You have form 1040, which gives you a run-down of every possible form you need to reference. You fill out the boxes with the info it wants, then you go down the list, filling in each number box that applies to you: Got W-2s? Probably, attach 'em and sum them up. See a phrase you don't recognize? Read the relevant instructions. Got interest? Time to fill out a Schedule B, which itself references some other forms, and attach some 1099s. Sell any investiments? Schedule D, which might have you fill out an 8949 (strictly speaking, you can skip this one if all your investments have declared basis on your 1099-Bs that you received from your brokerage). If you think you might have more deductions than the standard, there's Schedule A, but for most people you can safely skip that one and take the standard. Taxable income determined!
Then the taxes section contains a bunch of forms that apply to you if you're in certain situations, maybe you have a kid (Schedule 8812), the instructions are very helpful in telling you what you need to care about here. The first box is important, it includes your income tax which the instructions will tell you how to calculate.
Sum up your witholdings from the W-2s and 1099s to figure out how much you've already paid the government, then figure out if you owe the fed money or they owe you.
Sign, stick in an envelope, and send. Whole process takes a couple hours the first time, when you need to learn what you actually need to fill out, and in future years less than 2 hours.
If you can read at a 6th grade level and do basic addition and subtraction you can fill out your tax forms.
You fill your shopping cart with a bunch of groceries then you have to write down what you think it all costs. The shop keeper then checks if you got it right. Then they call the police for each 12.3th customer who got it wrong. The odds to get it wrong are so big the help of a different company is needed who will add up the shopping cart for you.
You cant make it up.
I used the FileFreeUSA and TurboTax Federal Free in the past and it worked well. I just use TT's paid offering now for the F-income declarations.
I agree it's probably a bit much for most people though and not filing should be akin to not reporting anything else and the IRS should automatically calculate your return and mail a check or a bill if you owe.
Federal taxes only. Except for entering in your W-2s by hand, it's pretty straightforward. You can save a PDF copy to your local drive. The nice thing is you save postage and do not have to pay someone to prepare / file it for you.
“Free vs Turbotax”
and everyone with a CPA just has to pretend they dont do that
God knows why it took this long.....
If Trump wins again he's going to have a lot of work destroying all the progress Biden has made in just one term.
Tax prep companies: $90M lobbying against free tax-filing - https://news.ycombinator.com/item?id=37363616 - Sept 2023 (231 comments)
IRS moves forward with a new free-file tax return system - https://news.ycombinator.com/item?id=36804710 - July 2023 (221 comments)
IRS tests free e-filing system that could compete with tax prep giants - https://news.ycombinator.com/item?id=35950836 - May 2023 (567 comments)
Call on the IRS to provide libre tax-filing software - https://news.ycombinator.com/item?id=35705469 - April 2023 (129 comments)
60M Americans have taxes so simple the IRS could do them automatically - https://news.ycombinator.com/item?id=35476709 - April 2023 (277 comments)
Lobbyists begin chipping away at Biden’s $80B IRS overhaul - https://news.ycombinator.com/item?id=35381701 - March 2023 (214 comments)
Intuit pouring money into lobbying amid push for free government-run tax filing - https://news.ycombinator.com/item?id=34840039 - Feb 2023 (178 comments)
IRS builds task force to explore running its own free e-file system - https://news.ycombinator.com/item?id=34764952 - Feb 2023 (199 comments)
IRS Free File: Do Your Taxes for Free - https://news.ycombinator.com/item?id=34462122 - Jan 2023 (247 comments)
IRS will look into setting up a free e-filing system - https://news.ycombinator.com/item?id=32753099 - Sept 2022 (408 comments)
The IRS could be on the verge of changing the way Americans file their taxes - https://news.ycombinator.com/item?id=32550841 - Aug 2022 (17 comments)
IRS will study free tax filing options - https://news.ycombinator.com/item?id=32502321 - Aug 2022 (25 comments)
TurboTax’s fight against free tax filing - https://news.ycombinator.com/item?id=31072202 - April 2022 (394 comments)
Filing taxes could be free & simple. H&R Block & Intuit lobby against it (2017) - https://news.ycombinator.com/item?id=30856968 - March 2022 (114 comments)
FTC sues Intuit for its deceptive TurboTax “free” filing campaign - https://news.ycombinator.com/item?id=30846071 - March 2022 (587 comments)
Ask HN: How does TurboTax get away with dark patterns? - https://news.ycombinator.com/item?id=30409523 - Feb 2022 (122 comments)
Why do Americans have to pay much to file their tax returns when the IRS knows? - https://news.ycombinator.com/item?id=30267361 - Feb 2022 (22 comments)
Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Lobby Against It (2017) - https://news.ycombinator.com/item?id=30185484 - Feb 2022 (18 comments)
California tried to save the nation from tax filing, then Intuit stepped in - https://news.ycombinator.com/item?id=28944200 - Oct 2021 (283 comments)
The IRS has a big opportunity to fix the way Americans file taxes - https://news.ycombinator.com/item?id=28177289 - Aug 2021 (12 comments)
--
(for example, this irs page links to googletagmanager)
https://epic.org/report-id-me-lied-to-the-irs-about-wait-tim...
I don't think there is any stipulation that the US government can't use products sold by US based companies. In fact, they enjoy doing it. You should ask your elected representatives to prohibit tracking on government websites; if they pass a law, the IRS's web design team will follow it.
so what? Biden's bill made a good thing happen, so much that HN readers gave it 859 upmods (which is a lot). I point this out mostly so that I can be amused at how infuriating it is to Hacker News readers who can't help but be hypocrites that they love certain policies but continue to rail against the kind of government that brings about such policies.
The private companies have demonstrated pretty clearly that they will do everything they can to avoid people actually having free tax filing, and while ~$50-100 might not seem like a ton of money, keep in mind that at the current United States minimum wage ($7.25 as of this writing), it would take upwards of working 6-14 hours just to pay for tax filing. $100 is a lot of money when you're not a yuppie software engineer.
I suspect I did enough crazy stuff with stocks this year that it probably won't apply to me at first, but hopefully by 2025 or 2026 I can stop giving money to Intuit or Jackson Hewitt.
Still, I kind of feel annoyed that I have to pay any amount of money to do something legally required of me to avoid going to jail. I think the IRS should provide a free option for filing, and TurboTax/FreeTaxUSA/Jackson Hewitt would be forced to provide a better service than "the bare minimum".
Relatively few people in the US earn the Federal minimum wage. It's less than 1/2 of 1% of the labor force. It's a very poor reference for anything in terms of personal finance comparisons.
You can walk into a CVS or Walgreens and earn $15 / hr as the minimum scanning barcodes with zero experience, zero job history, as a teenager. You'll get heavily subsidized health insurance, dental, vision, and PTO.
On top of that, the majority of US states have a higher minimum wage than the Federal.
If you're still earning the Federal minimum wage at this point, it's almost always by choice (if you don't want to work for Costco, Walmart, Target, CVS, Walgreens, et al.).
So it's only millions of people.
I got ~$35 out of it, which was nice.
Why on earth do you need a third party for your tax calc and resolution? It is surely the antithesis of the "land of the free" and all that stuff.
In the boring old UK I login to a govt. run website to do my annual tax self assessment. My P60 is already filled in (that's my PAYE - pay as you earn, my normal salary) I'm a company director too so I have dividends and expenses and offsets etc to worry about. It takes around an hour to complete.
Most UK employees don't do self assessment. PAYE is such a simple and obvious idea - routine taxation should be done by routine.
End of the day with TurboTax and co, you, as expected, get a "not our system, not our problem" type response when dealing with the post-filing ramifications.
There seems to generally be a lot of "I'm not sure if I did it right" anxiety in the general population.
Is there an equivalently-blissful tax-filing software/service? I don't want to go back to TurboTax, and with several single-member LLCs I'm probably beyond the scope of the IRS' free service.
Anyone have any suggestions?
Arizona
California
Florida
Massachussetts
Nevada
New Hampshire
New York
South Dakota
Tennessee
Texas
Washington
Wyoming
Someone please correct me if I'm wrong.
Not quite; ~71.8 million constrained to just individual income tax filings based on 2022 stats[1]. Excludes estate, corps, gift, tax-exempt orgs and excise, but includes both paper and electronic filings.
AZ 4,197,918
CA 23,209,479
FL 14,563,047
TX 16,750,330
NY 13,115,425
---------------
71,836,199
===============
US 204,434,236
[1] https://www.irs.gov/statistics/soi-tax-stats-state-data-fy-2...
#Income reporting
W-2 wage income
Social Security and railroad retirement income
Unemployment compensation
Interest of $1,500 or less
#Credits
Earned Income Tax Credit
Child Tax Credit
Credit for Other Dependents
#Deductions
Standard deduction
Student loan interest
Educator expenses
There's the notable point. If states integrate into it, it's a game changer. No need for the vast majority of filers to use any 3rd party.
This is what I was mostly curious about. So, I'm guessing things like ISOs, AMT, capital gains from investments etc would not be supported by this service yet.
Income reporting
-W-2 wage income
-Social Security and railroad retirement income
-Unemployment compensation
-Interest of $1,500 or less
Credits
-Earned Income Tax Credit
-Child Tax Credit
-Credit for Other Dependents
Deductions
-Standard deduction
-Student loan interest
-Educator expenses
I hope this IRS effort works out.
It's almost as if you don't actually live in a democracy.
https://www.propublica.org/article/inside-turbotax-20-year-f...
They already do your taxes in the background to confirm your return is correct, so this is not significantly more work for them (in fact, it is probably less work).
In some countries with such a system, unless you intentionally lie, you are absolved of legal liability if the government screws up your taxes.
The article makes it sound like they are building a crappy turbo tax clone instead.
This is a common misconception. Most places that send you forms also send them to the IRS (but by no means all places). The IRS makes sure that the information you put in your forms is the same as the forms they got, but they know nothing about your dependents, whether you pay mortgages interest, etc.
Now, the counterpoint to that argument is that c.90% of people just take the standard deduction anyway now that there's not SALT, but the argument there is that we should move completely away from deduction-driven taxes (which is probably the solution).
As for TurboTax et al, those places are not sending your forms to every state tax agency (why do people always forget about state taxes in these threads?), so there's still very much a need for some solution there. Probably IRS data sharing, but good luck getting all the states to agree with the Feds on tax forms (just look at the SALT battle).
Just to double down on this, what gerdesj is describing only affects a very small portion of workers. For those who _don't_ do the steps above the process is:
- It's automatically taken out of your pay, and you don't do anything.
That's it.
Because the IRS isn't allowed to tell you what you owe. You're supposed to calculate that yourself... (And it's so damn complicated that it's worth paying someone to do it, unless you were the kid who did the math textbook for fun.)
Eventually, the IRS calculates what they think you owe, and if you underpaid, they send you a bill. You can respond explaining why they are wrong, or pay. The interest is so low that, as long as you don't goof up every year, you're better off risking underpayment than overpayment.
Honestly, the system would work better if the tax prep software could see all the information the IRS has, because then it would be easier to correct their mistakes and harder to make mistakes.
>Eventually, the IRS calculates what they think you owe, and if you underpaid, they send you a bill
It definitely feels like a few steps could be skipped here…
Is there a legitimate reason for this or is this just a joke?
The vast majority of taxes that are filed by US taxpayers are simple. Unless you're extrapolating your own experience to everyone else, that is.
Paper sucks. Tax filing helpers (people/software) have always cost money. “The government sucks” and won’t try to help you.
And, oh yeah, ads and tax prep stores everywhere.
No one questions it. They don’t like it, but they accept it. Just like so many other things in the US because we’ve never seen anything else.
Paying income ta is made into an arduous task so people are likely to vote against taxes or for repeal of taxes instead of being accepted as a fact of life.
You don't; you can download the forms and fill them out yourself. It's annoying but doable.
That said, it really should be better; your description sounds like a good outcome.
The government's preference would probably be to contract with them and license it.
> Our overall success will depend on several special legislative proposals and regulatory authorities that we believe are appropriate for an effort of this scope and importance:
> Engaging the Office of Personnel Management to utilize existing direct hire authority for IT modernization positions and/or broadening government-wide critical pay authority
> Seeking reauthorization of IRS Streamlined Critical Pay Authority that expired in 2013
> Ensuring funding is available for multiple fiscal years at somewhat predictable intervals.
[1] https://www.whitehouse.gov/omb/briefing-room/2023/09/22/fact...
[2] https://www.irs.gov/newsroom/irs-modernization
[3] https://home.treasury.gov/news/press-releases/jy1666 | https://news.ycombinator.com/item?id=36976331
(please consider a tour of duty: https://www.usds.gov/apply | no affiliation, just an engaged citizen)
I reluctantly gave money to TT again.
If your brokerage reports all of your trades to the IRS, which they likely are, then you can just enter a summary. You don't need to grant access to your outside accounts and import anything.
I'll let her know. She cares about UX.
In practice, it's not really needed. The thing is (and I realize that it's not the general perception) if you sincerely try to file your taxes and you screw up, the IRS will generally work with you to fix things. Sure, if you go all sovereign-citizen/Wesley Snipes and refuse to acknowledge taxes they'll kick in the door and take all your stuff. But if you accidentally report select head-of-household instead of single, and you can explain why you did, the IRS won't ruin your life.
I personally find it misleading to undersell how high stakes taxes are in the US. Sure for 95% of the people if you make a tiny honest mistake nothing will happen, but it's not like a small error in your taxes can't cause a huge ordeal. I tell my friends, taxes are an extremely high stakes deal and you need to understand what's happening on those papers and IRS website. I'll tell my kids the same once they're of age to understand.
It's literally just filling out the paper forms except in a web interface and it does most of the math for you. And then you can file electronically for free regardless of your income level, and it produces a final PDF with all forms filled out for your files.
It can be tricky to do your taxes the first time around depending on their complexity, but the good thing is that once you figure it out, you just use the previous year's PDF's as a reference for the current year's. The lines move around a little bit year-to-year but it's usually the same idea. And it becomes pretty obvious what has changed (that requires research), and you can figure out if anything has changed in your own financial situation that warrants filling out a new line or new set of forms.
(I don't believe there's anything specifically textfile-based. But this is definitely the electronic version of doing your taxes "manually" with full control.)
[1] https://en.wikipedia.org/wiki/Free_File#Free_File_Fillable_F...
That's interesting. Apparently submits electronically sometimes - but if you need attached statements, for example for f1116, you have to print the product and mail it. Otherwise supports surprisingly MANY forms - many of them with some limitations which are enumerated for you. Some schedules are not included, for example this year f1116 requires 1116 Schedule B for carryovers and that's not provided here. So again if you need f1116 then you'll be printing and mailing that. Really... Many forms are included.
2017-01-01 open Expenses:GA:Insurance USD
tax_form: "1040 Schedule C"
tax_line: "15"
tax_description: "Insurance (other than health)"
Being able to write comments is also super-useful. A real life example:
; We can make a "Section 1.263(a)-1(f) de minimis safe harbor election" to
; treat repairs and improvements to tangible property as an expense, which
; would otherwise have to be capitalized. A statement that we are making the
; election must be attached to our tax return and should include name, address,
; and Taxpayer Identification Number. Under the election, we must apply the de
; minimis safe harbor to all expenditures meeting the criteria for the election
; in the taxable year. The limit is $2,500 per invoice.
;
; https://www.irs.gov/businesses/small-businesses-self-employed/tangible-property-final-regulations
2016-01-01 open Expenses:RD:Hosting:Repairs:DeMinimis USD
tax_form: "1040 Schedule C (R&E)"
tax_line: "21"
tax_description: "Repairs and maintenance"I'm considering whether to move away from it but it would of course be a considerable investment of effort.
I love the idea, but not being an accounting expert (maybe you are), I'd be afraid that some immaturity or lack of expertise in the software would cause a big problem in a critical way. What makes you confident in it?
Also, how do you share data with accountants, etc.?
I wasn't terribly mad about the money (if I owe $7,000 then that's what I owe, it was my fault), but what I was mad about was the fact that I had to do anything in 2021 at all. If the IRS knows enough to know what I owe them, then why exactly do I have to file, just to have them validate that the numbers I give them match the numbers that they have on file.
If anything, this will compel the tax preparation software companies to get even better than before, and offer an increased value proposition.
Competition benefits the consumer, and for a long while there's been limited, mostly fixed competition (via Brand awareness mostly).
FreeTaxUSA is amazing, and cheap, but it does not yet have the brand power the incumbents do.
It's unlikely the IRS offering will be as easy to use or as pleasant as the existing offerings, but it will be a huge shot across all of their collective bows.
Keep in mind the IRS offering a free online service for tax filing does not reduce the complexities of the current tax code - nor does it make for a more fair tax system (one where having means to access professionals reduces your perceived tax liability). This system merely means fewer people need to pay $49 a year to file taxes...
Yes, there are alternatives, but what possible enhancement could any of them provide that is worth anything? Tax preparation is largely deterministic, and maximizing deductions is a largely human-lead task that is only beneficial to higher earners who have an accountant that does their taxes for them and don't care about services like TurboTax and FreeTaxUSA.
For most working class Americans a guaranteed free solution provided by the IRS itself is a no-brainer. You know that the government isn't in the business of maximizing profits at all costs, and you get the peace of mind that the IRS itself calculated your taxes, and that you are unlikely to get the blame if there is an error.
Tax collection is a critical function that the government relies on, it should overwhelmingly be a government-lead process that doesn't cost people any more than what they owe in taxes. I hope all of these predatory tax filing businesses go under, because paying taxes is a civic duty that people shouldn't be reliant on private organizations to fulfill for them.
Though, I also do my taxes on TurboTax to double check my work (I don't submit until both programs report the same amounts to the penny). I just don't submit using TurboTax.
It's not that deep, man. Not everything in life has to be an all-or-nothing scenario. This is a big win for a solid percentage of Americans who have a relatively straight forward tax situation.
Tax fairness, IRS tyranny, bought-out politicians, corporatism -- let's leave that for another day.
Let's learn to celebrate wins no matter how small.
This implies that the state of tax preparation software is "good", which really doesn't line up with overall consumer sentiment. Personally, I hardly consider clunky UI/UXs loaded with dark patterns to be anything but good.
I don't know that this is really true anymore. Maybe a little, but mostly just no.
I support many public goods, including this one, but they are a tool with appropriate uses just like private enterprise is. I don't want operating systems to be a government-provided 'public good'. Also, I think freedom is the core, but not only, value here, including in commerce. When government takes over, it's no longer a free market with free people.
I support the IRS's new service, as a general matter (i.e., without knowing details), but you raise a serious issue.
If an industry exists because of the government and it can be replaced by a public service, then it doesn't deserve to exist.
FWIW, public defenders are a public service used to interact with a government-created system, but the private legal defense industry is alive and well. So, it's not like making a public service is sufficient to kill any government-created industry.
It was created by a public service. It would be better if they'd just made a rule that those with super simple tax affairs just didn't need to file, as we have in the UK. But there's probably no pork in just making things better.
If I have to manually input 5 billion crypto and stock transactions including every damn weekly staking reward just to pay taxes it's just bleh.
It doesn't to suck.
Also, my wife paid a joint filing online under my SSN, and the system couldn't figure that out and claimed we were in arrears. I'm not hopeful.
* cost of TurboTax Pro Ultimate will be deducted from your refund amount, plus interest.
It's not surprising the system couldn't figure that out. There is no such thing as a joint-filing under a single SSN. You need to include both spouse's SSNs or ITINs on the 1040 to file jointly, and the return is treated as a "joint" return (meaning, equally by both spouses).
[1]: https://www.ibo.nyc.ny.us/iboreports/understandingthebudget....
All other taxpayers will continue to use systems that ideally maximize deductions as government continues to tax endlessly.
Because the "problem" they're solving has been solved in other countries without a profitable middleman. Intuit's continued existence in this space is dependent on their lobbying team.
Taxes were made to be done on a simple blank sheet of paper. The forms are more instructional record keepers, than they are systems of procedure every taxpayer must follow.
Of the 141k, 53k are teenagers, so that leaves 88k full adults (age 20+) making minimum wage. That's not nothing, but it represents 0.1% of those paid an hourly rate and 0.06% of the workforce as a whole.
[0] https://www.bls.gov/opub/reports/minimum-wage/2022/home.htm
167,929,000 * 0.5% = 839,645
how many accounts do you possess? seems like a non issue.
If taxes worked simply and logically, the whole population wouldn't have to pay $100+ each year to Intuit and H&R Block, which would not please the shareholders.
https://www.propublica.org/article/filing-taxes-could-be-fre...
A ton of repetitive bookkeeping tasks become so much easier when you can copy and paste, or use keyboard macros or something like multiple-cursors[2], rather than have to click tens or hundreds of times in a GUI. Many years ago I used QuickBooks, and basic tasks like importing a bank statement took at least an order of magnitude longer than they do now.
Having my company's books in Git is also huge when it comes to auditing, concurrency, backups, and figuring out where things went wrong when accounts don't balance. As mentioned in another comment: `git diff` is a really powerful tool and it's awesome to be able to check out the books as they existed at a particular point in time. `git blame` is great for when you're trying to figure out where a number came from. Writing meaningful commit messages and comments keeps me sane when I try to remember a year later why something is recorded the way it is.
The biggest downside—or advantage, depending on how you look at it—is that there's no default or built-in chart of accounts, so you need a certain level of accounting acumen (or professional advice) to set things up at first. I'm pretty sure GnuCash aims to be plug-and-play, whereas Beancount is more akin to a programming library that you use to build an accounting system. I agree with the grandparent commenter, who said that text-based accounting is "the best and most flexible accounting experience I've ever had." But the cost of that flexibility is that there's a fair amount of DIY involved.
The government isn't aware of your donations or losses, or whatever. So you have to tell them about it. Tax preparation software, historically, was designed to make this process easier by prompting you for all sorts of details you may have forgotten or were un-aware of. In essence, the software was supposed to replace a paid tax professional.
Today, most people use Standard Deduction since it was raised so high by the Trump Administration, and the need for credits and deductions has been greatly diminished. However, the need is still there for many folks, and not all tax filings are simple.
The nirvana for tax filing would be a single page online that disputes any facts the IRS already knows (such as informing them about donations or the like). But, our tax code itself needs to be vastly reformed and simplified before that can become a reality.
The reason public tax filing software makes sense is that the government imposes this cost on the public so the government should collect the money to pay for it in the usual way (i.e. from taxes paid in proportion to ability to pay) instead of imposing a fixed fee on everyone.
Remapping a transaction to a different tax line item (e.g. if tax law changes, as it did this year with § 174) is just a matter of updating the account metadata. This is much more convenient than having to go back through the books and reassign transactions to different accounts.
It's plain text in Git, so I have the usual tools available. For example, `git diff` can tell me what changed between tax years, and I can check out a copy of my books as they existed at the time a past year's return was filed.
I suppose if you are arguing that the one and only reason that tax preparation software is needed is because of Intuit's lobbying then that could be true, but Intuit's lobbying is only part of what has led to a complex tax code.
This means that if you don't report sales from your side so you can note the cost basis, the irs assumes a cost basis of 0 and calculates owed tax on the entire sale value - this applies to stuff like RSU grants as well, and trips up a great many people entering the tech sector ( especially young people who may not have much tax filing experience )
I legitimately don't know why brokerages don't all include the cost basis by default ( or why they aren't required to by law )
An example of where the brokerage wouldn't know:
You buy 5 shares of stock at $X and then a few months later buy 6 more shares at $Y. Later on you sell 3 shares for $Z. What is your cost basis? It could be $3X or it could be $3Y. Or maybe a blend of the two $(2X + Y)! The IRS thinks that you should be the one to decide, not the brokerage.
I'm sorry, but this response comes up every time, and every time the answer is "yes, that's why I said you should be able to just tell them it's correct." It doesn't have to be any more difficult than checking a box.
90% of people are just going to use the standard deduction (no, seriously: in 2019 it was 87.3%[1]), and for most people their filing status will only change a handful of times in their lifetime. It makes no sense to waste everyone else's time for what should be at most 3 or 4 yes-or-no questions.
[1] https://www.irs.gov/statistics/soi-tax-stats-tax-stats-at-a-...
edit: It's also possible you file before things are reported to the IRS about you.
Guess what I do? I get all my forms together. Look up the numbers on the forms. Double check the entries on the fillable forms are correct.
Then I get my paystubs, I check the deductions, double check the prefilled form is correct.
So what did it save me over the way US taxes are done? The form prefilled the numbers, that’s it. All the rest is the same. Same collecting forms, same doubling checking math.
And why? Because mistakes are made. My employer sent the wrong numbers in, so the prefilled form was incorrect and would have cost me about $1,000 in extra tax.
If you want to make tax filing better, make the tax code way more simple. I’ve lived in countries where the tax form was 2 pages with 12 entires. That’s it.
Now that is the way to go. I could care less about fillable forms.
I'd wager that ~90% of people where I'm from where we have pre-filled tax forms does their taxes in less than 5 min (ah, looks reasonable, click).
It's your money. You'd be smart to spend more than 5 minutes to make sure it's 100% right
Every time HN discussion about US taxes comes, I imagine a sizeable group of users from developed country watch in amusement the craziness that the IRS makes its taxpayers go through to charge them money.
I know in Mexico and Chile everything is highly automated. In Mexico 50%+ of working class dont have to do ANYTHING, as whatever tax stuff needed is submitted by their employer.
Come on US... that we in Mexico have better automation for this is inconceivable. We look up to you for lots of things, particularly technology.
> The following factors don't generally qualify as valid reasons for failure to file or pay a tax on time:
> Lack of knowledge. You're responsible for knowing or getting advice on how to file returns and pay or deposit taxes on time. This includes filing requirements, deadlines and amounts you owe.
> Mistakes and oversights. You're responsible for making sure your tax returns, payments and deposits are correct and on time. In certain cases, reasonable cause may apply to a mistake if additional facts and circumstances show that you tried to comply with tax law.
A much easier path is first time abatement. [2] Though of course as the name indicates, it can't be used multiple years in a row.
[1] https://www.irs.gov/payments/penalty-relief-for-reasonable-c...
[2] https://www.irs.gov/payments/penalty-relief-due-to-first-tim...
The bar for a mistake (assuming you filed and paid on time) is much lower, see the next section, "Accuracy-Related Penalties," on the first link you posted: https://www.irs.gov/payments/penalty-relief-for-reasonable-c...
> In a number of recent Tax Court cases, taxpayers have raised the argument that they relied on Turbo Tax software as a defense to the imposition of the accuracy-related penalty. With one notable exception, the so-called “Turbo Tax defense” has been rejected by the Tax Court.
https://scholarlycommons.law.wlu.edu/cgi/viewcontent.cgi?art...
Some things should not be privatized. The government allowing corporations to profit off of a civic duty like taxation, while offering no free public alternative, just anoints a handful of corporations with the gift of extracting profit from a mandatory governmental process. You should not be required to understand the intricacies of tax code, or pay for someone who does, just to file your taxes as required by law.
If a criminal has the right to be provided a public defender, then every American with an income should have the right to be provided with public tax preparation service from the same government that mandated tax collection in the first place.
Huh. Interesting example. I actually do want to see a government produced public good operating system.
Where we're going, operating systems will either be ad filled messes or locked down walled gardens. A public good option would be required to meet high bars for interoperability while also not ad funded.
It's one thing to regulate away a market (make things illegal) and a very different situation if the government is just setting a bar for quality within a market.
Linux?
China has given money to FOSS projects far more than the US does, and there is an official Chinese Linux distro available to Chinese users. Nobody is forced to use it, outside of Chinese government employees on their work machines, but like a library, it is something of value that the state can provide to those who might need it.
I believe that these companies lobby to keep IRS from providing free tax prep, but I do not think that they lobby to make the tax code more complicated.
It’s my understanding that the tax code is complicated as a result of disparate efforts to increase support among voting blocks, to encourage/discourage behaviors, and to reward supporters/backers.
It's a start, but I'd need to think of examples. I'd say if the government creates inefficiencies, such as for basic tax filing, it should remove them if possible regardless of the effect on businesses profiting from them.
Off the top if my head, there could be cases where government makes a change that shifts the demand from one industry to another (that donates more to politicians).
The complexity of the US tax code is certainly inefficient from the perspective of someone trying to get through their taxes, but many economists would argue that it enables a very economically efficient way to soft-enforce policy and influence behavior without resorting to regulation and law enforcement.
Whether the economic efficiency outweighs the bureaucratic inefficiency... I'm not sure. I guess that's where public tax software comes in.
If you had a national VAT instead of a national income tax and the government wanted to subsidize e.g. solar panels, they would simply exempt solar panels from VAT and individuals wouldn't have to file anything, they would just pay less for solar panels because the seller wouldn't have to collect VAT.
The system we have now is unnecessarily complicated because the subsidy is essentially always for something you buy, but then you have to go and file paperwork to deduct it from your income tax. On top of that, then penalties have to work differently -- if you want to impose a penalty on cigarettes then you can't just change the amount of the existing VAT on that product, you need a whole new tax with a duplicative collections infrastructure.
The justification for this is nominally progressive taxation, but you could get a progressive effective rate curve just by giving everyone a fixed "standard refund" (i.e. a UBI) against an otherwise flat rate consumption tax.
It's really not a hard problem.
It's actually an extremely hard problem if you try to match payments by name, since there are a lot of people with the same exact name, many of whom even live in the same state or same city. Most checks don't include an address, and even those that do don't always match the address the taxpayer gave on the return.
It sounds like you failed to include your SSN on the check, which means this problem was one of your own making. That being said, if you could provide proof that payment was timely sent and the check details (check #, account, etc.), the IRS can match the payment received and will void penalties and interest that were assessed.
Of course it was cleared up, but the point is that at least one of our SSNs was on everything. That should be a trivially easy for record merging or linking.
The vast majority of taxes that are filed by US taxpayers are simple.
No, but I do know that it's much simpler. We (the US) seem to have a "not invented here" syndrome towards learning from how other countries improve over our system.
> It is crazy how much work you need to do in the US ... even for a "simple" filing.
The old rumor is that drug dealers and gangsters get convicted for tax evasion.
We (the US) seem to have a "not invented here" syndrome towards learning from how other countries improve over our system.
I just think it's disingenuous to paint all US tax returns as this difficult, complex beast.
I sometimes end up plugging the currently requested info into 2 to 4 tax prep sites (discarding the highest results, unless the lowest seemed to come from a glitchy or confusingly-worded site), because even they can give wildly different results.
[1] https://www.form8949.com/tto-e-file-attach-work-around.html
[2] https://www.taxact.com/support/21598/2022/e-filing-attaching...
Anyway, I let her know.
Either way, the $49 to use the software is trivial (under this situation) and often is only paid if you use that software to submit your taxes (meaning you can "get a second opinion" for free).
Did you have a specific counter-argument, or just thought-termination?
You can always choose to print out your forms and mail them though.
The US would need to vastly simply the tax code - remove all the various tax breaks for dependents/spouses, remove the progressive taxation scale, etc. - before it could be successfully automated.
With all of that, I just get into SAT page, ask it to fill up everything with the data they already collected, review it, and agree on the $$$ they will give me back (yay mortage!).
It CAN be that simple. that's what systems are for: to automate complex processes. Computers excellent at it.
All
I didn't have to hire anyone to get the penalties waived; I just submitted a letter explaining my original rationale, along with an amended return fixing the problem and a check for the correct tax. The IRS was completely reasonable about it.
Edit to add: But then again, I do my own plumbing repairs. Heinlein didn't list taxes in one of my favorite quotes from him, but he should have: "A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects."
For me so far the problems have been easily sorted out except once. The once was a lot of extra and unnecessary calculations but essentially no penalty. Just the cost of my time, which is bad enough.
My main complaint (which is still fairly minor) is that they still too often presume that "it" (the reason why they want more money) is the fault of the individual taxpayer. No need for them to consider other possibilities. Once, a client provided poor numbers on their 1099 and I used my version. Both versions based on my invoices. IRS doesn't bother to ask for a clarification. Just sent me a bill and fine. And I suspect in the end after my response letter, they audited the client. Not the best result but only a little stressful on my side.
* Marriage is incentivized via the advantageous married-filing-jointly option.
* Donations are deductible.
* Employers are incentivized to replace part of wages with benefits packages including health insurance, which incentivizes people to not be unemployed.
(I'm not saying any of this is a good thing, especially that last one :)
For 99% of people the 2023 brackets for married filing jointly are just double the ones for being single, and actually penalize two-income married couples in higher income brackets. Moreover, this wouldn't even do anything in a system with a flat marginal tax rate.
But if you actually wanted some marriage bonus you could increase the amount of the UBI for married couples.
> Donations are deductible.
So you don't charge VAT for donations or let the charity buy things without paying it.
> Employers are incentivized to replace part of wages with benefits packages including health insurance, which incentivizes people to not be unemployed.
This is definitely not a good thing and should be burned to the ground. But you could get the same effect if you wanted it by not charging VAT when e.g. employers pay for healthcare.
The better solution would, of course, be to not charge VAT when anyone pays for healthcare.
Do X? Get Y!
instead of:
Do X? Fill out 3 forms, cross-reference to 2 others, be eligible for a tax credit if you earned enough, file ....
The only 1099 that most people will get, even with meaningful savings, meets this description.
1. https://www.pewresearch.org/internet/2021/12/08/the-state-of...
Yes, most people with more than a few hundred bucks in savings accounts will get a 1099-INT, but a lot of people just use checking accounts and if you're at a big bank like Chase even savings account interest is so low you still might be under the $10 threshold.
The average American's investments (if they have any at all) are in retirement accounts so they'd avoid those taxes too.
Dividends and capital gains are not mentioned, and presumably not eligible.
For example, how many of those respondents in the Gallup poll answered yes only because they have a Simple IRA? For those respondents, their contributions don't preclude them from taking the "simple tax" branch when filing taxes. (That's the "simple" part-- well, one of the simple parts, at least for the employee.)
Moreover, there were some changes to simple IRA administration in Secure 2.0 act that make automatic enrollment mandatory (for the employer to do 3% matching or whatever). So the category of respondent I mentioned above-- who technically has a brokerage account but can file simple taxes-- is likely to grow quite a bit in the next few years and decades.
Edit: I'd also be interested in how many people with simple IRAs contribute anything more than the 3% matching-- I'd bet its more than a majority. Perhaps that could change now that Secure 2.0 lets them contribute to a Roth IRA.
In my case it was $900 difference.
I guess I’m not making those fat tech dollars like you where $900 extra is “close enough”.
Must be nice. But try and remember not every is rich like you. $900 is the difference between paying rent and being homeless for a lot of people.
It's basically backed by the IRS and implemented by Intuit et al, but appears independent.
It works a little better every year, but you do still have to manually carry over some numbers from form to form.
I've been using it for the last 8 years at least. I don't love it to death, but if it wasn't available I'd do my own paper forms anyway.
I'm very glad that the IRS is going to be making something that's more comparable to turbotax now.
Glad a digital equivalent to paper forms exists, the US tax code is far less hellish than I previously believed.
If you are a typical tech employee and have highish income, incentive stock options, interest, dividends, capital gains, etc. don't think you can use freefillableforms to do your taxes in a couple hours.
To err is human, to really foul things up requires a computer.
As a user, how do you know that the tax software you are using was "properly written"?
It takes longer to do my taxes via the web forms than it did by hand (which says just how bad the UI of tax prep is!), but it saves me from human mistakes.
Note that the ISR already has all the information they need to do my taxes for me. They just don't do them.
Not me! FreeFillableForms is apparently the last piece of software in the western world that doesn’t save your progress as you go. I found that out the hard way about three days ago and immediately switched to freetaxusa.
Takes me about 2 hours on ffff ....
.. mostly because I've done my own taxes for the whole 34 years I've lived in the USA (including the first year when I got the US government to pay me the excess of what I'd paid the UK government, and the year I paid taxes on amzn stock that exceeded everything I had ever earned until that time).
This stuff is not as complicated as people make out, though I would concede that it is likely easier for a software developer-type person than a personal grooming specialist or firefighter. There's a whole industry out there predicated on the idea that you can't do this yourself.
In the context of the IRS providing a useful filing tool, covering 96% of Americans' income sources would be fantastic.