This stuff aggravates me. My taxes aren't abnormally complex (single, one state, very few deductions, one w-2), but I get several 1099s for my investments and end up spending an hour filling them in manually, importing CSV files from my brokerages, and double checking the numbers. What annoys me is all the forms clearly state the IRS has also been sent this information; I'm literally filling out forms in a slow, error-prone way just so the IRS can run a simple == check to make sure I entered them in correctly. I feel like it's something my third grade teacher would force us to do to kill time.
I don't care about the 30 dollars turbotax charges me, I'll send 30 dollars straight to the CEO or promise to burn it. What bothers me is that I've been forced to do manual data entry - a pet peeve of mine as a programmer - because the government has been lobbied specifically to be less efficient.
I haven't manually entered more than a trivial amount data into TurboTax in years. Most banks and brokerages seem to be on the direct-download bandwagon these days.
Are you endorsing TurboTax as some sort of appropriate monopoly on tax prep? My bank can tie in to TurboTax, but why should I have to support a private company lobbying to make the tax code worse on purpose just to do my taxes easily?
I went through the same thing as the commenter above and it was OBNOXIOUS. Even worse, there's no real reason for it be done the way it is.
Oh, and then I realized I'd made a really stupid (but easy to make) mistake that altered the amount I owed by $12 and had to file an amended return.
Really really obnoxious.
I'd bet anything people would care 10x less about getting taxed if filing weren't such a hassle.
> I don't care about the 30 dollars turbotax charges me, I'll send 30 dollars straight to the CEO or promise to burn it. What bothers me is that I've been forced to do manual data entry - a pet peeve of mine as a programmer - because the government has been lobbied specifically to be less efficient.
in which the author reveals that he or she uses Turbotax, but finds the manual entry of data into the program onerous. I found this interesting as a criticism, since my own experience is that I virtually never have to manually enter anything into Turbotax. There was no endorsement of Turbotax or other judgement about the primary question under discussion in the article.
Yet, Government programs have excellent customer service as compared to corporate equivalents. I use one example: student loan servicing. My loans were serviced by the largest company in the business for years, it was pure torture. When the department of education offered to assume the loans, I was happy to have the pain gone. They have been absolutely lovely to work with, clear, transparent and... helpful.
In my experience, I would tend to agree that customer service from the government is generally better than corporations, from the DMV (though states my vary), County Clerk Recorders, Passport offices and even the IRS, and they generally seem happier than customer service folk at corporations who read verbatim from support guide trees and are incentivized to do what's in the best interests of the company rather than you.
In my experience of living in four different US states that the quality of customer service in government departments varies from locale to locale and even department to department, just like in corporations. My visit to the DMV here in Texas was quick and easy but the visit to the DMV in Las Vegas was such a maddening experience I'm surprised anyway bothers to get a drivers license in the first place. In the office if someone announced they were going to the DMV we would assume their inability to escape and start looking for a replacement. I heard stories of a guy that got in line as the foundation was being poured for the DMV and he's still there to this day, fifth in line.
Yea, I find the DMV surprisingly helpful. The old saying 'Good enough for government work' used to mean over engineered and built to last, now it's a euphemism for how much you can get away with when outsourcing government work.
The INS (err, BCIS, err, USCIS --a great sign of a well run institution is how many times it needs to change its name cough Xfinity) comes to mind. They are the most horrifying bureaucracy with which I have ever dealt.
DMV offices in many states are actually run as private businesses under contract to the state, not by the state government directly.
In my state, actual government offices are generally less seedy looking, better staffed, and friendlier than the universally-privately-run DMV offices are.
Deputy Registrars are independent contractors and are selected on a competitive basis as described in the Ohio Administrative Code and RFP. Deputy Registrars receive service fees of $3.50 for each vehicle, driver license and ID card transaction; and $0.90 for each vision screening performed. All fees are established in accordance with the Ohio Revised Code. Contracts are generally for two or three years per Section 4503.03 of the Ohio Revised Code.
All that said, the private contractors do get the job done, but they do it in a way that's efficient with employee time, not in a way that's efficient with customer time.
DMV in New Jersey is great. It really is. Completely painless for everything I've done there including getting a license, buying/selling cars, trailer registration, etc.
DMV in Connecticut is horrific. One of the worse "customer service" experience.
Which says to me, all of the reflexive "DMV sucks" comments are missing the real question - why does it suck in some states and not others?
BTW, despite DMV being the common complaint, I've been dealing with DMV a number of times and never had a problem. Dealing with the IRS was somewhat nightmarish though - while I can't complaint about customer service per se (people I spoke to were polite and tried to help me within what they could) the processes and the transparency were quite Kafkaesque. Basically somehow IRS decided I owe them a ton of money, and I spent several months (not consecutively, just how long it took to be resolved) trying to find out why and how to make them realize it's not true. I never found the answer to the why question but when it got to the question of me owing them something like 17 dollars (there also were cents, I just don't remember the exact sum) I just paid it up to put the whole thing behind. I still don't know why exactly they wanted it and what was wrong (my return was pretty simple and I asked professionals and IRS service people, nobody had any idea).
I had a situation last year where the IRS sent me a notice that I owed something like $20,000 in taxes from a single 1099 they claimed I did not file. In fact, they had missed a decimal point on the 1099 and read something like $75,000 rather than the $750.00 that was on the 1099. After re-sending them copies of the 1099 and all the data I had on what I filed, they responded saying the matter was settled and apologized for the inconvenience, but I'm still bothered by the fact that had that decimal place error been my own fault, I would have been fined $3,000 (according to the documents they sent) but when they make the mistake they just send a form letter apology.
I've had quite the opposite experience. Dealing with the DMV here in Pennsylvania is always a nightmare with long waits and dealing with employees who are rude and make it known they'd rather be getting a medical procedure than renewing your license or some other aspect of their job. I've only had to deal with the IRS in an official capacity twice and both times (while a PITA for the reason I had to deal with them) the people with whom I spoke were exceedingly polite, helpful, and most importantly knowledgeable about what they were helping me with.
I say this not to say that you're wrong by any means, just to offer another anecdote.
I've been to the DMV to get an ID and it wasn't bad at all. The worst I've seen happen to other people is a long line. What are the big problems people apparently have with the DMV all the time? I'm from NY if that makes a difference.
Most Texas DMVs are hugely understaffed, I assume deliberately because they don't want to fund more staff, so the wait is generally long, like 2-3 hours long, and the facilities you're waiting in are old and poorly maintained. However, that's pretty TX-specific; TX generally underprovisions government services. The CA DMV is much nicer, and you can even book a specific time online!
You can renew your license in Texas online every other cycle, the only reason it's every other is they want you to come in to refresh you photo every decade, so make an appointment.
Yeah, I do it online when I can, but I had to go in in person in 2011, and it wasn't particularly pleasant. I didn't know you could make an appointment; when I asked at the time you couldn't. Seems like there is now some kind of "get in line online" feature, though it's not available at all locations: http://www.txdps.state.tx.us/administration/driver_licensing...
Blame your city government. St. Louis City Hall houses the DMV and all other city offices and the service is stellar. I've yet to have a bad experience in over two dozen trips there.
Yes. In the last decade or so, the Virginia DMV has been painless for typical tasks. Most common tasks can be performed online - registration, license renewal, even obtaining titles after paying off loans (assuming the dealer/bank held the title electronically). The few times I've had to show up in person, I've been in and out in 30 minutes or less.
There's an obvious distinction between state governments and the far greater competence of Federal agencies. As someone who works in a business that's heavily regulated at the local, state, and Federal level, I can tell you that the differences aren't subtle. (It will also vary quite a bit depending on the state and locality.)
Yes, I went to the DMV in Illinois to get my license and managed to complete the eyesight, written and driving tests and walk out the door with my new license in maybe an hour and a half. I didn't even have an appointment.
I'm aware this isn't the case in all states, but that says more about the priorities and competence of the people running those governments than it does anything else. Unfortunately a lot of people seem resigned to the idea that things are going to be run poorly and don't even bother punishing the politicians who are shirking their responsibility of administration and blaming their own failures on some abstract idea that government is always inefficient.
DMV in the District had a pretty long line but was fine otherwise. The biggest problem I saw was people who had not read the provided information/required materials in advance of coming then started arguing or pleading their case.
You get problems when the employees cannot interpret the rules correctly, though. For example, proof of residency can be utility bill from the last 60 days, OR a DC property tax bill, and they reject a current DC property tax bill that wasn't issued in the last 60 days.
Service wise they do a pretty good job. They've spent the past decade or so beefing up their online and automated services. In most cases you don't even need to go to an actual office if you're dealing with a license or plate renewal.
I just recently went to my DMV in sunny CA to get my DL renewed (I made an appointment as without one it's literally half a day in lines). I had slated 2hrs of non-billable time on my calendar, but I was out in 15m - with the to/fro latency, it was 45m total.
The government doesn't pay low salaries to coders, (remember, all they really need are CRUD apps. This isn't rocket science), its just HORRIBLE at hiring.
Rather than leaving any hiring decision to anyone who knows the issue at hand, hiring is done based on a process which is optimized to be legally unimpeachable. When government succeeds, nobody gets credit, but when they get sued, its cover your ass time. This is why ALL government processes, including hiring, are first and foremost about CYA.
I've been able to witness some of this in the State of California. This system is designed to try to prevent the government from overspending on software. They can always point to a public RFP and open bids if anyone objects. However, it is not designed to produce the best value for the state.
First the RFP has to be written, which itself is a very political process and may have been initiated by a contractor/sales-person convincing someone they need the software or process in question. They'll often help write the RFP if you let them. These RFPs are often signed off on by non-technical people who are not qualified to really understand the technical details.
Then the state has to get multiple bids. Sometimes the RFP is written so specifically that many options are excluded. For example, I've seen an RFP that required the state pay for the software. The way it was worded excluded an OSS contracting company from providing support for a Linux solution. A more public example is the LA School District looking for computers for their students. They are required to support both a keyboard and touch, which is prime market for Windows Surface devices. It could theoretically go to something like an iPad, but it makes it very hard for laptop makers to compete.
Finally the state is required to take the lowest bid that meets the requirements of the RFP. To reject a bid the state has to show that it does not meet the requirements. They can't simply take something that is better value, they have to take the cheapest solution that meets the minimum requirements.
The IRS was recruiting for interns at my university recently, who could eventually become full time workers. However, I found that at best I could enter as a GS-9, and those were positions with 5 years of expirience. The best salary I could get from that was $53,000 in NYC. Even the lowest offers my friends were getting were $60k in a low-cost area.
If the government was able to fund it's IT operations at market rates, or pay outside the GS we'd all be much better off. I don't know about the federal level but my state relies on outside contractors to make web applcations, who mostly do a half-assed job and disappear when maintenance becomes a problem.
The government doesn't do anything at market rates. They employ below market rates, and contract external companies above market rates. This is (unfortunately) by design.
Unfortunately, the pensions are largely gone the way of life 401(k)s, and with the furloughs that have been coming due to Congressional instability, those things are not really that true anymore.
A certain group of politicians want to replace all government functions with private contractors, and most of those are captured by various lobbying groups representing said contractors.
The GS salaries aren't the complete picture once you factor in benefits and the pension. Traditionally, gov't salaries have been below market rate with the understanding that you and your family would be looked after. But with the current administration and legislation I wouldn't depend on that agreement remaining in place for longer.
If you're young and job hopping I wouldn't look at a gov't job just yet. 35 with a family of 4? I would seriously consider it.
It used to be that they hired at GS-7, but accelerated you to GS-12 in 2.5 years. GS-9 at 6-months and then 11, 12 after a year each.
Within 10 years you'll get a capped GS-14 spot (105k-136k) and by 15 years, you'll have 5 weeks vacation, 13 holidays, alternative work schedule, 13 days of forever accruing sick time (think family medical leave for having kids). Oh, and you can't be fired unless you do something really stupid -- so clock in and out 9-5.
Oh and you get COLA increases even if you don't get step or grade raises.
I only lasted a year, but I have friends that are still there. The fact that you can't get fired also applies to the colleagues you'll be working with...
> If the government was able to fund it's IT operations at market rates, or pay outside the GS we'd all be much better off.
I can't speak to market rates but the Federal government does indeed have alternate pay schedules that they can use (in theory) for IT expertise. E.g. scientists and researches have their own specific pay grades for their work, "hourly" workers have FWS pay instead of GS, etc.
You're right that the government workers are generally underpaid in my experience though. I struggle with the same thing here in DC, except that I'm trying to fill GS-5 positions to do work which involves knowing lots of policies, manual interpretation of individualized orders, and having to do all of that in a "customer service" environment.
No one pays penalties for simple mistakes. That's what FOX news tells you, but it's not true. We've made five-figure goofs on taxes in the past and a simple letter explaining the mistake (assuming it's an explainable mistake and you didn't get caught in actual attempted fraud) is enough to get the penalty waved.
Seconded. Mine was a 6 figure mistake. I fact, it COST the IRS money to contact me.
Once they sent info I realized the error, and that I did not in fact owe 6 figures. Paid it anyway so my wife wouldn't stress about penalities, restated ( took a year) and then received a refund with hefty interest paid by the IRS. Along the way their support line was helpful in getting some questions answered.
At the risk of seeming flippant, but if you can afford to pay a six figure mistake just "so my wife wouldn't stress", then she probably really didn't have too much to stress about, financial burden of penalties or otherwise.
My wife has several degrees in finance, and that is her field. So I am lucky that our finances are somewhat more well managed than a lot of other folks. Her "home budget" spreadsheet spans more tabs than many small business' budgets.
With that in mind, we keep a certain amount of "operating expensed" liquid, since we both tend to work in smaller companies than can go sour rather fast. Paying out that check to the IRS sucked up the majority of those liquid funds. If you've read some of my posts in the past (not that I'd expect you to have done so...), you'd see that I'm on the upper end of the age scale here, have been around a while, and managed to enjoy a run through the dot-com 90's. So, I do not have the finances of a single 20-something college graduate.
I looked at this IRS payment as an investment. I was very highly confident that I would get my money back (and then some), so that was the easiest path, all things considered. Had I been more in doubt I would have certainly kept the money, reasoning that I'd rather have them pry it away from me if it came to that.
I didn't mean for my comment to sound like I just go around writing 6 figure checks as the path of least resistance.
That's like saying you shouldn't get stressed about receiving a parking ticket as long as you have the money to pay the ticket. Or you shouldn't get stressed if you get dinged with a penalty for not using an airline ticket or (pick your example). The truth is people do get stressed regardless of what their financial situation is. (Add: Logically they shouldn't but they do.)
More to the point the thing that causes stress is the fear of the unknown. The fear of "what if" where you don't know the outcome. One of the ways I have found to at least reduce a bit that stress is to come to the acceptance that the outcome even worse case scenario can be dealt with or how it will be dealt with which seems to work for me as a mind game.
Add: Also the parent's wife may have a different financial upbringing and might have a case of ptsd because of family history or other factors.
I don't know. Not paying what appears to be a 6-figure tax bill would be pretty stressful considering the amount of taxes the IRS would think you were evading.
This is my experience as well, and the experience of everyone I know. At least for us, the IRS is not out to give us the run-around.
Besides, if you think about it, even if you figure the IRS is greedy and only motivated by money, the biggest returns for them are catching fraudulent millionaires dodging tens or hundreds of thousands, rather than slapping you with a $100 fine over a $2.38 mistake.
Another profitable tactic would be to find the sweet spot of people who make enough money that they can be accused of large tax errors, but not make so much money that they can afford to fight it all the way out in court.
Like I said, it was an error on our part. I don't disagree that at all. I have absolutely no qualms in paying what I owed. But I wouldn't have paid a dollar over the amount owed if they had adequate systems in place to catch my typos and immediately notified me to fix it. But a lack of proper processes on their part meant it took them 2+ years to find an error and now I owe them taxes + interest. Whether I would've made or lost money if I had invested in mutual funds, stock market, or horse races is not the question. The problem is by making a mistake, I am now at their mercy for an unspecified length of time.
Also the error could not have been avoided by us. My wife was in school and we took the American Opportunity Tax Credit since it was higher than Lifetime Learning Credit. But turns out my wife's estranged stepdad had years ago, unbeknownst to my wife, taken Hope Credit for her by claiming her as a dependent. Long story short, we owed some taxes + interest after filing a correction.
This is where I simply don't understand the thought process. You got burned and had to write a check, and you're angry. And yes, a more efficient and effective tax regime (which is what the linked article is about!) would have caught that faster and you would have been less angry. But that's where this has to stop -- your rationalizations just don't hold water.
I mean, really: how is paying 4% APR on a loan[1] you got from the government "at their mercy?". It's not even a bad rate for an unsecured loan! People routinely pay much higher for car loans, and even now mortgages (which are at historic lows) are only a little better.
[1] Which is what this is. You walked around with extra money in the bank for three years, albeit accidentally. Why doesn't that fact figure in your analysis?
(FWIW: if the stepdad was really "estranged" and still claiming your wife as a dependent, then you should have been able to fight that. That's not how tax law works. My guess is that they weren't actually "estranged" three years ago, and she probably did meet the definition of a dependent. Again, that's your mistake if so.)
> I mean, really: how is paying 4% APR on a loan[1] you got from the government "at their mercy?". It's not even a bad rate for an unsecured loan! People routinely pay much higher for car loans, and even now mortgages (which are at historic lows) are only a little better.
Because I didn't want the loan. What's not to understand. I wouldn't have had a problem paying the full amount if they had told me sooner. Also it was over 6% because it was 2+ years and not 3.
> My guess is that they weren't actually "estranged" three years ago, and she probably did meet the definition of a dependent.
I'm certain it met the definition but not the spirit. It wasn't worth having us fight or prolong this. As it is it took 8 months, four registered letters, 20+ hours on the phone, and numerous meetings with my tax attorney to get this resolved. IRS didn't just say "Cannot qualify for Hope Credit because lifetime limit was reached." They outright denied it and asked for the full amount with interest immediately. If this was a business deduction like restaurant bill, we would've paid it immediately. But denying education credit without any reason why? We had no idea her 4 years credit was already used. We had to contact her school, Sallie Mae, review all of our past records etc. and finally our accountant suggested that maybe when she was younger, someone claimed her.
This 2 year $500 'unsecured loan' at a wonderful interest rate cost me easily over $3k and delayed my citizenship process by 8+ months. Did you know if IRS has an open claim against you, you cannot file for citizenship even if you're married to a citizen, lived in US for 13 years and have a green card? I'm not angry. I'm just saying their systems and processes leave much to be desired.
Because I didn't want the loan. What's not to understand. I wouldn't have had a problem paying the full amount if they had told me sooner. Also it was over 6% because it was 2+ years and not 3.
You had the use of the money in the meantime, which has a value. As for the delay in your citizenship, IRS does not make that rule, it's written into the immigration law.
The facts keep changing here. How does a 12% interest accumulation on a $500 loan come out to $3000? Or maybe the $500 was the interest, in which case your "loan" amount was $4167 (which, I'll just say again, is hardly an insignificant fact -- lots of people would love to get a $4k loan at 4% with a 3-year baloon payment!). And I don't see why you ended up paying the remaining $2500k to a lawyer when even you admit the tax liability was correct (and in any case why would you pay >50% of the amount being contested on the lawyer anyway? That's just not worth it.)
The one item that strikes me is the bit about the citizenship. And I can clearly see how that would be a huge disruption. But frankly I'd blame an unjust INS policy here. I don't see how you're pinning this on the IRS for correctly (if inefficiently) enforcing its tax code.
Interest was just $65-$70 or so on the $500 'loan'. $3k was in accountant, tax attorney, paperwork fees. We also had to pay her school to send notarized transcripts to IRS because they wanted proof that she even went to school. And since the IRS letter arrived just 2 days before their deadline, we had to pay extra to the school to get it delivered overnight. Most annoying part is that Sallie Mae was the one that gave out the loan directly to her school.
I'm not saying the citizenship was IRS fault. I said a $500 'loan' that I never asked for, had no intention of 'stealing', had no way to know was pending, ended up causing months of paperwork, hassles, and undue stress. It is appalling that people expect me to treat this like a wonderful tax refund instead of what it was - absolute waste of productive time.
All of this could've been avoided by a single rule in IRS tax processing system that auto-sends a letter or email saying 'Our records show X yrs of Y lifetime credit have already been claimed. Please refile.' And I'm certain that I'm not the only person who had to go through a similar thing.
I can see where you're coming from but given some of the content of the original story it's not entirely irrelevant.
I actually do wonder a little what Grover Norquist's deal is here. I understand his politics (sort of) but I assume receiving a statement laying out the calculations the government is going to use against you could only be an advantage when strategizing how to reduce one's tax bill. That he'd be against it is odd.
Maybe he really wants the whole process to be as inconvenient as possible so people will sign on to some of his other ideas.
What I've seen listening to Grover Norquist is that you can't take his positions at face value. Example: Before the 2012 election he said they'd primary Republicans who broke the pledge. After the election he started supporting compromises. I don't think you can rely on a straightforward statement of these people's principles.
Well, I couldn't really make a straightforward evaluation of Norquist's principles even if I were ready to extend that kind of trust to him. The guy is on the record as believing that the government's imposition of income taxes is equivalent to the Holocaust.
With him, it's always a question of whether he's crazy in the obvious way or in a more subtle way.
Ten bucks says his organization, Americans for Tax Reform, gets money from Intuit, HR Block, or another similar company. Of course, we'll never know because 501(c)(4)s aren't required to disclose their backers.
How does it help vendors of tax preparation software and services if Norquist and his group succeed in getting taxes reformed, simplified, and lowered?
I think the reason Norquist opposes measures to make the existing tax system easier to live with is that such measures would tend to reduce pressure to implement his proposals to change it. He doesn't care one way or the other about Intuit, H&R Block, or your friendly enrolled CPA, the demand for all of whom would be reduced if he were to succeed in getting his proposals enacted.
As for myself, I happen to believe tax withholding was not one of Milton Friedman's finer inventions[1]. You should get your full paycheck every payday. Then, every quarter, you should have the privilege of cutting a check to the United States Treasury. That would keep taxes on everybody's mind!
Interestingly - my experience, on innocent mistakes, has been varied.
I got hammered owing 6 or 8 hundred dollars for a $200 mistake when I was 10 years old and making money off of my paper route. (No, my parents didn't cover the bill nor do my taxes.)
And I made $10,000 mistake five years ago and they said "Oh - whoops, pay your bill and be more careful next time" and then called it a day.
That is a reasonable conclusion to draw. But not the one I draw.
However there were 20 years between the 2 events.
And the first was found because of an audit, while the second I found and reported within a few months of filing.
There’s a lot going on here. The lesson I draw is: different circumstances different results. But both good and bad results are possible, for fairly similar inputs into the process.
That they did. I assume it’s for the reason that maxerickson stated. These where some /really/ simple taxes.
Other than the huge (for me) fine, it was a fairly painless experience. My parents did handle it - but even for them other than the stress of knowing it was happening, I think it involved not too much work for them, and as far as they where concerned had not too bad an outcome.
I do suspect my parents double-checked my filings from then on a lot more closely than they had before.
I've paid penalties for an IRS mistake. I submitted my returns, and the IRS said "We found a mistake, here's $300 more than what you thought we were going to refund you!".
A few months later I got another message from the IRS. "You made a mistake and got $300 too much! Pay us back + interest."
Didn't feel like fighting it because I heard that can go south easily, especially for such a tiny amount, so I paid it back with the interest.
Yup, 100%. I did the same, it was a big botch that I then took 6 months to finally get around to addressing. The IRS sent a few simple letters, and in the end there were no penalties-- I think I paid some ridiculously low interest on the money I owed and payed past the grace period they gave me from when I found out about it.
The penalty is in interest on the taxes. We had an incorrect entry in our 2010 return and had to pay about 12% in addition to the deficient amount. That would've been zero if they just verified it in 2011 and told us that there was an error. That is a penalty as far as I am concerned because I didn't get to choose the rate, I didn't get to fight it, and I didn't get to decide when it was due. It was an error on our part and a lack of efficient process on their part caused us to pay extra fees on top of the back-taxes. Whether you call it justified interest or penalty doesn't matter because it still costs me the same.
No. The current IRS interest rate for unpaid tax is 4%. You apparently paid almost three years late, which is getting pretty far afield from "explainable mistake" or "charge you a giant penalty for !=". Hell, if you had "cheated" and put that money in a mutual fund you'd have made a profit.
Well that's the thing, the IRS can wait 3 years (or 6 if the error was bad enough), then look at your taxes, and pound you with 4%/year, instead of setting up a job to look at everything right away.
Is that what happened in this case? Again, this is turning into an anti-government diatribe. The original assertion was that the IRS would apply heavy penalties for getting math wrong on the return. No, that's incorrect. Then it was that they'll assess a 12% penalty. No, that's wrong too, it's just a 4% APR.
Now your claim is that they're... what, lying in wait? Deliberately maximizing penalties? That's not my experience (our mistake was caught after about 5 months I think). You have a counterexample?
(Edit: and reading the replies, the discussion has now slipped yet further afield from the original assertion, and in two directions: on one hand, it's now outrageous -- yet somehow still an argument against the reforms in the linked article -- that some people merely have "bad experiences" with the IRS. On the other the IRS are apparently now highway bandits literally robbing people with threat of force. I give up.)
Since you had a good experience then we are to suppose that everyone has a good experience? I believe there are a good number of stories to show that people have had rather bad experiences with the IRS. Just like you, I'm sure there are stories of people having a good experience with the IRS.
You used yourself as an example, he used himself as an example, so I fail to see how he is required to provide another counterexample to you at this point.
"No one pays penalties for simple mistakes. That's what FOX news tells you, but it's not true"
My first reaction is "agree" as I have been through this as well.
But now I will modify that agreemet to recognize that not everyone is smart or capable enough to know how to approach fixing something like this with a letter. Or to take the time to read the letter or understand what is going on. Or maybe they go to the clerk at the tax prep office and they are clueless so they ignore the letter and then they have a bigger problem. Stuff like that does happen. There are probably more people who don't know or have the resources to handle this then people that do.
As an aside many years ago I received refunds of thousands of dollars of overpaid sales tax to a state by simply submitting a letter and a spreadsheet which they never audited or checked. I could have said anything with practically any amount (iirc maybe 20k was the amount requested inflation adjusted approx.). By simply presenting a spreadsheet showing the errors each month and writing a letter a check arrived back cheerfully iirc 6 mos. later. Just like that.
I should point out that I completely agree here. Streamlining any sort of manditory process, especially one like this that can affect people financially, is always a good idea. That, after all, is what the linked article is about.
But I'll also say that if you want to address tax complexities in a way that will most help those in need, catching unclaimed EITC returns (something like 30% of eligible filers don't claim it, I believe) is a much better use of effort than trying to eliminate underpayment mistakes.
Why are my points negative for my comment? Is it not true that he made a statement about FOX as though it were known accepted truth and did not back it up with a factual reference?
Only if it's malicious or intentional. A mistake will be picked up and you'll get a form a year or two later asking you to accept or challenge proposed corrections. If less tax was paid than required you have to pay that + interest...which really isn't that unreasonable.
I'm not saying the whole system isn't needlessly complex, but don't make it out like the IRS is actively out to get you.
My return for 2008 or 09 was a mess. I had one 1099 I never received from a former employer I'm convinced was trying to screw me, I had one 1099 sent to a former address and a debt forgiveness 1099 from a credit card charge off. I got a packet from the IRS listing the adjustments, what they proposed I owed and very clear and detailed instructions on how to respond to each of the three changes.
Incredibly easy to resolve the entire ordeal within weeks, including full payment.
I have no doubt that if the IRS truly made it a policy to extract as much money from everyone as they could, they would have just audited me and nit picked every math error ad nauseum until I was drowning in penalties and interest.
I challenged the adjustments to one of my returns and the most difficult part for me was finding a damn fax machine while I was on hold with a very helpful woman at the IRS. In the end they admitted they made a mistake (to their credit, an understandable one) in saying that I made a mistake and I lost a total of maybe an hour or two of my time.
I got paid interest because the IRS took longer than they were supposed to when they processed my return claiming the first time homeowner credit. I wasn't expecting it, and I certainly wasn't expecting the interest rate I was paid to be higher than any non-credit-card interest rate, but it was.
I treated myself to a bottle of Lagavulin 16 and a couple good cigars.
It's not so much of a mistake, per se, but a function of dealing with estimated tax payments as a self-employed person with fluctuating income. I could very easily pay the amounts required, and then suffer a bad Q4 and have a much lower tax obligation than what I've paid in, all while meeting the mandatory minimums that the IRS requires me to pay quarterly.
Of course, I'm not allowed to just pay the full amount when due, which would solve the problem (for me, but potentially cause much larger problems for people and the government w.r.t. those who don't/can't budget appropriately).
It is nice to hear (from fotbr) that in the case of an actual mistake on behalf of the IRS that they actually pay interest... I did not know that, and wouldn't have expected it.
Rubbish. I made a $250 mistake on my tax return a few years ago and they just wrote me a nice letter about it. The only penalty I paid was some tiny dollar amount of interest. I don't dispute that people can have bad experiences with the IRS but they're not going to drop the hammer on you over a math error.
Turbotax has data import for some of the major payroll systems. However, making this work with IRS data directly, is a secure way, it not a trivial task and this task has to be performed by the IRS, not Intuit. Note that this is not what Intuit lobbied against - it's preparing the whole return (which is non-trivial, especially given law changes and thousands of options that exist) against just exporting data. I don't think Intuit would be opposed to the latter, but they are to the former.
'especially given law changes and thousands of options that exist'
The IRS needs to have this logic and data import anyway to be able to verify the return. So, all they really need to do is process everything by say March 15, and allow someone to see the data on a website and click (Accept).
I don't think IRS has all the data in one place. E.g. do they have my local property taxes? Do they have record of mileage that I could deduct for charity purposes? Do they have a value of goods I donated to charity? Hypothetical examples, there can be a lot more options, many of them not so easy for them to verify. That's why they audit - then if I am audited, I'd have to prove them it's true.
> The following month, an ad in The Sacramento Bee, paid for by the CCIA, cautioned "Taxpayers beware" and said ReadyReturn "could be very harmful to taxpayers." The ad pointed to a now-defunct website, taxthreat.com, opposing ReadyReturn.
The fact that a tax-hater such as Grover Norquist opposes reforming the tax-filing procedures illustrates the complex dichotomy between giving government good responsibility without giving it dictatorship-like responsibility.
In Norquist's opinion, making taxes too easy to file will make citzenry too complacent about how they're being nickel-and-dimed and will lull them into not pursuing reform. OK, fair enough.
But what about a scenario in which for 30-50 million Americans file for their taxes by sending a SMS (as it's apparently done in Scandinavian countries)? And all the other taxpayers, they're wondering: "Why the f-ck can't my taxes be that easy??"
Isn't this scenario as likely to lead to overhaul of our complicated tax code?
>But what about a scenario in which for 30-50 million Americans file for their taxes by sending a SMS (as it's apparently done in Scandinavian countries)? And all the other taxpayers, they're wondering: "Why the f-ck can't my taxes be that easy??"
That's why Grover Norquist and others are lobbying against this. If taxes weren't a hassle, their movements would lose an important emotional touchstone that fuels many people's aggravation against the government. Being able to tap into that frustration, in order to enrich themselves and their political donor class is very effective.
Exactly, instead of having a convenient -option- that could save many Americans time and money Norquist and people like him are forcing the rest of the country to use a less efficient method. In other words they are taking away people "freedoms" in order to force them to fight to get their "freedoms" back. Norquist is of course more than happy to provide helpful guidance on what freedoms should be fought for.
The argument seems to be that Americans don't sufficiently resent paying taxes already because it's too efficient, so we have to make their lives even more inconvenient. The amount of complaining about taxes I hear on a day to day basis I think entirely discredits the premise of the argument.
>But what about a scenario in which for 30-50 million Americans file for their taxes by sending a SMS (as it's apparently done in Scandinavian countries)? And all the other taxpayers, they're wondering: "Why the f-ck can't my taxes be that easy??"
How does your independent consultancy cram all of its income and expenditure items into an SMS?
Less snark version: the main cause of complicated tax code is needing to have rules about how much you can deduct for an expense when determining net income (for entities taxed by net rather than gross income, like corporations and independent contractors), not from special credits or varying rate schedules.
That problem, in turn, is amplified by the size of the taxes, which gives people an incentive to abuse whatever leeway is given by the deduction rules, forcing them to be more precise, leading tax experts to abuse the new language, and so on.
Btw, just did my taxes. Did you know that the cost of classes to change your career or improve earnings isn't deductible unless it's from an institution on an approved list?
> How does your independent consultancy cram all of its income and expenditure items into an SMS?
Sorry, I wasn't clear enough, so snark accepted...what I meant is that if there are Americans who are in the "SMS-and-done" category, then there is a group of Americans who are almost in that bracket. But because of our convoluted tax code, they are ultimately forced to use a third-party to deal with filing taxes.
In my imaginary unicorn world, this group of Americans would be the critical voting bloc toward either an overhaul of the tax code that makes tax filing simpler, if not SMS-simple. There will always be entities that need dedicated tax accountants...but tax reform is about reducing the overall number of entities
In Australia there is a program distributed by the government each year, based on some sort of spreadsheet type thing, that looks up as much info as it can from central records (when provided with identifying info) and then walks you through the rest of the process of filling in a return.
Not as simple as "yes, that looks right" that happens in a bunch of places, or the UK system (no tax return unless you have special circumstances) but it works well.
Yes, it works fairly well, but unfortunately has crushed the capitalist Ubermenschen who never had a chance to build TurboTax Australia under the government's boot heel.
I've actually had my return automatically amended a couple of times to give me more money back based on tax rulings on deductions.
1) The IRS itself gets most of the tax advice wrong that it gives out to taxpayers
2) Paying taxes is one of the few transactional relationships you have with your government. If you ask me, a government representative should come to your office and you should pay him in cash, not hide and automate taxes so that they disappear.
3) There is a difference between a simple tax system and a tax system that is simple to operate. Taxpayers deserve a simple tax system. Continuing to automate the byzantine monster we already have is a terrible, terrible idea. How would reform ever take place?
4) Think for a minute what this implies: that a government agency that is responsible for collecting money should also be the sole source for computing how much money is owed. Where else would you allow such a conflict of interest? Should the police come by your house to determine what crimes might have been committed? Would you want inspections by the local health department of your private cookout? Right now we have administrative courts and such, but the principle is fairly clear: reporting by the citizen, oversight and acceptance of reporting by the government, and the court system to sort out problems. You don't start putting everything in one bag under the name of ease-of-operation. That's whacked.
5) I do not believe these candidates campaigned on this. What I believe they said (or meant) was that the system should be simple enough to eliminate the burden on the taxpayer, not that compliance with a bad system should be automated.
As a side note, have any of these people ever created software or worked for a project inside the IRS? The guys I know that have could tell you horror stories. Testing alone should give anybody who knows programming and the IRS nightmares. This is a tremendously bad idea, both from an execution and a structural standpoint. When something doesn't work, the answer isn't to just do it harder or throw computers at it.
Having said all of that, having the IRS give you the information that's already been entered once so you don't ever have to re-enter things? Excellent idea.
ADD: Completing taxes is not hard because we don't have technology applied in the correct manner. It's hard because the tax code is a complex, unintelligible POS. The only people benefitting from continuing to hide the POS that the tax code is are those folks who made it complex in the first place (And will continue to add to its complexity the more that we ignore it)
To me, it seems you're attacking a strawman sauced up in government-is-evil hyperbole.
The tax system in Denmark is 100% automatic for almost everything. Most people don't have to do anything at all. Once a year, you get a letter or email asking you to check the numbers, you can then go in and add extra information if needed, and that's it. If you discover an error back in time, you can fix that too and get money back or use a credit card to pay if it's in the other direction.
Despite this level of automation, the Danish government manages to change the tax rules almost every year.
Are we saying that since the system apparently works in Denmark it therefore works everywhere and that there never be any government-is-evil considerations?
What a bizarre exaggeration of the parent comment. The comment about Denmark appears to serve as an existence proof, demonstrating that there isn't any inherent property of tax systems that means they must necessarily be convoluted and evil.
I would agree with you if it weren't for the "government-is-evil hyperbole" line. I took that as an example of saying "that person must be wrong about their experience because this other thing I experience is actually good." That line says to me "you are wrong" with a description that tries to explain why. I admit I could be mistaken but that's the way I read it. I saw nothing in the comment along the lines of this is how it could be if some things were different.
"4) Think for a minute what this implies: that a government agency that is responsible for collecting money should also be the sole source for computing how much money is owed."
Did you even read the article? All they are saying is the IRS could "pre-fill" your forms. If you don't agree, you can change the values, or get a CPA and do the whole thing completely independently. Where did you get the 'govt would be the sole source' argument?
Baseless fear-mongering like this doesn't do any good for any one (except Intuit maybe)
2-3) The idea that it should be painful to pay your taxes so that people won't want to pay their taxes is a political idea, not a technocratic idea. But I don't give a shit about your politics. Keep your politics out of my government services. Political meddling by ideologues is what makes government services so awful. Whatever the government is required to do after the law is passed should be done in as friendly and efficient manner as possible. Advocating for the most painful possible experience for millions of people is evil in my opinion.
4) Nobody said anything about "sole source". You could still get your taxes prepared by whoever you want. The rest of this paragraph doesn't make sense.
I would agree with your statement about politics and whatnot.
As for "sole source"; yes, you can have anyone prepare your taxes but the IRS still says yes or no to what they were provided. If the IRS decides that your preparer was wrong then that's where it might get interesting. I read it as saying there are possible issues with having one agency having both judgement and collection powers. It's much like the complaint lately about prosecutor offices benefiting from seizure laws leading to obvious abuses, such as the attempted hotel seizure in NY I believe.
"2) Paying taxes is one of the few transactional relationships you have with your government. If you ask me, a government representative should come to your office and you should pay him in cash, not hide and automate taxes so that they disappear."
Yep. My brother resists giving his credit cards to businesses to keep on file because it makes it much easier for them to get your money habitually, unconsciously, accidentally and by sleight of hand. There should be a little friction at every transaction wherever possible. Frankly, this goes double for the government, which has way more power than any business.
I like the government. It does lots of good stuff for me. But I like it at the right price, and I know that just like any other powerful entity, it will take more than its best share given a bad dynamic. In the same way that unconscious eating habits make people obese, unconscious tax policies makes the government obese.
You should love paying your taxes because you love your government. That means that you and the government should have some sort of transactional relationship. I give the government 100 bucks every payday, and I see the things it provides for me. Then, every election, I get to vote for folks to make adjustments based on my desires. We have a relationship. I understand and am reminded on a regular basis that there is a trade-off
I can't emphasize how much that making this relationship go away is a tremendously bad idea. Yes, tax paying can be easy -- if the tax code is easy. But you should do something on a regular basis to think about the agreement you're part of, even if it's just sending an SMS every week to transfer your funds.
The late Senator Daniel Patrick Moynihan is the person responsible for making sure the Social Security agency sends out statements to show how much you've paid into the system. He felt, and I agree, that government systems for which there's no interaction eventually become perceived as either magic or worthless -- and either choice was really bad for a democracy over the long term.
You shouldn't run a government the same way you'd run one of those companies that wants to automatically deduct money from your account every month -- hoping you'll never miss the charges once the benefit goes away and then they can continue billing. It just won't work.
Yeah, man, that's such a great point. I look around and see all the GREAT things the government does for me. I mean, who else but the federal government would put a massive army in the Middle East to blow up swarthy people that might think bad thoughts about me. I sure as hell can't afford that! So when I see thousands go each month to feed our democratically elected government, I smile -- because they're blowing up the darkies that none of us could afford individually to blow up.
Same thing with drug prohibition. I mean, my friends and I are clever and all, but there's no way in hell we could ever scrape together the money, material, and manpower to lock up a bunch of darkies for putting the wrong chemicals in their bodies. I mean, SOMEONE has to keep them off the job market and from providing for their families, and we can't trust them to just go attempt rape on a white woman anymore. That's lots of prisons we've got to put up and manage.
Golly gee, I'm just ECSTATIC to pay for these things.
> In the same way that unconscious eating habits make people obese, unconscious tax policies makes the government obese.
This analogy doesn't make sense since unconscious eating habits do not have a causative link with obesity and existing studies about correlative relationships are fraught with issues.
Even though the tax code is complex, a large number of people just need to file a 1040EZ and don't get to experience the complexity of the tax system. There is no reason why these filings can't be automated to start while the tax code is simplified to include more people in automated filings.
Thank you -- very well written. It would be incredibly interesting to have employees write their own withholding cheque to the government every month, as opposed to having the employers do it automatically. There is absolutely a need for us to be more aware of our relationship to the government and the power dynamics involved.
Many in this thread seem to be glazing over one important detail. This system would be opt-in. Don't trust the IRS? Have a lot of complicated deductions? Hire a CPA or use Turbo Tax or fill out the paper yourself. Approx 13% of filers used a 1040ez last year. This system is perfect for them. I would venture a guess that 1/2 of 1040a filers could also use it. Again though it is your (hopefully informed) choice to do so.
Being more cynical... deducting taxes from your paycheck before you even get the money is already (by design) lowering awareness of how much we are taxed. Imagine if we had to write a check to the IRS every month like we pay our utility bills...
Making your tax return a "click here" effort while on the one hand appealing has the disadvantage of further reducing your awareness of how much you are taxed.
This is why I do my taxes by hand, with pen and paper. I want to read the instructions and fill out the forms so I never lose awareness of how insane the system is.
The only two monthly expenses I still write a check for is the water and sewer. That does not stop me from realizing how expensive my mortgage, electric, etc is. Trying to save people from their own stupidity or ignorance by making them fill out menial former is not the answer.
The latest statistics I could find for Denmark (2009) say 80% accepted the tax as prepared by the government, around 18% edited it online and 2% sent in paper.
Recently most things are automatically filed and unchangeable, even down to something like charitable giving -- if you send Amnesty some money every year, they are responsible for telling TAX so you can get a deduction. If there's an error, you have to contact your charity, not TAX.
If you paid too much money in tax, there's one specific account every citizen has, that's used by government to send you money. No checks.
How people file isn't a problem in the US: in 2010, 70%[1] of tax filers (~90 million people) filed electronically and that number has almost certainly increased since. The issue in the article is whether the IRS (our federal taxing agency) should be allowed to file returns on behalf of citizens (i.e., do most of the work for them).
I wouldn't consider "how" people file a problem. I choose to file on paper still, and will until I can upload my tax data from my machine directly to the government's computer without passing through some third-party provider that I don't trust to keep my data safe.
Most of these are pre-prepared returns. Nobody edits their tax return via SMS or phone - it's just acceptance of the one that have already been sent to them.
It really is that good - as a Swede, you get your prepared statement (and unless you've done a major or irregular thing in the past year, like buying a house, or trading stock on an exchange outside the European Union) that prepared statement is correct.
Part of the statement says "If you agree without modifications, just text 1234234 to the number 1234454".
And a few seconds later you get a reply SMS that confirms that your taxes are indeed filed for this year.
In Brazil this kind of tax statement has been done online for many years using software supplied by the federal government. Unfortunately the government doesn't supply the data as well. It knows much better than me how much money I was paid, how much I paid for medical services, what my bank statement says, and so on, because we have a very comprehensive and intrusive set of laws about accountability towards the government. But still the government has us entering a lot of information from a lot of sources every year (information, I repeat, it already has) and we face harsh liabilities if we fail to retrieve and enter the correct information.
"On Monday, March 11, the state released a list of 13 specific line items that led to errors on Minnesota tax returns filed through the Intuit software and other tax-preparation products from the company.
"These were very serious to us," Terri Steenblock, the state's assistant commissioner of individual taxes, said Monday at a news conference. "We've never seen issues like this."
Last week, the state advised people not to use Intuit products to file their state taxes. Those products include TurboTax, Lacerte, Intuit online and ProSeries."
This seems an easy to grasp example of how the free market actually benefits the wealthy disproportionately. I think its an over-simplified concept.
Yes, we definitely need to remain free and diverse, but we need to figure out how to factor more actual science, especially science related to human needs, into our decision-making systems. Right now its just whoever manages to collect the most money buys the policies.
I think that the concept we have of money is inadequate. We need to start tracking and taking into account more data rather than just how many points everyone has regardless of how they got them or how they want to spend them. And I think to make things fair and effective the rules and enforcement need to be automated.
Imagine a computer game where there was only one stat. Does that sound like a fair, fun, or sophisticated game?
> This seems an easy to grasp example of how the free market...
I can't even begin to grasp what part of lobbying the government to prop up your business via threats of penalties and imprisonment you are interpreting to be "the free market."
You aren't going to get something that works better without altering the fundamental structures. The way things are set up you can't take lobbying, money, and special interests out of government. Because every politician needs money for everything and there is one number tied to your bank account that goes up or down on the basis of how much people give you, with little to no accounting for what you did to get it.
What I am saying is that we need more variables. There needs to be some math equations and technology that actually support and automatically enforce the market ideal. Because making laws and relying on people to do the right thing just isn't adding up, since there is no money in doing the right thing. We need to improve the nature of money so that doing the right thing adds up.
This is an oft-repeated conversation but I just don't believe that fair and free market ideal ever actually existed.
Trying to make people do the right thing with math and technology sounds scary as hell. How will that work? What about edge cases and outliers?
What we need is philosophy and persuasion. People need to learn better and understand why there actually are benefits to doing the right thing, not have an algorithm monitor them and punish for deviations.
Doing the right thing already is in one's self-interest. The problem is bad philosophy claiming otherwise. The solution is things like Objectivism which explain why the free market is good for people like you, why smaller government is better for everyone, how to live the right way and be better off (and how to think well in order to understand these things clearly. a great deal of the opposition to these things is confused and up to low quality standards).
I agree that we should improve philosophy and education but I think you are mistaken about incorporating math and technology into 'doing the right thing' being scary. What we have now is what's scary -- a game with no automatic enforcement of rules and very few rules to begin with, where everything is up to the discretion of what amounts to a bunch of dungeon masters. Only in this 'game' the dungeon master only likes say 1 out of 10 players, he gives them all of the breaks, and the rest are working with rigged dice. I'm suggesting that even though World of Warcraft can have a lot of loopholes and corruption, its more fair than Dungeons and Dragons, or Monopoly.
Taxes are prefilled in Estonia also, you can see all of the information on the webpage, and in case of a home loan or investments, you can send that information to the tax form from a bank site with one click. If you're married you can file joint tax. And thats it.
The whole process takes about 10 minutes, the deductibles are calculated and returned quite quickly, this year I was returned about 100euros, mostly because of my daughters dance lessons that are exempt of tax.
I dont see the reason people try to defend TurboTax here, yes, taxes are more complicated in US, but still, government does the same calculations anyway, have the same data anyway. Why not do this automatically. And if government wants to screw you, well, then I dont belive that turbotax or alternatives could help you anyway.
On my Estonian tax return last year, I had to declare overseas income too, and was impressed that it even did the exchange rate calculations at the relevant dates for me.
The choice is between letting the government do your taxes for "free", versus having a company whose reputation rides on getting your taxes done as efficiently as possible with the least tax burden to you. Anybody who would choose to have the government complete them, hasn't been paying attention to the lengths revenue-strapped states will go to maximize their tax collections.
It's a bit like letting the user car salesman set the price you pay for the auto versus haggling for yourself. It's also simpler, "free", quicker, and less intensive to let the professional do it for you.
But free can sometimes be the most expensive way of all.
No need for the hyperbole. OP's question is logical. On one hand you have a company who is taking your money and has a reasonable expectation that, as a result of using their software, you will save more money because they will help you find deductions and tax credits that you would've been hard pressed to find yourself. These companies compete in a free market for your money, both with other software companies and with CPAs/CPA firms. The "winner" (for a particular user/client) is the one who (a) has the best reputation of not getting you audited, and (b) who gets you the best price:deduction ratio.
On the other hand, you have a government entity whose sole charge is to collect revenue. Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses (just to pick one example)? Maybe, maybe not. The question is legit though and thus causes us all to say, "Wait a minute... maybe, since there is a financial incentive for them not to show me deductions, that they will hide some of that (or make finding it as complex as the tax code)."
If Intuit/et al help you save $5000 in taxes this year by helping you deduct all that you can, Intuit/et al do not make one penny more - that money simply stays in your pocket. If the IRS helps you save $5000 that you would have otherwise paid (b/c you did not fully deduct all that you could have), then the IRS loses $5000. That in and of itself highlights the problem.
"nd has a reasonable expectation that, as a result of using their software, you will save more money because they will help you find deductions that you would've been hard pressed to find yourself."
That has a lot less to do with software and more with you knowing the allowed deductions.
Funny how I have no problem finding these deductions using the free sw provided by the government (in more than one country)
I understand this is strange, but it works because deductions are often balanced. For example, you filing a deduction for medical expenses signal a correspondent owing of taxes by the doctor/hospital, so you're helping with enforcing collections.
" Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses"
More or less yes. There may be the case where the software is going to be completely useless (like Argentina), but then you just skip the sw and go for a tax consultant.
"If Intuit/et al help you save $5000 in taxes this year by helping you deduct"
If you really can save 5k you 1 - probably know it 2 - may get the help of a tax consultant
But most people don't have deductions and should just file the 'default' for free.
I disagree. We are talking about instances where both you and the government have all the information necessary to compute your tax exactly. It doesn't matter who does the calculation, the rate is fixed in advance. Even if you let them calculate the number for you there is no reason you can't double check it.
For more complicated tax situations where you are trying to minimize your tax based on information not available to the government this type of a system wouldn't be applicable.
Your (and others) comment is about income and taxes paid only. However, the US tax system is not just about income and taxes paid; it is also about deductions and tax credits. Yes, the IRS can calculate accurately (based on company reporting/history) what you've earned (income) and paid into the system for the tax year (taxes paid). Is that all you want them to do though? Of course not. Anyone who says, "Yes!" to that simply hasn't either thought this through or doesn't understand the concept of tax deductions and credits. See my comment above for more detail.
I think that, while the "5 minutes and you're done" thing can be understood as marketing spin, it would not be tremendously hard for any IRS service to provide the same kind of itemized listing that most tax softwares do to handle credits and deductions.
My tax experience is light–it takes me maybe an hour of data entry after all my stuff is gathered–so this wouldn't actually help me at all. But for others? If you could shave off as little as 20% from time spent on taxes, that sounds worthwhile to me.
Having tried both the systems of Spanin and Denmark - your post doen't seem very informed.
In both Spain and Denmark the system works excellently and all the information is available for you to verify. You just dont have to do any typing.
So if you are paranoid you can spend as long as you want verifying pre-completed information. If you have better things to spend your time on (family? friends?) you can just do a quick check to see that the numbers look right.
It's free and on a donation basis. I switched from TurboTax to this and I'm really happy with it.
I'm surprised there isn't a open-sourced free way to do taxes. That way we can address the tinfoil hat based worries of the government doing your taxes and have free and easy software.
I might do the same, having just filed last years' Canadian taxes with TurboTax. I didn't have a problem with TT but I do have a problem with Intuit's actions here.
Coming from the UK where it has been automated all my working life, I resent having to file my taxes each year. As others have said, the government has nearly all the information anyway.For anything else, then only short declaration forms should be necessary and not a full return.
I also don't like the lump sum return or payment if there's any discrepancy. In the UK the most common option is to have an adjustment to your tax code, which simply deducts more or less tax at source over the following tax year. You don't even need to give them your bank info.
The only reason why i used TurboTax in the past was because my parents used it and they were comfortable with the UI. But I've since taken over that task and I have no such love for their UI, especially when a free alternative is available.
The IRS switched to an xml file format a couple of years ago for e-filing, which broke the first week of the tax season. They were unable to accept any returns for around a week, IIRC. This article is a little overly optimistic about their chances of fully replacing tax prep, in my opinion.
The belgian government is so ineffective we didn't have one for two years because they failed to organize a ruling cabinet after elections. And still we have prefilled returns that work well. It's not that difficult.
Yes, TurboTax is being rather transparently venal, but that doesn't mean they're wrong. I doubt the American government is competent enough to get tax calculations right, and I suspect they're hungry enough for revenue to make all their default assumptions in their favor. At least that's been my experience with every state and federal tax authority I've dealt with for the past half-decade or so.
Once we have a tax code that's simple enough and a government that's competent enough to get things right, then we can talk about having the government fill out our tax forms. Until then, the government's just going to be ripping off the blindly trusting, a little bit at a time.
> I doubt the American government is competent enough to get tax calculations right, and I suspect they're hungry enough for revenue to make all their default assumptions in their favor.
That is the way it works NOW. With the described changes the difference is that you would hear about it earlier rather than later.
Today, the IRS absolutely will send you a letter with a bill a couple of years after you pay your taxes if your calculations don't match theirs. For an ordinary tax bill getting your interpretation on paper first isn't really a big advantage.
> Once we have a tax code that's simple enough
I wonder if simplicity isn't overrated, particularly in this age of computers and so on. It's not like we have to calculate everything with an abacus. On the other hand, I've noticed that the tax plans that are touted by political groups as being simple would generally cost me money to the benefit of people who make more than I do. This holds true pretty close to 100% of the time.
> Once we have a tax code that's simple enough and a government that's competent enough to get think right
How do you foresee this happening if we -- the government and the public -- maintain a status quo in which feasible optimizations are never pursued because hey, we have a private alternative that doesn't charge too much to do it?
For the government to become more competent, the people have to demand reform. For people to demand reform, they have to be aware of how much better things could be. Private competition helps spur that reform, but this doesn't mean that the government shouldn't itself be expected to optimize things. This is not an either-or zero sum game
I'm arguing that without these prerequisites, this 'optimization' isn't an optimization at all - it'll be a step backwards, because it'll just end up ripping people off.
People certainly should demand reform, but not this particular reform at this particular time. People should absolutely demand a simpler tax code - I don't know about you, but I'm still holding out hope we'll see some tax reform in 2013.
'Competent government' is a harder problem. Americans aren't Norwegians or Germans, and simply aren't good at large bureaucracy. Unless America starts subcontracting out its administration to the Swedes, better government is going to take either a change in American character or something smaller and less-centralized.
> Americans aren't Norwegians or Germans, and simply aren't good at large bureaucracy. Unless America starts subcontracting out its administration to the Swedes, better government is going to take either a change in American character or something smaller and less-centralized.
This is a strange assertion, as if Swedes had an innate gene that allowed them to be more adept when they joined public service. Let's assume that that's not true and it's an ability learned through environment and civic education...I'm arguing that that reaching this ideal situation of "good character" will require -- when it is possible -- to make interaction with the government more efficient. Else, you may end up in a situation in which citizens are so distrustful of the government that they never see the point of achieving good civic character. And then we never end up being as good as the Germans and the Swedes.
They're not competent enough to make an initial proposal for how much taxes are due, but they are competent enough to doublecheck a manually filled out tax statement and not send you a tax bill which you don't owe them? The blindly trusting will get ripped off regardless of whether returns are prefilled, assuming a government set on tax fraud (an irrational assumption in my opinion.)
Prefilled returns are the opening round in a negotiation with the government. In any bargaining situation the opening offer is the weakest party. You should prefer them to make the opening offer, especially if you distrust them. Better that you check their numbers rather than them checking yours.
The IRS computer systems are stuck in the 80s. You can get them to send you a copy of the information they have; it will be ready around August.
I'm not exaggerating; I've done this a couple times because I'm terrible at keeping track of the paperwork otherwise. (Protip: you can file an extension until October with no penalty.)
> Protip: you can file an extension until October with no penalty.
Caveat: This is true ONLY if you are due a refund. If you owe tax you will be charged interest (and possibly penalties) for paying after the deadline[1].
Technically speaking, I believe you can still file in October, as long as you pay in April. So you can estimate (guesstimate) and pay, then calculate properly and file later, if that's advantageous somehow. If you pad your estimated payment so that you overpay, you should be safe from penalties, in the event that you can decently estimate up front but can't actually file a full return for some reason.
There is a lot of reading between the lines that needs to be done with this article:
> It's already a reality in Denmark, Sweden and Spain.
This is roughly equivalent to saying: "New York, New Jersey, and Louisiana already do it, why not the whole country? Lobbying must be to blame!"
> William Gale, co-director of the Urban-Brookings Tax Policy Center.
So the left agrees with it, I wonder what the right thinks?
> Conservative tax activist Grover Norquist
Now things are getting interesting.
> opposes IRS government tax preparation.
> allowing the IRS to act as a tax preparer could result in taxpayers paying more money
> calling return-free filing a "massive expansion of the U.S. government through a big government program."
> In 2005, Norquist testified before the President's Advisory Panel on Federal Tax Reform arguing against return-free filing. The next year, Norquist and others wrote in a letter to President Bush that getting an official-looking "bill" from the IRS could be "extremely intimidating, particularly for seniors, low-income and non-English speaking citizens."
> The letter says the IRS wants to "socialize all tax preparation in America" to get higher tax revenues.
> A year after Norquist wrote Bush, a bill to limit return-free filing was introduced by a pair of unlikely allies: Reps. Eric Cantor, R-Va., the conservative House majority leader
The article says Intuit spent $11.5 million lobbying in the last five years (which in the U.S. is table scraps--see $30 million paid by Yahoo! for Summly).
What is really more likely here. That Intuit has managed to buy the government for $2 million a year, or instead that they've successfully hit on a message (free tax filing = government takeover of return preparation) that resonates with rightists and billionaires who have good reason to not want the IRS to have any part in tax return preparation, not to mention ideologues who see simpler tax filing as a slippery slope to making it easier for the government to raise taxes without push-back (on the theory that citizens are more likely to push back against taxes if they are forced to face the numbers every April).
Government sucks since it's inefficient and bureacratic and wastes people time. In order to remind people of this fact we must ensure that it remains this way so that people don't get the incorrect idea that government can be efficient.
Those of you who live in Silicon Valley might consider writing to Rep. Zoe Lofgren about this. The article mentions she is one of two Representatives who co-sponsored a bill to limit return-free filing. From the article:
"A year after Norquist wrote Bush, a bill to limit return-free filing was introduced by a pair of unlikely allies: Reps. Eric Cantor, R-Va., the conservative House majority leader, and Zoe Lofgren, D-Calif., a liberal stalwart whose district includes Silicon Valley."
There are two things that disturb me about the US government:
1. As a whole, it seems to operate on the assumption of guilt; and
2. It seems bought and paid for by special interests, pork barrelling and so forth.
As a foreigner I of course have foreign retirement and bank accounts. If they total more than $10,000 (at any point in the last calendar year) you need to report them. This is FBAR (Foreign Bank Account Reporting).
Failure to do so can result in civil penalties up to the 300% of the balance and/or criminal prosecution. Why? To fight money laundering, drugs, terrorism or child pornography (every piece of onerous US legislation or prosecution is justified by ostensibly fighting one of more of these things; even sharing MP3s).
How are foreign retirement accounts treated? Are they taxable? How do you report them? Nobody really knows. Just tick "Other" and write "Retirement account" and hope for the best.
If your foreign assets are above a certain amount there is another separate form you need to send to the Treasury department IIRC.
You can e-file this form... if you use Internet Explorer. The JavaScript actually doesn't work in any other browser in a way that locks your account after 2-3 attempts.
In Australia the ATO (Australian Tax Office) produces e-tax, which for most people allows you to file taxes for free. But beyond that, the ATO doesn't seem to have this same level of mistrust of its citizens that the IRS does.
In Australia it doesn't scare me to make an honest mistake. In the US it does. This is not only for taxes but things like immigration issues.
In some European countries, once a tax return is accepted, that's it, it's done. The government basically can't reopen that later in an audit. In Australia I think they can go back 7 years. No idea what it is in the US. Probably to the day you were born. Now I'm sure there are exceptions to that rule (as in if you commit deliberate fraud) but the point of the system isn't to punish innocent mistakes.
All the while corporations and high net-worth individuals get away with blue murder as far as tax obligations go. The US could solve a lot of problems if it treated foreign corporate earnings the same as foreign individual earnings (in that you owe taxes on foreign income even if it isn't repatriated but tax you've paid with double-tax treaty countries offsets that obligation).
Yes by all means send me to prison for failing to mention a $24,000 retirement account in Australia I can't touch until I'm 65 instead. Great use of resources.
EDIT: to clarify (2), which is the major point relevant to this article, I don't understand why other governments don't seem so easily bought and sold for a pittance (in this case $1.5M over 5 years).
Another example: toxic fire retardants used in pretty much all couches due to a California law bought by an industry only worth tens of millions a year [1].
In the case of TurboTax specifically, I think so many people use them because of (1) and the complexity of the tax system created by (2).
Many people use TurboTax. You can say that's because of lobbying but that's only part of the story.
Those records generally should be kept for three years from the date the tax return was filed.
>Yes by all means send me to prison for failing to mention a $24,000 retirement account in Australia I can't touch until I'm 65 instead. Great use of resources.
The IRS doesn't put anyone in prison for making a mistake. You have to willfully try to cheat on your taxes, multiple times, before you're even close to the position of facing jail time.
"The IRS doesn't put anyone in prison for making a mistake. You have to willfully try to cheat on your taxes, multiple times, before you're even close to the position of facing jail time."
You only really face jail time if you do something else on top of tax evasion (like money laundering for a drug cartel).
Did you read the examples? In many of these cases, tax fraud isn't the primary factor:
"On September 18, 2012, in Cincinnati, Ohio, Larry Lough, of West Chester, Ohio, was sentenced to 24 months in prison, three years of supervised release, and ordered to pay $757,751 in restitution to defrauded investors and $145,175 in restitution to the IRS. Lough pleaded guilty on February 15, 2012, to conspiracy to commit mail and wire fraud, conspiracy to commit employment tax fraud and income tax evasion."
> I don't understand why other governments don't seem so easily bought and sold for a pittance
I was in Scotland with my US born wife. The airwaves were rife with outrage. Politicians had expensed $200 radios to government accounts that were for personal use. My wife could not believe the country was so focused on a pittance.
I think of it like broken windows and graffiti in New York. Once in a while, something big like Watergate or Blagojevich comes along. Otherwise America doesn't care. Other countries do care. There is a principle at stake.
New Zealand for instance, is one of the least corrupt countries in the world. One of the oldest and most popular TV shows is called Fair Go. Fair Go largely deals with tiny little grievances. But the country, as a whole, cares.
Worst part is that we have to pay US taxes as well local taxes even if we don't live or make any money in the US. If you live in a county with an effective lower tax rate you have to pay the difference.
I take home less money than someone with the same job and same expenses. In addition it's so cumbersome to file from abroad that I have to pay someone.
It's like the king of England collecting taxes from the ones who left.
We also have to declare the entire finances of any company that we own more then 10 percent in which is a huge problem for the other 90 percent owners that aren't Americans.
I don't think this will ever get fixed since Americans abroad also don't have any representation in congress. :-(
> I don't think this will ever get fixed since Americans abroad also don't have any representation in congress.
Overseas Americans are theoretically represented in Congress at their last American domicile. In practice, this is difficult to achieve. For example, many places will not mail absentee ballots overseas.
And of course, the Congressman for your last American domicile probably isn't that concerned about your interests overseas. This makes it disturbingly similar to the "virtual representation" that the colonies had in Parliament.
Also, the United States now practices more "taxation without representation" than the United Kingdom. Commonwealth citizens residing in Britain can vote in British elections. EU citizens cannot vote for the British Parliament, but they can vote for the devolved Scottish and Welsh Parliaments.
In most cases, paying a tax-preparer to do the annoyance for you is far less hassle than dealing with both trying to get rid of citizenship, and trying to attain citizenship in another country where you would like living.
Perhaps some European country would like to start offering citizenship to anyone that renounces US citizenship, as a way to encourage immigration of skilled and high net worth individuals.
There are two things that disturb me about the US government
This is an article about private interests lobbying to obstruct government reform for their own gain, and you've launched a screed about interesting but really quite irrelevant matters that disturb you about government. Please stop trying to hijack the thread to push your own political agenda. What you wrote has literally nothing to do with this story.
I'm in the same situation (literally). The FBAR penalties are even worse than you describe. It's a case of well-intentioned legislation with unintended consequences. The extreme penalties were intended to hit people with offshore tax shelters, but instead it is mostly a source of revenue for tax lawyers.
This is, unfortunately, true of the US tax code in general...
My situation mirrors yours. I'm an American living in Australia.
The FBAR requirements and penalties are completely ridiculous, I couldn't agree more on this point.
On the issue of the ATO e-tax system, it's not that incredibly awesome. I still use an accountant to maximize my tax refund. Costs me $250. Totally worth it for the additional taxes I save.
For my USA taxes, I use TaxACT. Completely free and that includes one free e-file.
From a practical perspective, this is a complete non-issue. You CAN e-file your taxes easily and for free in the USA, it's just not a service supplied by the government.
As a US person who visits other countries, I get scared about making a mistake in immigration issues. Going through customs in a country where you don't speak the language (well or at all) is scary.
I agree. Applying for a UK visa is not a walk in the park and you can lose a lot of money on application fees for failing to include documentation that covers every single statement you make on an application, even if that statement isn't integral to them approving the visa.
I had a visa to Russia delayed because under employer I put 'self', and they didn't seem to grok that. To their credit, the agency called me and asked for clarification, vs mailing documents back.
I knew a woman with three passports, US, UK and Dutch. She only ever travelled on her US passport because only the US has the resources to help out single private travellers in shitty areas when something goes wrong. They're not going to help everyone, but they're going to help a lot more than the other govs.
Frankly, anyone who does trust any government hasn't had very much experience with them. At best, governments are inefficient and incompetent. At worst, they are run by politicians absorbed with self-interest.
There are already scads of people trusting too much to other entities rather than figuring it out on their own. These people leave their tax withholdings at default levels, then walk down to the local Wal-Mart and trust the Jackson-Hewitt crooks to do their taxes. Jackson-Hewitt files a 1040EZ for them, charges $300 bucks and they leave happy because it will be automatically be taken out of their $10,000 refund. They feel rich for about two weeks.
The solution is not more government nanny-state ideas. The solution is to find ways to require people to be MORE accountable for their own well-being.
How about requiring every person who receives 10% or more of their yearly salary back in a refund to attend classes on how to maximize their tax benefits? It would be paid for out of their refund. After they go once, they don't have to go again for 5 years.
If you're too dumb or unaware of your surroundings to know that you can file your taxes for free with a little bit of effort, you need education.
> The solution is not more government nanny-state ideas.
> How about requiring every person who receives 10% or more of their yearly salary back in a refund to attend classes on how to maximize their tax benefits?
How are you not contradicting yourself there? Less nanny-state, but forced classes...
> If you're too dumb or unaware of your surroundings to know that you can file your taxes for free with a little bit of effort, you need education.
I think you're being extremely unfair; this is like saying "only an idiot would pay for webhosting, with a little bit of effort you can host your own site for free".
I'm well educated, good with math, and generally observant....and yet I would still be up shit-creek if I had to do my taxes all on my own. I wouldn't know where to start, other than just searching around the 'net. I could figure it out eventually I'm sure, but it'd be a no-frills return that would probably rank very high on the "audit me!" list, and inevitably I'd end up spending more money, and taking around 10x's longer, than if I just settled for an online service (free or otherwise).
Just because I see spending a smallish amount ($25-50) to save several hours (if not 12+ hrs) of time, with the a decreased chance of audit, doesn't make me dumb nor unaware of my surroundings.
"The solution is not more government nanny-state ideas"
"requiring every person who receives 10% or more...to attend classes"
This seems like a bit of a non-sequitur. Don't provide an easy (and free) way for people to submit their taxes without going to a CPA, but do force people to go to some classes? How is that less of a "nanny state"?
I admit it sounds contradictory. I guess I equate a nanny-state to the government taking care of something FOR you so you don't have to worry about it.
To me, a required educational course about taxes and personal finance would be akin to a driving course--not so much absolving you of responsibility as preparing you to accept it.
What? This post criticized corporations (Jackson-Hewitt in particular). The point was that people need to take individual responsibility for their tax liability.
> The point was that people need to take individual responsibility for their tax liability.
There are people in the military who get married just to claim a higher housing allowance (this despite it being against the UCMJ). Yes, we should be individually responsible but it's not practical to actually expect that from people.
How many people make < $100,000 (required for the 1040EZ), withhold the "default," and get a $10,000 refund?
(And re: "default", I've looked and looked, and can't find such a thing. How do you determine a "default" withholding from a W-4 other than just taking your expected income tax for the year and dividing by pay days? If you do that, you shouldn't have a $10,000 refund...)
For what it's worth, in 2012 I made less than $100,000 in AGI, withheld the W-4 default for my filing status (Single, Independent), and my refund was $650. More or less right on the mark.
Edit: Aha! Found it[0]. $100k biweekly is $1923/week of gross pay; let's ignore medicare and social security, etc. For Single/HoH, that's $344.20 + 28% of 1923-1732 = $397.68 weekly or $20679.36 / year[1]. Since our expected total tax is $18,500, we get back $2,100 in refund. Big-ish, but not $10,000. And only 2% of $100k.
Honestly, my examples were based on true stories about people that I know that I've heard in the very recent past. One person makes far, far less than $100K and received just below a $10,000 refund.
Libertarian paternalism is a thing, even if GP probably doesn't know what it is. It's actually interesting to learn a bit more about, since it's effective as a political-philosophical position, even if it's got holes as much as any other position.
If you get a libertarian paternalist who really doesn't know what he's talking about, you can easily watch him justify totalitarianism in the name of freedom. It's horrifying.
Also unlike other countries from what I remember you mail your federal and state tax forms and you don't even get a receipt or acknowledgement notification, just hoping the envelope won't be lost.
A simple official paper stating your basic tax figures (gross/net income) can also be used as a simple way to verify low income when asking for scholarships and other financial aids right?
This seems to suffer from the same main weakness as attempts to simplify the tax code. The people who most care about taxes and best understand alternative systems are those who know how to work the current system. No doubt the Grover Norquists of the world have accountants who can use differing opinions of the rules to shave their tax bill. If our tax system was simpler or easier more people would claim all the deductions to which they were entitled then taxes would have to go up, but effectively only on those who already knew about all the deductions.
We might all be outraged about this, but we're not going to change who we vote for based on whether a given politician supports tax reform or not, we reserve that for things that directly effect us like SOPA. Likewise people who prepare taxes for a living will change their vote to punish politicians who are taking away their jobs, but will ignore stuff like SOPA.
David Cay Johnston covered this in one of his chapters in The Fine Print. If you're looking to be incensed by more cases of corruption between corporations and government, it's definitely worth a read.
You'll also get to find out why we in the US pay 38x more per bit of data transferred than the Japanese do!
Here in the state of Virginia, we never had return-free filing for state taxes. But we did have free online filing of state tax returns. It was cheaper for the state to process the online returns rather than paper forms. However, the legislature decided that it wasn't proper for the state government to provide for free a service that should be provided by private enterprise. So now your choices are to file paper forms (which costs the state more to process) or file electronically, which, of course, costs you, the taxpaer, money. . .but is quite a boon for private enterprise.
"When you make an appointment for a car to get serviced, the service history is all there. Since the IRS already has all that info anyway, it's not a big challenge to put it in a format where we could see it,"
Personally I'm against any business lobbying to change laws to give itself a competitive advantage. However, so that I don't have to pay more than my fair share in taxes, I have to itemize deductions: business expenses and those that I am entitled to. Until we can implement something more libertarian like the Fair Tax plan, a lot of us are stuck with long tax forms unfortunately. An online EZ form or a tax form that the Government fills out "on my behalf" won't cut it. The Government will screw you as much as these scumbag businesses.
US Tax reform is one of those things I don't expect to happen in my life time. Our government is too addicted to the income stream it provides and is just too scared to mess with it in any meaningful way.
All it takes is a fear monger with an agenda like Intuit to whisper "Our experts estimate that you will lose $X billion in uncollected taxes with this new scheme" to send congressmen from both parties running.
Ideally, we would see state governments take the lead here and innovate. If they can show meaningful gains then maybe the Federal government will pay attention.
If you read the article, it seems like there are at least several members of the legislative branch in favor of reforming the tax filing process to simplify things (and save taxpayers money).
The opposition comes from business interests whose revenue comes from helping taxpayers navigating a complex code and processing.
Tax reform generally means simplified tax code and which does not necessarily result in less revenue.
But there is a huge industry built around servicing the complex tax code, many of whom wont be needed if the tax code is simplified. Just like any other industry disrupted by changing business environment, they will fight to the death to keep their industry alive and necessary.
Here's my idea. I suspect TurboTax would lobby against it as well.
Tax reform.
Woah. I mean make it simple enough that there isn't any need for tax specialists, because it's just not that involved. Then filing takes seconds for most people, audits are trivial, costs go down for everyone, and most importantly, companies that shouldn't exist die (H&R Block, TurboTax, the many law firms that help major corporations exploit tax loopholes). Win win win win?
He managed to get 238 of 242 House Republicans and 41 out of 47 Senate Republicans to sign his pledge. He's not elected, but his adherents certainly are.
For the past three years I have filed my taxes myself, and every single time I make a mistake +- $100 or so, the IRS sends a correction, I fill out more paperwork and send payment / receive refund.
Y'all know this is inefficient. I spend at least 20 hours of work filing my taxes each year, and as a fairly intelligent citizen I always make a mistake anyway.
I'm not sure what the tax code is like in other countries, but the US one is pretty complicated due the number of write-offs you can add to your tax deductions. A lot of those deductions are not reported to the government, so it's up to you to figure out if its worth doing or just doing the standard deduction amount.
I think you're missing the point. The IRS has already received your 1099/W2/etc and thus it knows (a) your income, and (b) how much in taxes you've already paid. By then having the IRS start your tax return for you, you would no longer have to fill in that info. The IRS makes free forms available already. Besides, are there actually people so stupid that they would give their SSN/info to a site like that?
"Besides, are there actually people so stupid that they would give their SSN/info to a site like that?"
Honest question. Are you saying that this particular site is less secure or all online e-filing services less secure? This is one of the options recommended by IRS[1] for e-filing.
All e-filing services (include free file fillable forms) result in a third party seeing your data on the way to the IRS. This is true for both online and offline tax preparation software (e.g. TurboTax).
I think many of us here don't get paid by W2 or by 1099. We are compensated in different ways which don't require those types of filings (e.g. K1), in which case we do need to fill out forms.
I can't speak specifically for the group here, but the vast majority of US taxpayers by a large margin _are_ compensated via W-2 or 1099. Isn't that who it should be optimized for, rather than outliers or exceptions?
To clarify, the vast majority of US taxpayers that are compensated via W-2 or 1099 are eligible to file under 1040A or 1040EZ, both of which are much simpler and easier to deal with (and, incidentally, all of the major tax preparers like H&R Block and Intuit offer free versions for those use cases).
The portion of that cohort that file 1040 (generally those that make over 100K and have situations that make itemized filing more efficient than taking standard deductions) is pretty small.
Definitely ... until someone finds tax advantages to being in a different category and people gradually "reinvent" themselves as being in that category.
You were outraged at hedge fund managers classifying their income as interest (15% tax) rather than "earned income" (~35% income tax)? Well, wait until the income tax goes back up to 50+%, and see how many non-"earned income" ways there are to compensate employees...
There are an incredible number of moving parts with circumstances that may seem trivial, such as a master limited partnership or a foreign company paying dividends. Unless the entire world can standardize on taxes, these complications can't go away because not all information is properly reported or reported in a timely manner
Sure. But a system that only addressed the needs of 100 million people with simple taxes might still be a good idea (I realize that the thing exists. Free File is urged on by the government and has wide reach. I don't like that it is roughly designed to prevent the IRS from developing any sort of direct servicing).
You are looking at a group of a small percentage of that (at most a few million people) who make enough that they are not eligible for 1040A/1040EZ (the 1040A cutoff is roughly 100K) yet don't have particularly complicated tax situations. That pales in comparison to the people who can be catered by the free tax systems.
I'm saying that I don't like the current free file implementation. Who it covers (or not) isn't particularly part of my dislike for it. I'm admitting that it covers a great deal of people.
No, it's not about doing your taxes electronically.
It's about the IRS pre-calculating everything for you, so you don't have to input anything. You just say "yes, that's right", unless there are errors or additional information needed.
Is this correct? Yes. No. buttons. Workflow is present to deal with incorrect data.
The data is already submitted electronically by employers, brokerage/retirement asset management companies, states, etc. Why should I have to pay a private company (I'm looking at you Intuit) when the IRS should have the ability to provide the same service FOR FREE.
Government doesn't know your business expenses and various deductions (unless you want to stream your cash and credit card transactions directly to the IRS)
Sweden already has a form of this. There is a black box many retailers need to install which submits all of their daily transactions to the government.
Response to niggler: Yeah, I'm cool streaming them my business transactions via Yodlee/Mint/my bank if it streamlines the process. They can already get the data if they want it (audit, etc).
Have you been through an audit? They don't just arbitrarily ask for all your records; they have questions about a specific number or set of numbers on your tax return and they ask you to substantiate it.
same thing is happening with electronic medical records. Why else does EPIC's CEO donate heavily to Wisconsin congressmen, or sponsor memberships to the FDA panels that oversee the guidelines and policies regarding these systems?
Hmm. How good is Turbo Tax, I mean I can tell it's horribly coded, but does it have automated features/recommendations that will help you earn more? Or is it basically what the tax system does in Swede/Finland etc?
They usually have a free version that is adequate for the most basic of returns, and then all others require you to purchase something in order to file through them. If you actually want the value-added services (such as the recommendations you mention), then you pay even more.
The situation is a farce and a disgrace to our country; the pockets of a few are getting lined at the detriment of the many. Wait, are we discussing taxes, or healthcare, or big banks....?
Thanks for the clarification; luckily (?) I live in TX where we don't have state income tax, and so I forget that.
Agreed about the "paying taxes on paying taxes", and of course the general idea of there being a for-profit industry centered around a requirement of citizenship. This is clearly another area that furthers the agenda of the Plutocracy, whereby the wealthy are at a great advantage on account of being able to afford a CPA to find all the loopholes.
What a lot of people don't realize is how easy state income tax is, and how a lot of states have gone to fully online forms. I think people assume it is as complicated as federal taxes, but our state, it's essentially just "take your federal gross income from the 1040, add a few things to it, then subtract a few deductions." The form and the worksheets is two pages.
So what I do is prepare the return in Turbotax, then print it, then file it electronically on the web for free. Fun thing is that Turbotax calculates the tax a dollar different than the state's web site.
Why do you believe that TurboTax is horribly coded? I can't say whether or not their code is good or bad, but the US tax the fact that TurboTax is so popular and successful is only because the paper + accountant alternative was so terrible. I was describing an business app I've been working on to a non-technical friend, and she commented, "whatever you do, please make it as easy to use as TurboTax."
There was an interesting article posted on HN on how Intuit manages its 10 million lines of code for QuickBooks. I wouldn't be surprised if TurboTax is built in a similar fashion.
https://news.ycombinator.com/item?id=4315578
I'm not sure how terrible paper+accountant is/was, but TurboTax is just so damn convenient. I can do file my taxes on my lunch hour, at 3:00am, or while I'm on a webex at work.
They're instantly submitted (or at least they appear to be) and combined with direct deposit I get my refund within days. In the old days I had to either drop my paperwork off at an accountant and wait, do them myself and mail them in, or make an appointment with a preparer.
I've used the web version of Turbo Tax the past 2 or 3 years and it's actually pretty nice. It feels a little heavy at times, but for the most part it is pretty responsive. As to how the code actually looks, obviously I can't speak much to that, but from a user perspective, I'm quite pleased with the experience.
It does try and help you find more things that you might have missed, walking you through a series of questionnaires to try and uncover deductions you might not have known about or forgot you could take this year. And, like another reply to this comment, a basic 1040 is free to file. You have to pay if you want to file your state return through it.
Poorly coded in terms of usability, I'm guessing? I think the workflow for modifying already entered (or skipped) parts of the tax return is lacking. It's difficult to keep track of navigation for more complex returns.
Turbotax should have a tree-like navigation pane to the side, showing status icons for each section.
I don't know if it's horribly coded though. One test would be how quickly they could add the navigation pane. If the underlying code is properly designed, it would be a minor project. If the entire codebase is designed around forcing people through the back/next workflow within each category, arbitrary navigation might require major code surgery.
The workflow for amended returns is absolutely, utterly, horrific.
If I recall correctly, it involves loading your existing return, making changes, and at some point (only vaguely defined in documentation), changing something different (err, this is a very bad description, obviously - but suffice to say, as someone who has no issue navigating complex systems, the times I've done it, it's been a horrible and fraught experience).
I'm curious what makes you think it's horribly coded. I actually work at Intuit on an app deeply integrated in TurboTax and although I haven't seen the code for TurboTax proper, my team's code is quite nice imho :)
For me, it was the deep integration with Internet Explorer browser elements and rendering engine. For several years, TurboTax just wouldn't run on my main desktop computer, always throwing some arcane error message about MSHTML, and the only info I could find from Intuit was something about upgrading Internet Explorer which was already done. I had to install and use TurboTax on either an underpowered laptop or my work machine.
It cleared up somewhere along the line, I think with IE8 circa 2010, but I'm always still not quite trusting of TurboTax's code quality.
To those saying "We should be more like Sweden/Finland!", I'd ask whether those countries have a tax system that is also based on using tax credits and deductions to lower your tax due? I don't know the tax codes in those countries but my guess is that, because they use the tax entity-created system, they do not have such a complicated tax code as the US.
In the US, you have two sides of this: (1) the IRS, and (2) CPAs, CPA firms, and software firms like Intuit who profit from helping customers file taxes. The question always is, "Why would I pay someone to file my taxes?" The answer is, "If they can save you more than their fee, it's worth it." In other words, if they charge $100 but save you $101 in "tax due", you have a net "win" of $1 thus you should hire a professional. Why does this work?
For the CPAs, CPA firms, and software firms like Intuit, you have a professional who is taking your money and offers a reasonable expectation that, as a result of using their software, you will save more money than you pay in fees because they will help you find deductions and tax credits that you would've been hard pressed to find yourself. These companies compete in a free market for your money, both with other software companies and with CPAs/CPA firms. The "winner" (for a particular user/client) is the one who (a) has the best reputation of not getting you audited, and (b) who gets you the best price:deduction ratio.
On the other hand, you have a government entity whose sole charge is to collect revenue. Is their system going to be designed to help you get as many deductions as possible? Are they going to prompt you to deduct moving expenses (just to pick one example)? Maybe, maybe not. The question is legit though and thus causes us all to say, "Wait a minute... maybe, since there is a financial incentive for them not to show me deductions, that they will hide some of that (or make finding it as complex as the tax code)."
If Intuit/et al help you save $5000 in taxes this year by helping you deduct all that you can, Intuit/et al do not make one penny more - that money simply stays in your pocket. And you probably smile, buy a new car/vacation/etc. And you certainly tell your friends, "You should use Intuit!" If the IRS helps you save $5000 that you would have otherwise paid (b/c you did not fully deduct all that you could have), then the IRS loses $5000. That in and of itself highlights the problem. Do you trust the IRS to say, "It's okay if we lose $5000 - you're happy, right? That's what matters!"? Of course not. Having the separation works in the US for this clear conflict of interest.
Again - I don't know the tax code of the Euro countries but I'd be interested to hear if they have a similar setup and how they work around this. It's logical to think that the IRS could invest $500 million building such a system and then no one uses it because paying $30 to Intuit/etc results in a higher refund for the above reasons...
I've lived in Sweden and Iceland, both of which have pre-filled tax returns to be submitted either on paper or electronically. Sweden is particularly easy, all I have to do is to verify the numbers and then send an SMS with a personal code printed on my return. If I need to change anything, I log into the tax office website, make the changes and submit.
I have deductions to offset paid interest. If I hire a person to do some renovation in my home, the tax office pays half of the fee directly to them and I get a deduction as well. I sold my flat this year and will need to pay tax from the winnings, deducting costs. Almost all of this will be pre-filled.
In Iceland I had a slightly more complex tax situation. I filed jointly with my ex wife. Mortages, minimum wage deduction (i.e. you don't pay tax of the amount that is the legal minimum wage), property tax (house, cars), stocks and bonds, bank deposits and earned interest, deductions for rent compensation, was all prefilled.
Compared to this, filing my dead-simple US taxes with one deduction, filling in a two page calculation worksheet, feels like the middle ages.
No matter the complexity of the tax code, there are systems in place for all of them to evaluate and error-check tax declarations. The information is most likely all there already. All you need to have is a way to authenticate tax payers, and a front end.
And if I have a reason to think the tax authorities will not include items that lower my dues, I can always hire an accountant to file for me. I simply give them my "third-party filer access code" and sign the final return.
In Norway, if you qualify for simplified tax return (which I think most people do), you don't have to do anything anymore. You get a default pre-filled tax return that you can access electronically (or on paper if you prefer), and you only have to return it if you need to make changes.
Same in Denmark; you also get the refund automatically paid, if they owe you anything, with interest (0.5%, but still). I screwed up my withholding my first year here (failed to apply for a tax ID at all, so taxes were withheld by default at the highest rate). The next March I got a letter saying, your taxes were over-withheld by large_amount. If this is incorrect, please log in and fix it, otherwise we're going to deposit a huge pile of money in your account in N weeks. Did nothing for a few weeks and the money showed up.
To elaborate: In Sweden, even if you accept the defaults, your creditors and employers will send you statements (sv: kontrolluppgift) of your debts, interest, earnings, income et c that you can easily double-check against the defaults.
Ignore all the deductions and other stuff. It's a mess and should be fixed, but for this simple issue, it's not relevant.
I get W2s, 1099s, 1099-Rs, 1099-INTs, THX-1178s, ABC-123s, etc. I have to manually copy the stuff from boxes 1-30 on each of those onto my returns. I'd file my taxes in January expect it takes weeks for all the various organizations I deal with to make those and send them through the mail.
I shouldn't have to enter any of that. The government already knows it, they'll check my return against it. When I start my return, it should be pre-filled.
It's sad that Intuit and H&R Block fight this; though I'm not surprised. I'd say the government should provide a direct copy of the 1040 form online with this boxes pre-filled. Intuit and H&R Block should make their money by making easier forms and providing guidance.
Note that "keeping the government forms complex" doesn't count as "making easier forms".
I wish all of those would get reported/filled in automatically also. If you have to file for yourself, it's a massive PIA to get all of that info. And in 2013 it's far harder - in the past, I used to get paper copies of everything but this year I received lots of "Please create an account here and then you can download your ABC-123". It takes a day to collect and collate all of the ABC-123s. PIA indeed. And the IRS already has that info - it's double-entry accounting except that it's worse since you are judged on your ability to do it correctly. So yeah, that part of it could certainly be improved!
I don't think they were fighting against online access to IRS data. I think they fought against pre-filled 1040 forms becoming default return without you actually having to do almost anything. The former is innocent and useful, the latter may be a bit more controversial, since the incentive of the IRS is to maximize the taxes, having IRS create the returns may not provide the best option for the people who use it.
> the incentive of the IRS is to maximize the taxes
I'm not sure this is the case. IRS funding is not a static percentage of tax revenue. Sure, the tax money goes into one big pot, but IRS funding is not dependent upon the money they bring in.
Yes, but penalties do so there is a big incentive to maximize income from penalties. I was hit by this recently, by not filing a no-income return, and not certified mailing another return that was lost, but I wasn't alerted until 2 years later when they levied $4k in late fees. It used to be easy to get out of these penalties, but there are several accounts from uppers at the IRS that they have been sitting in meetings discussing cracking down on fee collection, no longer waiving fees etc.
Don't oversimplify. Prosecutors also aren't pay percentages of the sentences they get, still many prosecutors are zealous to get longer sentences. Because it's their job. The job of IRS is to extract taxes, more they do, more successful they are. People like to be successful.
Though IIRC, part of "paying" for PPACA (really, just to get the CBO numbers to work out) involved increasing the IRS enforcement budget on the premise that with more money they could bring in enough additional tax revenue to produce a negative net cost.
> If the IRS helps you save $5000 [via a tax deduction] that you would have otherwise paid, then the IRS loses $5000
Many Americans have a (one-sided) adversarial relationship with the IRS, thinking it is some kind of evil entity that only exists to financially destroy everyone in America.
But the IRS only exists to implement the tax code enacted by the "representatives of the people" (ha), the US Congress. When the IRS saves someone $5,000 because of a deduction that Congress specifically created as a tax expenditure, the IRS doesn't "lose" $5,000, they are simply performing the function that they are required by law to do.
You have to understand that to many people, any money that the government has been unable to obtain from you is money "lost" to the system or is listed as a "cost." These people would disagree with your statement that the IRS didn't lose that $5000. To them the IRS most certainly did lose that money.
To expand on your thought that people view the IRS as the evil entity. They are just misguided, the true enemy is the overly complicated tax code that is rife with abuse by many people within the IRS, Congress, and the private sector to the detriment of the majority.
"Do you trust the IRS to say, "It's okay if we lose $5000 - you're happy, right? That's what matters!"? Of course not. Having the separation works in the US for this clear conflict of interest."
I really think you misunderstand the intent and mentality of the IRS. You seem to be projecting a capitalist objective to their actions with the motive of obtaining the maximum amount of money. The IRS does not have any direct incentives for bringing in more money.
If you are audited and the auditor finds you missed deductions, they will tell you. I would hope that information should be enough force a change in your perspective.
Swedish here. There are deductions you can make but for the majority, it is either simple, or it has been prefilled. For example, for retirement savings of a very specific kind (IPS for Swedes reading this) there is a possible deduction and I believe it is pre-filled. Same thing for interest on house loans (I believe).
For capital gains vs losses, when you trade with stock, you however have to do it "manually" (not pre-filled). (For Swedes: K4 I think is mandatory but can easily be computed by your portfolia broker such as Avanza).
I think today the website that the Swedish tax office provides for you to actually fill in and confirm your tax statements is like a free, online version of what previous generations commercial tax software was about. Every year it includes yet another bit of functionality that simplifies it or handles a new corner case. For the majority it has been very simple for quite some years - send an SMS to confirm the pre-printed statement for example. But if you trade with shares, or if you have a business, or for example own forest (which automatically makes you a business), it is not as simple yet.
Last year I filed all my deductions from renovating and selling an apartment online. There's a fair amount of functionality now (according to the FAQ selling forest, business income, house/apartment sales (K2,5,6) investments (K4) et c) can be done online.
The swedish tax authority also incentivizes people to e-file: if you e-file, you'll get your tax return before midsummer, which in Sweden is a BIG holiday, when most people kick off their summer vacation. Even if you accept the defaults, but file on paper, you'll get your money in August instead of June.
So you're proposing that ~$3 per taxpayer is a huge risk?
I think lots of people will see your point and still believe that a system where the IRS tells you what it thinks is true would be an improvement over the current system (somehow, pre-filled forms, whatever).
My guess is that at least 85% of the population of Sweden does not have any deductions and can just accept the prefilled values from the tax office (employees). For a normal employee there are not so many deductions you can do. I guess travel to and from work is the most common deduction. But if you have a business (not a corp) things is of course very different.
That's what my guess was. In that environment then, a government system clearly works well. I wish I had stats about how many US tax returns have deductions - I'd assume it's close to 100%.
It's actually 35%, if you don't count people who file with just the standard deduction. While technically a "deduction", the standard deduction is pretty dead-simple to compute. It only gets more complicated if you're taking itemized deductions, and that's about 1/3 of taxpayers (though that's still a high proportion of itemized filers compared to many countries).
In Europe taxpayers waste millions with the tax authorities' pre-filled/free filing systems. The major reason for that is that once you have free filing with some data preloaded, human behaviour kicks in and you either spend some time figuring out where to minimize your tax losses (rational economic behaviour) or accept the tax return presented by the tax authorities and go with that even if it means wasting money (irrational behaviour).
To give a sense of how big a problem this is, here in the UK a report came out last year that pointed to £12.6B wasted. In Portugal, waste is around €2B if our math is right.
(Shameless plug): At http://gosimpletax.com we're actually helping taxpayers save as much as possible with as little friction as possible. We're currently operating in the UK & Portugal and would be great to have your feedback if you're in any of these countries.
Given how simple the UK tax system is, and what a large and rising percentage of UK , that number sounds incredibly high...
Regarding your site: The "Learn more" isn't a link. Why not? I don't want to go to your blog, I want a clear statement of what you provide without registering first. I'm not going to register without a very clear idea of what you offer. That I can register for free makes no difference to me when there's no clear statement to explain what I get if I sign up for free, given that the service costs money to use.
Looking at your "pricing" page, I see fear-mongering. "Hours wasted"? Only if your tax affairs are terribly complicated. "Painful and confusing forms"? Only if you failed basic English and arithmetic. I find the UK self assessment (having dealt with the Norwegian one before Norway went "pre-filled"/online) very well designed. "No guidance or help"? The HMRC guides and website are actually very good.
You seem to be positioning yourself for people with lots of money (to be able to save on average 2000,-, given that the average British taxpayer pays somewhere below 4k in income tax and 2.5k NI, and very few pays more than 10k-15k...), who are confused and clueless about the tax system, yet willing to sign up to an online service rather than get face to face time with an accountant...
If that's your intended market, and that actually brings the revenues for you, then your site is well targeted...
Aha so you ought to make software that interacts with the pre-filled forms before they are confirmed and charges 80% fees on all savings you account...
> The "winner" (for a particular user/client) is the one who (a) has the best reputation of not getting you audited, and (b) who gets you the best price:deduction ratio.
As a tiny nitpick, I think that, in this case, it is the absolute difference `deduction - price`, not the relative difference, that matters: given that I have the money available, I'm happier to spend $2000 to get back $2100 than I am to spend $10 to get back $11.
"You'd open up a pre-filled return, see what the government thinks you owe, make any needed changes and be done. The miserable annual IRS shuffle, gone."
That's how it works in Chile, for about 10 years now :D
It's a crime, isn't it? Your government is doing it on the behest of all those companies who fund the lobbyists. You must be having some public litigation system.
It disturbs me when in countries like USA such policies that directly and greatly affect the citizens are controlled by lobbyists. My hope and enthusiasm for changes in my own country dims by a bit.
(BTW taxation has become very simpler off late here, relatively I mean).
So taxes are morally equivalent to stealing? I think taxes are ok, so stealing must be ok too. I'll be over at your house to take your stuff in a jiffy!
I definitely agree with respect to income, estate, and property taxes. Consumption-based taxes are fairer than so-called "progressive" tax schemes implemented to fund world wars and military expansion.
Property tax encourages those who aren't using a property to sell it.
Real Estate ownership is already tracked (you can argue it shouldn't be, but that would upend the real estate system). And unlike cash sitting in a bank account, it's already fairly common to tax real estate. If someone wants to keep 5 houses and leave 4 of them empty at any given time, as a status symbol, shouldn't they be taxed punitively? Real estate is not an unlimited resource. Occupation of any sort would disqualify the taxation; this could be verified easily in most cases by data from utility companies.
Pure libertarians tend to argue that rational individuals will not let assets go unused. I think rationality as a model for human behavior has been thoroughly debunked. And if they don't let their real estate go unused, if they invest, lend, rent their property to others, taxes under the described system wouldn't apply.
Some of these arguments can be applied to hoarding other assets (like cash), but it would be an uphill battle to tax cash (not cash inflows -- as in the income tax -- but static cash). One place to start might be cash held by public corporations, which have no privacy interest.
The government are not incentivized to do a good job preparing your taxes. I'm not a tinfoil-hat conspiracy theorist. I don't think the US government wants to institute a program to systematically defraud the population. But I do believe that governmental inefficiency and incompetence is nigh-limitless, and the very people who may need their tax returns the most could end up being cheated out of them, not by malice but by indifference or stupidity.
(And there are many opportunities for the poor and underserved to have their taxes prepared for free. Many credit unions will do it, for example, and they are incentivized to do a good job because the tax returns will likely pass through their hands).
I realize the counter-argument is "but you can just opt-out if you don't trust the government". Sure. I can also choose to drive if I don't want my civil liberties violated by the TSA (and I do, except when traveling internationally). If the easiest and most convenient option also involves giving away rights, most people will take it. And then when later it turns out that it's being abused, there will be insufficient infrastructure in place for many people to choose an alternative.
So, to extend your analogy, if flight was just invented and a flight transport system was being proposed now, you would argue against it because TSA would start violating your liberties when you use it and deterioration of existing horse carriage-based infrastructure will make opt-out a non-option?
Sure, if you want to convert my argument into straw-man form to more effectively belittle it, that is a very effective way to do so.
A more accurate way to extend the analogy to transportation would be a company starting a free bus service for lower-income neighborhoods. All you have to do is link your grocery store rewards card and scan it every time you use the bus, which will authorize the company to access all your purchase data from that card.
You could very easily argue that this is a good thing, and perhaps at the outset it would be. But if it turns out that the company is doing something sleazy--rewards cards sometimes also encode personally-identifying information which could be used unethically, for example--then at that point a person's livelihood could very well depend on continuing to use that bus system, especially if the convenience of the system forced other free or low-cost alternatives to stop serving those neighborhoods.
In both of these cases (the IRS preparing your taxes and the company holding your personal information), the organization is not incentivized to do a good job. In fact, especially in the IRS case, the worse a job they do, the more tax money the government takes in.
Ah, that is much better analogy, yes. I don't think IRS _necessarily_ has no incentive to do the job properly though. If government didn't want those deductions and tax cuts used, they would not introduce them in the first place. Excluding the cases where the cuts were made based more on politics than on policy. No idea what proportion that would be.
Tax deductions are (supposed to be) made not because government wants to give people a break and be nice, but because it wants to influence certain behaviors. If those cuts are not used then they don't serve their original purpose, so that is an incentive for IRS to count deductions properly.
I don't care about the 30 dollars turbotax charges me, I'll send 30 dollars straight to the CEO or promise to burn it. What bothers me is that I've been forced to do manual data entry - a pet peeve of mine as a programmer - because the government has been lobbied specifically to be less efficient.