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FTC Is Investigating Intuit over TurboTax Practices

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Re: FTC Is Investigating Intuit over TurboTax Practices

#81

Post by vonmoltke »

masklinn wrote: post #68
vonmoltke wrote: post #45

Earlier quoted context omitted.

> Their employer reports their income, deducts an appropriate amount of taxes, and sends it to the government. How does your employer know what "the appropriate amount of taxes" is? In the US I have always had trouble setting this to where I'm not at least 5% off in one direction or the other, and I know more than my employer about what my withholding rate should be.

> How does your employer know what "the appropriate amount of taxes" is? It's an approximation based on your revenue (and they know how much they'll pay you). At end-year everything is tallied all proper and as taxpayer you either have to pay the missing bits (if you have extra revenues which weren't accounted for by your salary) or you receive a wire transfer from the state (if you had deductions which weren't taken…

I think I should have left the "End of process." in the quote, because this makes more sense. It's not the end of the process. The taxing authority sends you an estimate, you adjust based on a few factors they didn't account for and send it back.

That still raises the question, though, of how your employer knows enough about your tax situation to not significantly over or under withhold. If my wife and I just relied on the basic IRS calculations on the W-4 and didn't specify additional withholding by dollar amount we would end up owing thousands, possibly over $10,000, the following April (before penalties). How do Ireland and others avoid that?

Re: FTC Is Investigating Intuit over TurboTax Practices

#82

Post by scott_s »

jeffbee wrote: post #67
shados wrote: post #10

Earlier quoted context omitted.

There would be no problem with TurboTax if it was a product that solved a real problem. If the complexity of the tax code and the process to file your taxes were 100% a problem created by the federal government and the states. It works pretty well, it's not too expensive, it has free options, not what's to like? It isn't like that though. The IRS has nearly all the pieces it needs, if not all the pieces, to create a…

> The IRS has nearly all the pieces it needs Some things would need to change to make this statement true. Stock brokers and portfolio managers would have to be forced to stop reporting gains without basis. Without the basis the IRS has no idea what your gains were.

Only about half of Americans have any investment in the stock market - and yes, that includes 401ks. That means more than half the population can file taxes without information from brokers or portfolio managers, which means not having that information is not a good reason to not do this.

Re: FTC Is Investigating Intuit over TurboTax Practices

#83

Post by vonmoltke »

sokoloff wrote: post #78
vonmoltke wrote: post #66

Earlier quoted context omitted.

> It's not set by the employee, rather the employer looks at expected income for the year and withholds accordingly. At the end of the financial year, the Tax dept. does a final calculation and if the amount was too high/low, they send you a notice. That's my question, how does an employer or taxing authority know what that amount is? My employer doesn't know my withholding status until I tell them via a W-4, and tha…

> The IRS doesn't know my withholding status until I tell them via a W-4, You don't send the W-4 into the IRS; you give it to your payroll department.

Correct. I was changing my thought mid-sentence from "filing status" to "withholding status" and didn't correct the beginning.

Re: FTC Is Investigating Intuit over TurboTax Practices

#84

Post by krapp »

jaywalk wrote: post #54
krapp wrote: post #43

Earlier quoted context omitted.

> The fact is that the government, like a thief, says to a man: Your money, or your life. And many, if not most, taxes are paid under the compulsion of that threat. Yes, but I like civil society, infrastructure, paved roads and what little social safety net we have in this country, so...

So you see taxes as necessary. That's fine. It doesn't invalidate the point being made.

But are taxes really theft if I'm willing to pay them and I'm getting something of value back in return?

Maybe it's extortionate, but the entire premise of government and the social contract is extortionate to a degree.

Re: FTC Is Investigating Intuit over TurboTax Practices

#85

Post by Macha »

vonmoltke wrote: post #66
arvindch wrote: post #52

Earlier quoted context omitted.

It's not set by the employee, rather the employer looks at expected income for the year and withholds accordingly. At the end of the financial year, the Tax dept. does a final calculation and if the amount was too high/low, they send you a notice. Tax deduction at source is a common concept in a lot of countries, incl. dissimilar ones like India and the NL, where I have both worked. Super convenient and frictionless…

> It's not set by the employee, rather the employer looks at expected income for the year and withholds accordingly. At the end of the financial year, the Tax dept. does a final calculation and if the amount was too high/low, they send you a notice. That's my question, how does an employer or taxing authority know what that amount is? My employer doesn't know my withholding status until I tell them via a W-4, and tha…

Withholding =

(Taxable income in each bracket * tax rate for each bracket) - (annual tax credits / number of annual payments from your employer).

If you're married and want to be taxed as a couple, you simply send the documentation as such to the tax office after your wedding.

You can tell your employer and they'll try adjust appropriately in payroll, or you can not tell them and the government will send you a tax refund at the end of the year for the partner with the higher tax bracket. It's optional to be taxed as a couple, so presumably you're opting into it because it will reduce your tax obligations, so there shouldn't be a case where you have to pay more because you're married. The same applies for tax credits that you don't want to tell your employer about.

Re: FTC Is Investigating Intuit over TurboTax Practices

#86

Post by vonmoltke »

sokoloff wrote: post #76
vonmoltke wrote: post #45

Earlier quoted context omitted.

> Their employer reports their income, deducts an appropriate amount of taxes, and sends it to the government. How does your employer know what "the appropriate amount of taxes" is? In the US I have always had trouble setting this to where I'm not at least 5% off in one direction or the other, and I know more than my employer about what my withholding rate should be.

If your outside income is predictable and you prefer to do smooth withholding, you should be able to get quite close with W-4 excess withholding instructions. I just try to make sure I hit the safe harbor withholding amounts every year (100% or 110% of last year's tax liability, depending on income level) and then otherwise just minimize withholdings.

That's what I end up doing. The remaining difference is mostly from unpredictability.

Still, I'm trying to understand how a system like Ireland's, which from this description doesn't have anything like a W-4, works without being significantly off in many cases at the end of the year.

Re: FTC Is Investigating Intuit over TurboTax Practices

#87

Post by mindslight »

wffurr wrote: post #61

What's the least scammy alternative to TurboTax? I keep paying for it every year because it's what I'm used to, and I have capital gains and all that junk so I can't free file.

Torrent turbotax, run it in a VM without net access, and physically mail your tax return in. Or if your figures are relatively simple, just fill out the forms yourself. It helps to know how the formulas work out for tax avoidance purposes, anyway.

Re: FTC Is Investigating Intuit over TurboTax Practices

#88

Post by c22 »

klmadfejno wrote: post #50

God I hope this suit is successful. Lots of people here are discussing the regulatory trap they've got, and that's a big problem. But the actual problem mentioned in the suit is deceptive marketing. TurboTax is the worst in this regard. Last year, I, at every step of the process, declined the expensive options that say "maybe you'll save more money if you permanently switch into this paid mode". Yet after a couple ho…

This happened to me too. I just printed out the return they generated and mailed it in myself. This is actually how tax preparation software used to always work and it definitely wasn't free back then.

Re: FTC Is Investigating Intuit over TurboTax Practices

#89

Post by shados »

jeffbee wrote: post #67
shados wrote: post #10

Earlier quoted context omitted.

There would be no problem with TurboTax if it was a product that solved a real problem. If the complexity of the tax code and the process to file your taxes were 100% a problem created by the federal government and the states. It works pretty well, it's not too expensive, it has free options, not what's to like? It isn't like that though. The IRS has nearly all the pieces it needs, if not all the pieces, to create a…

> The IRS has nearly all the pieces it needs Some things would need to change to make this statement true. Stock brokers and portfolio managers would have to be forced to stop reporting gains without basis. Without the basis the IRS has no idea what your gains were.

Aren't stock brokers forced NOT to include the basis right now?

Fidelity reports the basis in a supplement section in the same damn document. Moving them together would be trivial, but I've been told the law is forcing them to do it this way (they didn't tell me that, I just read that somewhere. Not sure if it's true).

As someone said, almost no one has investments. If you remove 401k, it's a tiny fraction of people. If the only thing I'd have to do to file my taxes would be going online, finding the list of my sales and needing to add the cost basis then click submit, it would still be a huge improvement compared to what we have now.

Still, it's a problem that's pretty easily solved.

Re: FTC Is Investigating Intuit over TurboTax Practices

#90

Post by Macha »

vonmoltke wrote: post #81
masklinn wrote: post #68

Earlier quoted context omitted.

> How does your employer know what "the appropriate amount of taxes" is? It's an approximation based on your revenue (and they know how much they'll pay you). At end-year everything is tallied all proper and as taxpayer you either have to pay the missing bits (if you have extra revenues which weren't accounted for by your salary) or you receive a wire transfer from the state (if you had deductions which weren't taken…

I think I should have left the "End of process." in the quote, because this makes more sense. It's not the end of the process. The taxing authority sends you an estimate, you adjust based on a few factors they didn't account for and send it back. That still raises the question, though, of how your employer knows enough about your tax situation to not significantly over or under withhold. If my wife and I just relied…

This is why I specified for 90% of people. Most people don't have significant taxable income beyond employment (their only other income being savings account interest which is handled by your bank by a similar but separate system), so their tax liability is their income tax on their employment.

A lot of people in the software industry specifically might have significant investments, shares, maybe rental income, etc, and then you do need to specifically inform the government about those, but this isn't the case for the 90%.

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