. I call and get through on the first try, I inform the agent of what happened and what I did to the paperwork. They pulled up a scan and told me they saw what I was talking about, that it would be no issue and I could relax and have a great day and recommended I don't use that CPA again in the future.
For all the hate and horror I hear about the IRS, I don't see anyone substantiate it. All this going on about bloodthirsty thugs just seems to be trying to "other" a group of people.
Maybe another story is appropriate here too:
I have two brothers who just imported a small gas powered excavator from China bought off of Alibaba.
In order to import such equipment, the engine must be certified for use in the US by the EPA. The document filing is rather strict, not good faith and refile + pay interest like how the IRS works. $15,000 in penalties and possible jail time if you make a mistake kinda strict.
I told them they needed to make sure the equipment was cleared for import as I have to work with the EPA on emissions certification sometimes.
The manufacturer assured them it was, they paid the down payment and wait for it to arrive. 3 days before the ship docks, they get a call from the cargo broker asking them for the EPA documentation. If they can't provide it by the time the ship docks, choices are: Get documents showing engine is certified, send to Customs bonded warehouse(high cost per day) and possibly rework/remove engine or abandon/dispose of cargo.
In attempting to get the certificate from the manufacturer, they contacted the EPA several times to make sure the information they were getting would match what was required. The older brother did the initial calling of the EPA. OB: "Fucking EPA, they are trying to get me to make a mistake so they can screw me over and fine me" The younger brother then called the EPA to get a better understanding and clarify what was relayed to him by the older. B: "The EPA isn't to bad, you ask them questions nicely and they respond. They even gave me some good advice on where I might be able to find some of the documents."
The only difference between the two is how they approached the government agent and their attitude and manner of asking questions.
My advice, if it seems like there are a bunch of people trying to screw you over using regulations, it might be the manner and way you are approaching the situation.
>If you don’t believe that to be true then consider yourself very, very fortunate.
Only if you're Al Capone[0] or similar.
I had an IRS agent come to my home. He knocked on my door and was quite polite. I didn't invite him in, but made an appointment to go to his office a week or so later.
The IRS claimed I owed a six figure sum (which was ridiculous, but whatever), and within a month or so, I filed the five years worth of tax returns which I'd ignored.
Guess what I got? A prison sentence? Nope. A big fine? Nope. A small fine? Nope. A refund.
If you’re not guilty then you have nothing to hide. The bedrock principle of our legal system!
Out of curiosity, which system are you referring to?
It's not the system in my country[0], so I'd like to know so as never to move to that place. Thanks!
[0] FYI, the bedrock principles of the legal system in my country are embodied here:
"If you're not guilty then you have nothing to hide" is a semi-common phrase that is broadly considered to be wrong and foolish. https://en.wikipedia.org/wiki/Nothing_to_hide_argument
This sub-thread contains statements such as "Nobody goes to prison over tax errors unless it's deliberate fraud" and "Only if you're Al Capone[0] or similar". It is my personal opinion that those statements are roughly equivalent to "if you're not guilty then you have nothing to hide". You may or may not agree with that comparison, that's fine.
The idea that the IRS only prosecutes and wins convictions against the guilty is naive and foolish based on my lived experiences. Other people have had other experiences. They are fortunate and privileged.
The difference in opinion between the police and IRS is interesting. Police are not popular these days. Some people even believe All Cops Are Bastards. I would encourage people to extend whatever opinion they hold on the police, prosecutors, and the judicial system to cover IRS agents as well.
And so Poe's Law[0] strikes again, I guess.
>This sub-thread contains statements such as "Nobody goes to prison over tax errors unless it's deliberate fraud" and "Only if you're Al Capone[0] or similar". It is my personal opinion that those statements are roughly equivalent to "if you're not guilty then you have nothing to hide". You may or may not agree with that comparison, that's fine.
Since I'm the one that mentioned Al Capone, my point wasn't that. At all.
Rather, that at least AFAICT, IRS agents mostly have the accountant/used car salesman vibe rather than an AR-15 wielding SWAT team member ready to to beat you with their Shillelagh if you mouth off.
>The idea that the IRS only prosecutes and wins convictions against the guilty is naive and foolish based on my lived experiences. Other people have had other experiences. They are fortunate and privileged.
I can't speak for anyone else, but I never said anything even approaching that.
While the IRS does have a Criminal Investigations[1] department, IRS agents are not law enforcement. They do not have the power of arrest, nor can their actions result in jail.
>The difference in opinion between the police and IRS is interesting. Police are not popular these days. Some people even believe All Cops Are Bastards. I would encourage people to extend whatever opinion they hold on the police, prosecutors, and the judicial system to cover IRS agents as well.
I'm old. When I was young, there were many street gangs in my home town and the police were just considered the biggest and best armed gang.
Over the past 40 years, some changes for the better have been made, but not enough to disabuse me of that notion WRT police.
As far as IRS agents are concerned, they are a whole different animal. They are not police. They do not arrest people. They do not handcuff people and "rough them up."
What they do is attempt to collect unpaid taxes. Whether they do that fairly is probably a crap shoot, like most civil servants who deal with the public.
The IRS has broad powers to attach/seize assets in recovering unpaid taxes, but revenue agents are (at least AFAIK) paper pushers and not jack-booted paramilitary thugs.
My experience with an IRS revenue officer was unpleasant, as action was started to attach some of my assets. Even though the "tax debt" assessed wasn't valid (as I mentioned in my initial reply[2] to you.
That said, once I addressed the issues, I was able to resolve them without issue and, not only did I not have to pay anything, I received a check from the IRS.
I'm sure my experience isn't the same as that of others, and I'm sure that IRS agents can (and do) make things quite unpleasant for some folks. But "thugs"[3] seems an inapt term.
If you don't like the police, prosecutors, judicial system and the IRS, I suggest you take appropriate action (activism, voting, etc.) to change how those institutions operate.
You certainly won't get a lot of argument from me about it, but your hyperbolic tone ("bloodthirsty thugs"? please.) seems a little shrill, IMHO.
I'm not telling you what to say, think or do, just providing my personal opinions and experiences as well as my impression of your exposition of yours.
I expect you will continue to disagree with me and that's fine. I have no special expertise or knowledge about the IRS and its revenue officers other than my own experience, so I'm sure YMMV.
[0] https://en.wikipedia.org/wiki/Poe's_law
[1] https://en.wikipedia.org/wiki/Internal_Revenue_Service#Crimi...
If all your income is from a job or investments that have a 1099 and you only take the standard deduction, the government already knows exactly what you owe. The only thing they don't know is business income/loss and donations.
For most taxpayers the government could calculate your tax bill without any involvement from you.
Yeah, they're saying that it should work thatvway though, like it already does in Japan, Sweden and many other countriea
Which isn't actually an issue. I moved from the US to Norway some years ago. Once a year, the government sends a letter (to a secure digital mailbox) and has me go online to check my tax return. If I do nothing, they'll just send me any refund I'm owed (or expect my payment by the due date). If there is an error of any sort or I need to do something to it, I have that option.
Many if not most people don't need to do anything, which saves money since there are less tax returns for humans to deal with. I'm guessing there are more resources available for other types collection efforts.
Although I agree that the IRS can make a guess, I'd rather just change it to a system without so many damn details
Most people trade through brokers like Coinbase, which does report
> overseas earnings
I don't think this applies to the VAST majority people
> business expenses
Also doesn't apply to the vast majority of people.
When you transfer stocks it transfers the basis for you.
Of course every category doesn't apply to most people. But there's about a thousand of them.
Ever drive Uber? Ever get a donation on Twitch? Ever gamble?
There's so many ways you can get a little chunk of change and IRS wants a slice of all of it
Even with a system of "not so many details", a few things are simply going to slip through the cracks but this isn't going to affect most people.
I pay something like $120 to TurboTax annually to file federal taxes and taxes for two states. I've got a W2 from my job, dividends and gains/losses from equity sales from my brokerage, 1099-Rs for my IRA and 401k, a 5498 for my HSA, and a bunch of deductions for charitable giving, which I perform through my DAF. Every single one of these forms is submitted to the government with complete information needed to compute my tax burden, except for the cost basis of my RSUs which is against some idiotic law to report to the IRS. Fix that, and the IRS can send me a bill. What percentage of the population do you think has more complex taxes than me?
Sometimes real small, like a few hundred bucks driving Uber. I took a deduction on miles driven as well.
Filing this kind of shit, and keeping records is insanely time-intensive. Easily several days of work.
Not to mention every brokerage already sent them the data, all of my bank accounts reported interest paid, but I need to do it manually again
So I have a few important questions then:
- How large is the error?
- Can errors be solved by saying "confirm and if we find out you lied you'll pay a fine"?
- Is the error homogeneous or worse for certain groups/classes?
- Is the error less than the cost and loss of productivity that Americans face in filing taxes?
- If it is non-homogeneous, then can we do return free filing for the majority of the population?
- Why can other countries successfully perform this but we can't?
> the government is fully capable of passing a law to resolve that particular concern
That's an implementation detail, not a fundamental obstacle. Failing to recognize this is a failure of imagination.
I don't know, just a theory. I still think the whole complicated process is stupid and they should just give you a number at the end of the year.
France is only 70M people and HK makes a tax profit every year with 8M people, sure. We re not the strong and beautiful United States, but if us shithole countries can tell people an estimate they can touch up, the US can as well Im sure.
I thought before that the US was some sort of capital friendly country until I made a franco american friend who had to pay taxes there and Hong Kong. He had a guy hired and it seemed a complete nightmare. He worked as a low level programmer there for 3 years 15 years ago and nothing else. Still needs an accountant to do his taxes :s
you may have HN confused for reddit, you'll find very little american patriotism here
I did have basically the same thought as you, that not showing you the info means you're tempted to hide it. However, even if somebody is late reporting the info to the IRS, you're still liable. And the opportunity to hide income is gradually being reduced: eBay is sending 1099s [0] if you sell enough there, so is Amazon [1] and even Facebook Marketplace [2] for sales through them (as opposed to meeting in person and using cash).
If people use Venmo or Zelle, that's trackable. Maybe the IRS isn't using it today but some day.
[0] https://www.ebay.com/help/selling/fees-credits-invoices/ebay... [1] https://sellercentral.amazon.com/help/hub/reference/external... [2] https://www.facebook.com/business/help/970063599855691?id=54...
But the IRS is the government. It isn't here to make money. They aren't supposed to be working against the citizens.
Back in Spain, they just send you a draft that you sign off on, or update if needed. In my first three years in the US, I went to a tax specialist to get my taxes done because I couldn't figure out how to get them right.
Unless you’re a US citizen or permanent resident, in which case you still need to file in the USA, but that’s not the Germans’ fault.
I don't agree that things that one is used to, don't need to be improved upon. And the US is clearly falling behind the times here.
Literally true! I've had to interact with IRS employees, and as far as I could tell, they basically had what amounted to what my tax return should be on some kind of computer screen right in front of them. This was back in 2015 or so!
it's not the worst idea to have some counterbalances to that type of spending
The Free File Alliance came to be because Congress originally mandated the IRS to do away with tax returns altogether in a law called the Internal Revenue Service Restructuring and Reform Act of 1998. After a major lobbying push by the tax preparation industry, the Free File Alliance was introduced as a way to let low-income Americans file their taxes for free without getting rid of tax returns. The Alliance drew institutional momentum away from the change to return-free filing, which likely would have rendered large segments of the tax prep industry totally useless.
https://thehill.com/homenews/3607174-the-irs-could-be-on-the...
It’s such a relief of stress every year. I hate the way the US (and Canada) does taxes.
cc https://www.propublica.org/article/congress-is-about-to-ban-...
https://www.propublica.org/article/turbotax-deliberately-hid...
Also see https://www.reddit.com/r/DecodeInvesting/comments/tcm21m/int...
We have the same shitty system for the exact same reasons the US has their shitty system.
1) the best way to get elected is to promise people things with their own money. This creates more and more programs the government needs to fund and therefor ever more tax dollars are needed.
2) Rich people can hire lawyers and lobby their politicians. This allows them to make favourable changes to the tax code increasing its complexity. When has the tax code ever been reduced?
3) The government abuses the tax code as well. Instead of being a tool to generate revenue to pay expenses it does all sorts of "social" work as well. want your citizens to get married, change the tax code, want your citizens to buy houses, tax code... Move to the NWT, tax code.
Every time the idea of a "flat tax" comes up those who benefit from the complexity freak out. A flat tax would remove the ever-increasing complexity and loopholes so the rich protest, the government cant abuse it so they protest, Revenue canada would be cut in 1/4 so they protest...
https://www.taxpolicycenter.org/briefing-book/what-standard-...
I've got some bad news. It's not just those exotic countries. There are people inside the USA that don't understand deductions either. I've lived here my whole life here and I'm in my forties now. I always just use the standard or default. I'm not exactly sure why someone would or would not want a deduction. Are my taxes optimal? Probably not. This is ok. I'd like to at least have the option of having a simpler process.
I usually get a tax refund every year, automatically, in the thousands :)
I was able to confirm. And sign. Done in 20 to 30 min max
I've filed taxes in countries that "auto-complete" your return. What I end up doing in that case is pulling all the forms I received, double checking all the numbers, and if they are correct, hitting "submit".
So I basically end up doing the return anyways.
That said it was much simpler - but not because the form was already filled out, but because the tax code was way simpler.
If the IRS starts auto-completing forms, people are either going to still have to "do their taxes" or just take the risk that the numbers are right.
If you had a super simple return to start with, it wasn't much work anyways.
It's exactly the same with healthcare (and health insurance) & higher education.
Few systems in the US are setup in the best interest of the people, and are instead setup for profit.
Once I have the statements I need from investment funds, etc. I've never had a tax return take much more than about half an hour, and I've never paid a cent to file anything.
- how many dependents you have
- whether you bought or sold a house
- what you donated to charity
- any cash business / side / hobby income
- what health insurance you held this year
I mean sure have them send out a form, but it's naive to expect the correction rate to be low; half the country is going to need to tell the IRS stuff about their personal life, if nothing else for dependents to correctly adjust EITC or CTC.
Automatic income tax withholding was opposed for the reason reason(s). People who want taxes to be lower don't want the "pain" of taxes to be hidden. They want people to cringe every time they write a check for tens of thousands of their hard-earned dollars, not just have it magically spirited off to the government.
Filling out taxes helps share some of the same pain. Every year, every tax filer thinks "man, taxes suck." This undoubtedly has at least some effect on voters' willingness to pay even more.
The IRS being the only org most people have to figure out what they owe money to is bizarre, especially given the penalties.
This argument against automated tax filing seems to make sense to me. But if it’s true, shouldn’t we have manual tax returns for vehicles, real estate, sales, and fuel?
I think you could share the pain, by having the IRS send an annual invoice to each tax payer, stating clearly how much they paid the government.
It's crazy that people are still going to jail for grams of weed while people who have wasted billions of dollars of human productivity every year get to walk free.
Another is that a free filing system with pre-populated returns shifts the information asymmetry involved in tax filing to be fully in the taxpayer's favor. Many people have an "I need to report everything because I don't know what the IRS knows" mindset. If the IRS populates a taxpayer's return with all the info they have, there's no incentive to report anything not listed.
Wait until after file date but before extension date, and request all the transcripts.
Maybe. That also implies that the entire population wants to cheat the government. I don't think that is necessarily true.
I know there are challenges, mostly confronting lobbyists as the articles mentions. But we can put a man on the moon. . .
Then I would certainly hope you are aware that it is completely free for low income residents to file their taxes with any number of services. This has been a solved problem for years and makes me a bit curious about your experience. Could you possibly comment on what issues you’ve encountered with the current free options?
Suppose there's a planetary government and a solar government. Hear me out.
Filing a local, state, federal, planetary, and solar return each year is stupid. The solar government shouldn't process trillions of returns.
We should file local. Local should file state. State should file federal. Federal should file planetary. Planetary should file solar.
Now take away planetary and solar. Clearly the way to traverse a tree is one level at a time.
Planetary: Uh, federal, please correct this issue.
Federal: Uh, state, please correct...
...
In this model the federal government only deals with inter-state taxation and with collecting taxes from the state.
The goal is to take away the responsibility AND authority from the federal IRS, to streamline the process. If the IRS remains responsible but just has the states "do a first draft", it's useless.
I used to live in NYC, and that was a kafkaesque nightmare in comparison.
You can see this effect if you compare the effective tax rates of California that has a income tax to Texas which relies on sales and property taxes.
https://www.instagram.com/p/CdgZ6KOOGww/
California still has sales and property taxes so it isn't perfectly progressive, but it is much better.
I also don't really like how with property tax you can end up losing your assets. Let's say you work for years doing construction and pay off your house and then you end up on disability after hurting yourself. With property taxes you can end up losing your home.
I'm not convinced though that you are arguing in good faith and aren't just one of the few who benefit from a lower effective tax rate from regressive taxes. Why do you think a wealth tax is the best form of taxation and how would you implement it?
Personally, I am in the top 10% of income earners, but not the top 1%, and I get most of my income from LTCG (this is how the tax code incentivizes you to structure your income, and I follow incentives).
All of your arguments here and the resulting evidence assume that "fairness" in a tax system is about charging people with high incomes more. Specifically, that progressive taxation - which has nothing to do with political progressiveness or social progress, and is just about the tax progressing as your income goes up - is the fair way to tax people. It is not. Pulling out these sources as arguments in favor of progressive taxation is begging the question.
Income and wealth are correlated, but they are not the same. Income and the societal costs of your existence are also not correlated. All of these "tax fairness" pictures and websites use a sleight of hand to deflect the attention from the wealthy: they use "1%" to refer to the top 1% of income earners, not the people who you would think are actually in "the 1%" as occupy wall street would have identified.
The people who take the brunt of the burden of today's progressive tax system are middle class doctors, lawyers, and software engineers. These are not people who take up a lot of resources or place a significant drain on society - they tend to spend their time working rather than joyriding in yachts and private jets or lobbying for subsidies for their businesses. These are people who create a lot of value for the rest of the economy, and it is silly to use "progressive" taxation to punish this value creation.
Progressive taxes, in my opinion, are not fair. They are the wealthy pulling up the ladder and making it harder to compete with them. They are taxing people who benefit society a lot in order to subsidize people who have accrued a lot of resources in the past.
Wealth in assets tends to move from things that aren't real estate to real estate. Companies tend to go bust after 100 years or so, even investing in every company on the market exposes you to fairly high beta, things like gold don't appreciate much, government bonds don't have an appropriate term or appropriate returns for 100 year time horizons, etc. If you want to preserve a fortune, or if you are investing for longer than a 50 year time horizon, you do it in real estate.
Therefore, the loss of property due to taxation is not a bug: it's a feature. If you are property rich, you should have a long-term incentive in making sure that your community does well, and you benefit a lot from the systems that maintain your property rights. You should be happy to pay higher property taxes because of that. Ultimately, your property rights are about excluding other people from using that property, and the government guarantees that right using the courts and using guns. If you want to stay property rich, you should have to do something that benefits society.
In comparison, a fair tax system, in my opinion, should be about the drain of resources that you place on society (this does not include things like welfare payments, which are not societal drains, but transfers of wealth). This means:
* Vehicle and gas taxes based on how much you drive, as well as taxes on railroads, flights, etc.
* Physical property taxes
* Luxury goods consumption taxes - a VAT or a sales tax works
* Carbon and pollution taxes
* Sin taxes
* High fines for criminal acts - preferably income-based or wealth-based fines
* License fees for resource extraction
* Fees and taxes for intellectual property maintenance
* A flat income tax that applies to all forms of income over a certain amount
Align the taxes with the costs that society bears for your existence. That should also have the benefit of further disincentivizing antisocial behavior. Tax people for the value they drain from the society, not for the value they add. *That* is fair.
Society should provide a basic level of health insurance, including disability allowance. (America's example suggests that this cannot be done privately, because insurers can bully citizens with size asymmetry.)
I don't think that disability allowance should cover the property tax for a massive ranch, but it should allow a moderate lifestyle. If you pile all your wealth into lots of real estate and become disabled, you may then have a hard choice: rent out some property, or downsize. But I don't think that's too bad. I'm not arguing for guaranteed luxury.
An average middle-class worker owning an average house who becomes disabled should not have to downsize; the allowance should cover property tax and running costs.
And yes, I'd fund this benefit from wealth taxes such as property tax.
Stepping back to address your main point, porqué no los dos?
Tax property, but cover it for poor citizens with negative income tax.
Professional landlords should profit from the value of maintenance they perform but, let's be real, what they mainly do is arbitrage rent against their credit rating on secured assets. That margin ought to be narrow; fuck 'em.
It's an undesired effect to subsidise scroungers, but the lesser of the evils compared to rent-seeking. On one hand, scroungers are poor, on the other, they're wealthy.
In that scenario, any of those intermediaries who are unhappy with the tiers above them can simply refuse to pass on the income. If Texas wants to strong-arm looser federal gun regulations, or California wants to strong-arm abortion protections at the federal level, they can just refuse to pay taxes to the federal government.
Citizens can do the same thing, but at a much higher risk and dramatically more organizing. Citizens risk being arrested and funds can be confiscated, but what can the feds do if a state does it? Invade? Plus you would need millions of citizens to not pay taxes to have an effect, but you need a tiny number of states to throw the entire budget into chaos.
What you're saying makes sense from an efficiency perspective, but I don't think the power dynamic is acceptable to the federal government.
A streamlined tax system is worth 4 days per year. I imagine that in the future, it will take more time as our businesses grow.
Yet another basic service that the "greatest country in the world" is missing that the rest of civilisation has had longer than iPhones.
That and there are so many non-automatically-reportable exceptions (income doesn't have to be logged and calculated consistently and sent to the IRS), loopholes, deductions, etc. in tax law. Although, again, most of the population could be satisfied / correctly done with a baseline product. At least brokerage capital gains started being reported automatically (and mandatory) although I notice there are tons of errors than can crop up, as well as exceptions that break the system.
Not saying I like the situation Intuit keeps us in, and we should automate as much as possible, but aren't there deeper reasons fueling their existence? We should fix those problems as well -- but I suppose that is asking Congress to pass or restrain themselves from mucking up the system every time they want to inject some favored loophole.
Now, the IRS has all the information to provide a pre-filled-out tax return. They even do it internally to check that I filed my taxes correctly! Can they legally provide it to me... NO! When I did have to deal with errors, I only knew because the IRS sent me a bill. (Someone sent an incorrect W2 to the IRS.) I never had the opportunity to correct the error before I submitted my taxes.
It would be so much easier if TurboTax could hook into an API that downloaded my tax return and then I could check it for errors. I'm sure they'll figure out some kind of upsell that makes it "worth it" for me to pay them $100 as opposed to using the IRS's version.
Libertarianism is like communism; it may seem great in theory but devolves into oligarchy in practice.
That's not to say that a totally different UI approach (e.g. as used by Turbo Tax) would not be even better, but they absolutely do not need to "start from scratch"
https://freefilefillableforms.com/home/privacy_security.php https://www.olt.com/main/home/leadership.asp
> The timing is auspicious for such an endeavor. As you may know, if you make $72,000 or less, you’re eligible for a free return through the IRS Free File program, including software provided by Intuit, the company that operates TurboTax. If you make more, you’re eligible for Free File Fillable Forms, an Intuit product.
If you open the actual forms (not the homepage) the asset links went through an Intuit CDN. I'm not sure if this is still the case.
Even more oddly, the Vox article is from April 2022, so if it was sold or transferred it was recently.
e.g. it would do all the math that was defined on a given form for you, but wouldn't fill out any worksheets in the instructions. IIRC it also wouldn't automatically fill in the "Enter $X if filing single, $Y if married, ..." fields. Most annoyingly, it disallowed copy/paste, which seems like something they would've had to have broken on purpose.
Wayback machine seems to be broken for the FFFF homepage, but the earliest result for the privacy_security.php page is from February, and it already mentions On-Line Taxes: https://web.archive.org/web/20220211143256/https://freefilef...
But yeah it definitely used to be owned by Intuit. This 2020 Wayback Machine result shows it being owned by Intuit: https://web.archive.org/web/20200418025728/https://www.freef...
Maybe the new owners can fix its bad attitude.
However, this past year VA dropped free fillable forms due to lack of funding. Had to go back to mailing forms :/
(B) Task force to design an irs-run free “direct efile” tax return system.—For necessary expenses of the Internal Revenue Service to deliver to Congress, within nine months following the date of the enactment of this Act, a report on (I) the cost (including options for differential coverage based on taxpayer adjusted gross income and return complexity) of developing and running a free direct efile tax return system, including costs to build and administer each release, with a focus on multi-lingual and mobile-friendly features and safeguards for taxpayer data; (II) taxpayer opinions, expectations, and level of trust, based on surveys, for such a free direct efile system; and (III) the opinions of an independent third-party on the overall feasibility, approach, schedule, cost, organizational design, and Internal Revenue Service capacity to deliver such a direct efile tax return system, $15,000,000, to remain available until September 30, 2023: Provided, That these amounts shall be in addition to amounts otherwise available for such purposes.
https://govinfo.gov/link/bills/117/hr/5376?billversion=enr&l...
hahahahahahahahaha
https://www.washingtonpost.com/opinions/interactive/2022/irs...
That being said, i don't expect this to happen in the next 5-10yrs because of ~bribing~ err lobbying (because this is America). TurboTax and H&R Block are not going to let this happen.
This would reduce some of my business but also free up time for the people that actually need preparation services such as people who have a lot of deductions, businesses, rental properties, etc. My overall business would only change minimally but the cheats at Intuit, etc. would lose a lot of money in comparison because they wouldn't be able to charge money for a free offered service that is hidden as well as they can get away with.
>"The Internal Revenue Service will spend $15 million studying a free, government-backed tax filing system under a provision in the sweeping climate and health-care law Congress passed this summer."
Why does "studying a free filing system" require $15 million?
>"Now lawmakers including Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio), who pushed for the IRS free-file study, say they hope the funding will encourage the agency to more vigorously pursue its own platform."
This is the congress who had been cutting the IRS funding forever[1]. There's no way that the IRS can pursue its own platform without Congress loosening the purse strings.
>"Sen. Ron Wyden (D-Ore.), chair of the chamber’s Finance Committee, asked the IRS to conduct a taxpayer opinion survey on an e-file system and consult a vendor to begin to build a government-backed platform."
I think this answers my above question of why "studying a free filing system" requires $15 million. I'm guessing the "vendor" here is McKinsey or one of the other big 4 consulting firms. They will hoover most of the $15 million with the results of the study being "if you pay us, McKinsey, a hundred million dollars we can definitely build this for you."
[1] https://www.propublica.org/article/how-the-irs-was-gutted
- Eliminate capital gains tax. Taxing capital gains is essentially blind theft, and there's a strong moral foundation to stop doing it. I believe the US would have greater economic prosperity by eliminating a capital gains tax.
- Just tell people what they owe/what they are owed. You're the IRS, there's no reason why I should be telling YOU how much I made when you already know the answer. If I think you're wrong, I can prove that.
- Stop auditing people who are making less than $5m/year in income. The amount of revenue recovered from smaller earners is negligible and resources that now go to the IRS to staff thousands of agents could be used a hell of a lot better.
That's a terrible idea. Capital gains is basically the only way to tax the uber and intergenerationally wealthy. If anything, capital gains tax should be at the same level as income tax, so that there's less economic incentive to game the system.
That's just simply not true. There are thousands of ways to tax the ultra wealthy. We just don't use any of them. Capital gains tax is a horrendous idea that mostly punishes the middle class for doing well in the stock market. The uber wealthy are feeling none of that pain. Find a different solution.
That's simply not true. The top 1% own 50% of all stocks: https://finance.yahoo.com/news/the-richest-1-own-50-of-stock...
The whole other 99% of the population share 50% of all stocks. Most of "middle class" own little to no significant amount of stocks.
Also, if you must work, you're working class. The "middle class" is a propaganda term to keep the working class divided between those who feel like they're successful from those who are struggling. And speaking to the success of that propaganda: 22% of people think they're "middle class" and aren't: https://finance.yahoo.com/news/22-americans-mistakenly-think...
This would both:
1. Reward people who piggy back on the productivity and growth of the economy.
2. Punish those who are the actual backbone of the economy.
It doesn't sound like a strong moral foundation to me.
"Stop auditing people who are making less than $5m/year in income."
In an ideal world all taxation would go away and the IRS would be abolished. In the real world we have to work with what’s feasible, and I think killing capital gains tax could be a feasible platform to run on as a leader.
> If P(audit) literally equals zero, all rational agents will stop paying tax.
If you’re making over $5m and are pretty much guaranteed to be audited, why would you stop paying taxes?
Capital gains tax is good if the loopholes are fixed such as cost basis resetting upon death. Otherwise we need a global wealth tax, negotiated between the EU and US to avoid capital flight. Such a tax is actually good because it improves the quality of our democracy by reducing the ability for ultra wealthy people to enact their crony capitalist corruption. This is a unique reason to tax capital wealth that isn't applicable to labor taxes.
"If you’re making over $5m and are pretty much guaranteed to be audited, why would you stop paying taxes?"
Better to have invested that $15 million in radical ways to simplify this entire insane(ly stupid) process.
Bullseye on the problem. This is the number one reason for the complexity. And the complexity is the number one reason for the massive resources required just to make the system work.
However, the solution... repeal the 16th amendment? If my memory of high school history class serves, didn't trying alternatives lead to the 16th amendment?
[edit] To provide some more focus: I'm not saying the politicians are the problem, but the carrot-and-stick social engineering.
Fun fact: the 16th Amendment does not give Congress the power to levy taxes on income. Congress already had that power.
What the 16th Amendment does is directly overturn SCOTUS's Pollock decision, which ruled that a tax on income derived from rent was effectively a tax on property and therefore a direct tax, which the Constitution requires to be apportioned to the states based on population. Even if you repealed the 16th Amendment, it's doubtful that modern SCOTUS would uphold the precedent of Pollock anyways (already shortly after the passage of the 16th Amendment, SCOTUS effectively overruled Pollock on the grounds that income taxes were indirect taxes anyways). This makes the 16th Amendment arguably the single most useless amendment to the US constitution.
For the majority of people, the tax deduction is just in your income, and you have a (although questionable in privacy) mobile app if you are getting tax return or need to file for other off-the-book incomes.
-NO DEDUCTIONS WHATSOEVER!!! -Flat single digit percentage of gross wage.
There would be no need for the entire Tax Preparation industry.
Our government hasn't worked for: We The People in decades, they could have implemented this free-filing system at any time, and yet they have not.
Our government doesn't work for us. They're not going to make paying or figuring out what's owed to them any easier for us. Why would they?
If the feds make preparation and filing easy for us, we'll all get to see just how far the big red-white-and-blue dick is shoved up our collective asses.
They sure wouldn't want that, now, would they?
Instead of the money potentially being used by the government, where on paper everyone is a shareholder.
Now you pass that money to a company, where the beneficiaries are a restricted set of shareholders and top executives.
Much better!
The system that IRS was charged with creating would basically amount to this, and it might be that they simply buy the system and make it an offical IRS product. They already had sufficent control over FFFF to force Intuit to divest after Intuit exited the free file alliance.
I unlike many people who seem to be hoping for basically ISR Turbotax or nicer, I really cannot see the IRS offing a more guided walkthough style system instead, since that is far more complicated than maintaining basically digital versions of the paper forms. In some areas TurboTax and the others get into more or less the business of offering tax advice, which may even be incorrect.
Those businesses can afford to reimburse you if their wizards result in incorrect totals due to a misunderstanding. The IRS on the other hand would need to make sure that the wizards never accidentally misclassify anything, even for incredibly rare esoteric cases. This could be done by possibly asking many extra seemingly irreleavnt questions to rule out all these edge cases, or to dumb the whole system down making it closer to just electronic versions of the forms. The result the IRS would pick is pretty obvious, go with the simpler almost-identical to the paper forms options.
a neoliberal exploitation plantation, if you can keep it...
Where do you think all of this "student loan forgiveness" money is going?
(Or a 1% wealth tax on everyone... but our Billionaire Class won't stand for that.)
It might still be slightly regressive, but that's not such a bad thing when overall tax burden would be reduced.
We actually frequently try lowering corporate taxes. What we find is that prices stay high, wages stay low, but profits increase. Crazy.
You appeared to be making a claim that cutting taxes on corporate profits was somehow not cutting corporate taxes.
The FairTax is just a version of a GST.
SoftTalker then noted that we tax resident aliens but do not allow them to vote, presumably seeing some similarity in terms its impact on the (implicit) social contract.
What do you see as the difference?
Yes. That is a contradiction. Categorically, it's not fair to expect someone to pay for things without letting them have some degree of decision making in how the money is spent. Otherwise it's simply robbery.
1. not taxing people who live and work here but are not citizens?
OR
2. allowing people who are not citizens to vote?
Unless we do one of these, I'm fairly sure the situation you describe as "messed up" will continue to exist.
If they are monopolies that's a problem regardless of tax policies.
Markets are rarely competitive in a true sense. There are moats/barriers to competition, there's friction for users to switch to a different product. Companies often collude to keep prices static, or use a ratcheting mechanism to increase prices permanently[1].
[1] My trash removal company instituted a fuel tax 6 months ago when diesel was at an all time high. Diesel is now $.09 cheaper per gallon. Has the trash company stopped the surcharge? I'll leave it to your imagination. Oh and there are 5 trash companies in my area. They all charge within $.50/month for their service. I'm sure that's just the result of a competitive market.
Yes in competitive markets you'd expect the pricess of commodity services to be close to the same. There isn't much differentiation other than price for something like trash removal. People will naturally choose the cheapest option. So all the services will cut their prices to the point where they will making their minimal acceptable profit.
Of course it's possible that the trash services are colluding to maintain higher prices. That's illegal, but it probably happens especially in something like trash removal where there's a history of corruption and the people involved all know or are related to each other.
2018 - 3.178 2019 - 3.056 2020 - 2.551 2021 - 3.287 2022 - 5.013
I want the various governments of the US to have control over a larger slice of GDP, not less.
Please cite one of those studies that claimed that higher income quintile and higher wealth quintiles would pay more under a "FairTax"-like system, because I've never seen one that makes that claim. Here is that specifically rebuts your claim:
https://www.jstor.org/stable/23059394
"The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation."
Sales taxes are regressive. It's the rich and upper classes that stand to gain the most by the abolition of income taxes. They don't consume enough to drive up huge sales tax bills. In terms of positive generation, mostly they accumulate income and asset gains. Overwhelmingly they don't spend their wealth on buying Ferraris and mansions. In the US the top 10% pay 71% of all income taxes (while taking home 30% of the income). Their consumption is not high enough to offset if you switch to a sales tax system. It would do something beyond brutalizing the bottom 3/4 of people; it would destitute the majority of workers in the country if you attempted it and were serious about trying to bring in enough revenue to offset the loss of the income tax.
The US has a very progressive income taxation system, far more so than most of Europe (including all of Scandinavia). The US middle class and below pay exceptionally low income taxes, the burden is overwhelmingly carried by the higher income brackets already.
We have progressive wage income taxes (much less so if you include highly-regressive FICA contributions at ~7.5% for W2 and ~15% for 1099 employees—but still) but overall the US income tax scheme is quite regressive, thanks to how capital gains taxes work, which leads to things like Warren Buffet observing that he enjoys a lower tax rate than his secretary does.
It has strongly progressive main rates for income tax, but it has extremely regressive exclusions from income taxation and from the main rates, and it has a whole separate regressive system of taxation on labor income not characterized as an income tax in its payroll taxes.
It also, viewing state and federal systems combined, has a very large portion of total taxes in other, non-income, taxes which tend to be regressive.
To give you an idea, total sales in the USA was about $6 trillion, and income tax revenue was $2 trillion. So you'd need a 33% national sales tax.
How do you think someone who makes $50,000 a year and spends it all would feel about paying 33% in taxes, when today they probably pay closer to 10% today?
Or if you make housing and food tax free, you'd need an even higher tax rate to make up for it.
Most countries that do a national sales tax do it in addition to an income tax.
For some added support that your numbers are not crazy:
or you know a massive reduction in Federal Spending, the fact that US Sales was 6 trillion, and the US Government spent 4 Trillion should be ringing some alarms bells in people....
If we need a 33% national sales tax, that tells me the federal government SPENDS FAR TOOO MUCH MONEY
Percent of sales doesn't tell you much about government spending.
Just because other western nations also have irresponsible levels of spending does not justify the US spending
So, your main point is worth considering, but it's missing a vital point: the current taxation system is opaque in where funds come from. An alternative simpler taxation system is more transparent on where funds come from - I don't consider that regressive.
Let me put it crassly: if everyone paid 33% in taxes, the average voter would be more aware of the cost of tax-funded projects. Imagine what sort of voting that would lead to. I say "crassly" because in reality such a shift would definitely place a heavy burden on the poor in the near term. I honestly don't want that... but I also don't want to pull the wool over eyes.
The Fair Tax is an example: https://en.wikipedia.org/wiki/FairTax
Is debt counted in? Is it a difference in wealth from one year to the next? What if someone has a reduction in wealth? What IS wealth? Is thr same asset taxed multiple times? What if someone has to liquidate something because of such taxes?
Typically, no. Assets minus liabilities.
> Is it a difference in wealth from one year to the next?
No.
> What if someone has a reduction in wealth?
They owe less the next year.
> What IS wealth?
Assets minus liabilities.
> Is thr same asset taxed multiple times?
It's taxed every year, to the person who owns it. If it changes hands mid-year, prorate.
> What if someone has to liquidate something because of such taxes?
Their asset becomes cash, they pay the tax with it, and their wealth is smaller next year. Hopefully they plan ahead better for it.
Wealth taxes exist. Entire nations manage to get this all sorted out effectively.
Namely, how do you value private assets? How much is a paining worth? Or your private company?
Houses are easy to do because there is a ton of data and comparables (and even then wealthy people contest those assessments). Now imagine the government getting into the business of valuing private companies.
> The value of private companies is determined each year by the cantonal tax authorities based on an inter-cantonal administrative guideline agreed upon by the cantonal tax departments. Taxpayers may challenge the application of this guideline in court but appeals are rarely successful (cf. an example in section 0, below). In case the fair-market value of operational companies cannot easily be assessed (e.g. because of lack of recent sales between independent third parties), their value is determined according to the formulaic method, called the practitioner's method. A company's value is determined by calculating the weighted average of its ‘earnings value’ and its net asset value (i.e. fair market value of assets minus liabilities), thereby counting the earnings value twice. The earnings value is determined by capitalising the adjusted average net profit of the last two or three years with a capitalisation rate (of currently 7%), which applies uniformly to all industries. Holding companies or real-estate companies are valued based on the net asset value of the underlying assets.
It won't be perfect, but it's predictably imperfect.
When a company is sold the value of the assets is negotiated for sometimes years. And is different for every acquirer. How is the government going to do that for everyone every year?
No, it accepts that some wealth may require estimates, eventual corrections, and occasionally court resolution. (The doc cites an example of a $2M painting hung in a kitchen being deemed non-household goods.)
The "there's an edge case, therefore it can't work" argument is hard to sustain when there are countries making it work. The Swiss handle paintings, private companies, and presumably IP (I can't find specific details in here) in their system.
And I can turn the same logic around on you: Why do you think this will work when just one country is claiming to do it successfully? Especially after other countries tried it and then repealed or at least partially repealed their wealth taxes to exclude hard to value items?
It seems easier to come up with that value every year and let the taxed pass the costs on to final consumers rather then chasing around a million waitresses for unreported tips.
Taxing labor was never a good idea in my opinion.