forget a "free filing" system.
Why can't the IRS just send me a statement with my obligations and if I don't want to contest it I pay and I am done?
Why can't the IRS just send me a statement with my obligations and if I don't want to contest it I pay and I am done?
Folks argue that most of this information is available to some level of government already, but that’s a far cry from centralizing all of it in what by definition must be an easily accessible form.
Dramatically simplify the tax code and this approach becomes feasible without being a security and privacy nightmare.
There's nothing hard about updating a few values with these then you're done in five minutes. State governments already do simple walkthrough forms and federal is really no different. If you have a complex tax situation then that's your problem to deal with. Don't burden 99.9% of the population with something that should be free, should be simple, and should be fast.
I actually had to dig up pay statements, etc to confirm the information. I’m glad I did because my employer made a mistake on a retirement contribution.
So what did it save me? Maybe typing in some numbers, which is probably 5% of the total effort.
The issue is the complexity of the tax code. It would be great if the IRS pre-filled forms, but the forms aren’t going away.
Many people won’t review the dozen or so pages of forms to make sure they’re correct. No doubt that will favor the IRS, not the tax payer.
You could log into a website occasionally and upload charity receipts or click through a wizard to apply for a deduction for one of those deductions most people don’t use, but the flow for basically 80% of taxpayers, and essentially 100% of the bottom 70% of earners, should be a quick form update when life changes happen, and a yearly EITC-funded refund check that just shows up.
But of course everyone in that 80% uses a different 20%. When you consolidate the overlapping deductions, credits, exceptions, exemptions, … you end up with a staggering amount of data required to accurately “pre-compute” income tax bills for even 80% of taxpayers.
“Quick form update when life changes happen” is, I think, an overly sanguine way to express a requirement that grieving parents file paperwork with the revenue service when a child has passed. That’s a bit melodramatic, but my point is that centralizing the execution of a complex tax code inside a state bureaucracy creates a perverse relationship with the folks who are supposedly in charge.
Once all the calculations are taking place in an opaque, voracious IRS database, what constraint is there on even more complex taxes and exemptions? Your doctor knows you’re a smoker. Should you pay a Medicare surcharge? ACA plan purchasers already do, in contrast with most private employer plan members.
No, no they don’t. Because we already have determined what most people use and made a special form for them called 1040EZ. It only offers simple things but is enough for most people. Then there’s the 1040A which goes a few steps further but is still simple. Millions and millions of returns are submitted on these short forms every year. These filers are proving that they don’t need complicated deductions and stuff because they already don’t use them.
> grieving parents file paperwork with the revenue service when a child has passed.
What are you talking about, in our current system you’d be filing next April and omitting the deceased person from the list of dependents. Your grieving strawmen would be able to take many months to go update the info before the cutoff when they print your check/bill (likely it would be minimum 4 months after year end like it is today).
> Once all the calculations are taking place in an opaque, voracious IRS database, what constraint is there on even more complex taxes and exemptions?
I don’t really want to talk politics on here, but I think this is a separate battle to fight. The tax system is already ridiculously complex because it’s trying to use the tax system to incentivize/punish behavior and at least two parties/factions have engineered it, so it’s quite confused. All politicians will continue to use this to scam the people who they like less, for the benefit of whoever they like more (campaign contributors) and they obviously don’t mind complexity even when it’s on taxpayers to compute. All things equal I’d rather force a computer to compute it and know that I can’t be audited for not understanding tax code.
It’s a huge, political dark pattern designed to keep people angry at the government to lower public sentiment towards the government.
(I.e., most people have already been deprived of the funds for some fraction of the year; what interest is served by making them waste time finding records and jumping through hoops and potentially paying a third party to help them provide the IRS with information that it mostly already has?)
To that end, I would like taxes to be due about 4 Tuesdays before the Election Day Tuesday. If you want to vote for politicians who are campaigning on spending a lot of taxpayer money for good programs, so be it, but do it with recent memory of having paid your taxes (assuming you are in the slight majority* who pay federal taxes on net). If you want to campaign on spending a given amount of taxpayer money, whether more, the same, or less than today, your campaign should be interpreted close to taxpaying time.
I don't want it to be more onerous or annoying to pay taxes. I do want people to recognize that taxes and spending are linked (and frankly, ought to be more closely linked than they are today, IMO).
* - which until very recently was a slight minority of households who paid federal taxes on net.
>I would like taxes to be due about 4 Tuesdays before the Election Day Tuesday.
Most people pay taxes in small increments every 2 weeks then get a refund around tax day, so your plan may not do what you think.
>I do want people to recognize that taxes and spending are linked
To your own point, they really aren't. [0]
>But do it with recent memory of having paid your taxes (assuming you are in the slight majority* who pay federal taxes on net)
To add some color on this [1]:
But, for the most part, people don’t pay income tax because they have little income. About 60 percent of non-payers make less than $30,000 and another 28 percent make between $30,000 and about $60,000.
Of the 72 million households that will pay no federal income tax this year, about 24 million, or roughly one-third, are age 65 or older.
[0]https://fred.stlouisfed.org/graph/?g=17dyP [1]https://www.taxpolicycenter.org/taxvox/tpc-number-those-who-...
Under that system, I'm totally fine if people get a $1K refund after writing a check for $15K in taxes withheld. That would still demonstrate the linkage sufficiently to inform their voting choices.
[0]https://www.kff.org/other/state-indicator/number-of-individu...
That's OK, especially since most of those who are now over 65 and retired worked and voted on reps/platforms/policies from 18-65 and earned income/paid taxes for probably ~40 of those years.
The problem is that would only apply to federal taxes. Not state or local income taxes, nor real estate taxes, or retail tax, or tax on gas or other things you might buy or use.
Paying estimated quarterly taxes four times a year wasn’t bad. I calculated my withholdings, remitted my tax payment through EFTPS, and was never surprised at tax time. I don’t think I ever got a refund or owed when I was doing it myself.
I learned that many people who have never contracted before are shocked they have to do this, lost on how it works, and had (then) no good place to go for actionable advice. I found that surprising and kind of sad in a way. We could be doing so much better with financial literacy.
But, get a raise, take a pay cut, find a new job, start or stop a second job, or a third, or fourth, get paid hourly, get sick, take time off to care for a sick family member, have a kid, go back to school, graduate, get married, get divorced, get a mortgage, pay down your mortgage, ... There are all sorts of scenarios that could change your tax situation on both the federal and state level, making it difficult to calculate how much you would owe up front.
What it really boils down to is our tax codes suck, and too many rich folk are keen on keeping it that way.
Setting aside the 90% thing, to your original point, paying taxes is not a voluntary thing. There is, however, at least some flexibility in how you pay them.
The flip side of this is: who cares, withholding is actually fine. For a vast majority of people, estimated withholdings is pretty close, and the few percentage points one might earn on a $1k refund in the meantime just isn't worth it.
In my opinion, the best easy tax situation would be that at the end of the year we can skip (most of) the filing step and I either get a check or a bill.
In the US there is a feeling of lacking representation on both sides, which I suspect is due to corporate lobbying and the culture wars, and I think a feeling of ineffective spending, again I think due to lobbying, and also pork barrel projects.
I think the answer is to remove corporate lobbying and limit campaign spending.
Except that a lot of tax filing companies require a bank account with an American address, so it's always an even bigger hassle.