Comment by tombert | Hacker News Reader

Comment by tombert | Hacker News Reader

About a year ago, I got audited by the IRS. It was 100% my fault; I had sold a good chunk of stock in 2020 and but forgot to report the capital gains on my tax form (a tax form that was, evidently, automatically approved by the fed in about ten minutes!).

So last year I got a bill in the mail for $8,000; $7,000 for the actual taxes I owed, and a $1,000 fine. I was able to call and get the fine lowered (thanks to advice I received in HN actually!) and I wasn't "angry" with anyone but myself. I did owe the money, I didn't blame the IRS for wanting it.

But it did kind of make me wonder something: if the government was able to find out that I screwed up on my taxes, then why am I doing anything? Clearly they have all the data and information necessary to determine how much I actually owed, and clearly they were able to spot my mistake, so why make me pay $60 for TurboTax at all? Why not just send me a bill or refund every year?

This is a step in the right direction.

Because you could have gotten married, been blinded, and started a business grossing $900k but only netting $100k a year and they would know none of that outside of a couple of 1099s. What they did for you though is look at your return, and saw you didn't declare investment income that they knew about from a 1099.

Sure, but couldn't that be done on a case-by-case basis, and the fed just sends you a refund/bill at the end of the year that you're responsible for amending?

I'm not saying a company like Intuit adds zero utility, I'm just saying that I think a lot of taxes are simple enough to where it would be relatively easy to just give people a default thing. If the IRS gets something wrong, or is missing some info, then I think a software like TurboTax makes a lot of sense, but isn't that much more of an edge case? Fundamentally, the complexity of my taxes didn't really change in the last five years.

When the 1040EZ was a thing, only 16% of filers used it. Those would be the candidates who could safely have the IRS do their return. With anyone else, there's all kinds of information the IRS has no clue about.

Most people don't use the EZ because even the most common deductions (that the IRS knows about, like your mortgage and state taxes and your stock investments through a firm, etc.) couldn't be put on there.

But the IRS still knows about them.

Also they could put a website where you could spend five minutes entering the most common information they don't already know, and then spit out your bill.

It's not that hard. Most filers situations aren't that complicated.

>Also they could put a website where you could spend five minutes entering the most common information they don't already know, and then spit out your bill.

That's basically what they're doing.

No it's not. They are setting up a free filing that will still ask you to input forms they already know about just like turbotax does.

1040EZ did not allow claiming dependents, and had an income limit of 100k. So many people were ineligible to use it.

So they send you a bill and you send back a form that says "here is a thing you didn't know about that changes the math".

87% of tax filers could have their taxes filled out by the IRS because they IRS already has all the information.

They definitely don't have all that information. That was my point.

But your point is wrong. In 87% of the cases, the IRS does have all the information. Even if you have donations or other deductions it doesn't matter, because 87% of people take the standard deduction since it's more than their itemized deductions.

And marriage and death records are public, as are probate. So they would have all of that too.

There's really no point in continuing this discussion if you think the IRS is scraping data of every county in the US for marital status changes.

Of course they aren't. But they could if there was automatic billing.

Or simply ask you if the most common situations apply to you, just like turbotax does.

I think it’s likely the IRS uses some kind of database of US vital statistics (including marriages) as part of efforts to detect tax fraud. Other federal agencies do, eg the State Department’s passport office uses a proprietary database called EVVE of birth and death data. [0]

[0]. https://www.naphsis.org/evve

That's not what they said at all. Most people are not changing marital status or starting businesses every year.

The IRS could send a tax bill for what they do know, with an option to agree that is all you owe and pay, or an option that you will need to file the taxes yourself because they are missing information.

For the vast majority of Americans, option 1 will cover them.

Same happened with me, though technically not an audit, and in my case the IRS didn't actually know the cost basis for the stock sale. I had to tell them, otherwise they assumed 0 and were going to bill me a lot more. So that's why they needed me.

Which goes to another stupid thing, for some reason the RSU brokerage doesn't report the cost basis. I guess to make it more annoying to sell company stock.

> or some reason the RSU brokerage doesn't report the cost basis

This is because the employer doesn't tell them the cost basis, right?

Probably. One way or another, my employer wants part of my compensation not to be liquid like money.

Because what they don't do is make sure you get all the deductions you are entitled to receive.

Like it or not, tax law is complex. This is where a good CPA is worth whatever they might charge to do the work.

I did actually get a human to do my taxes for me this year. It wasn't even that much more expensive, though I think I don't generally do anything too crazy deduction-wise.

It doesn't have to be complex though, like it or not.

Agreed. Yet, tax law is complex. And we are not going to simplify it any time soon. We can't even build a damn high speed train, let's not pretend this country can get anything of note done these days.

So, yeah, reality-vs-fantasy?

Most people (87%) take the standard deduction anyway because it's better than their itemized deductions. All those people could just take the bill from the IRS (that would include the standard deduction).

The could also put up a website where you spend five minutes inputing the most common deductions they don't know about. It's not that hard, most filers situations aren't that complex.

Yeah, no. Not that simple.

One of the most valuable things I got from doing my taxes through CPA's for decades boils down to a single word: Education.

Tax laws are complex and they are not going to change any time soon. As I said in another comment, we can't even build a damn high speed train --which is simple when compared to changing tax laws. So, let's not pretend the idea of simplifying tax laws is anything other than a fantasy.

The education I received through the years guided me towards understanding what one can do to use the legal tools available to all of us to reduce our tax obligations.

I emphasize "legal" because people somehow have equated paying less taxes to some nefarious thing. If the law says you can take deduction A by doing B. Well, do B and get deduction A. If you don't, you are leaving your money on the table out of pure ignorance.

The probability of and IRS easy file system providing this level of service to taxpayers is less than zero. I have never regretted paying a CPA to advise me and prepare my taxes. It's worth every penny.

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