Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

IRS tests free e-filing system that could compete with tax prep giants

washingtonpost.com

Post reply on HN
Print view View original

41–50 of 589 posts

Re: IRS tests free e-filing system that could compete with tax prep giants

#41

Post by mountainofdeath »

AlexandrB wrote: post #26
brocklobsta wrote: post #15

What I don't understand about these programs is the added income clause. In California the state provides a free tool to file state income taxes (CalFile), but you can't use it if you make over $230,000 a year. Does it really make sense? It's similar with the federal free file program I believe. You would think they would want to encourage high income citizens to use their tool so they can control the deductions/cred…

American legislators seem to loooove "means testing" every government-provided service. Maybe it's a misguided version of that?

It's probably more-so that above a certain income threshold, your tax return becomes exponentially more complex.

Free-file is useful when all you have is 1-2 above-board wage earning jobs, maybe with a 1099 contract job where the employer is nice nice enough to pre-fill the form out for you.

Once you start dealing with non-trivial amounts of dividends, interest, securities, partnerships, real-estate, you really do need a professional to keep things organized.

Re: IRS tests free e-filing system that could compete with tax prep giants

#43

Post by linuxftw »

The IRS has no incentive to make sure you get all the deductions you're allowed. They don't have incentives to make sure the software works well under load and at scale. Whatever they put out will likely be half-baked, and the software will degrade rapidly because the tax laws change each year.

I suspect, that given the currently complexity of the tax system itself (rather than the filing, which seems to be pretty straight forward), the private based system saves the tax payers money each year over any system the government could create.

Re: IRS tests free e-filing system that could compete with tax prep giants

#44

Post by junar »

brocklobsta wrote: post #15

What I don't understand about these programs is the added income clause. In California the state provides a free tool to file state income taxes (CalFile), but you can't use it if you make over $230,000 a year. Does it really make sense? It's similar with the federal free file program I believe. You would think they would want to encourage high income citizens to use their tool so they can control the deductions/cred…

If you're curious why, it's because of the California itemized deduction phase-out, line 29 in the instructions below [1].

CalFile only cares about handling "simple" items. Other notable exclusions [2] are capital gains, health savings accounts, Schedule C, Schedule E, and Roth IRA conversions and distributions.

[1] https://www.ftb.ca.gov/forms/2022/2022-540-ca-instructions.h...

[2] https://www.ftb.ca.gov/file/ways-to-file/online/calfile/calf...

Re: IRS tests free e-filing system that could compete with tax prep giants

#45

Post by themagician »

Does the IRS actually know what everyone owes? I know it's true for W-2 employees, but what about everyone else?

I've always had this feeling that you could ask the IRS what they believe any given SSN/EIN owes and they'd be able to tell you (not that they would, but that it's already calculated somewhere). I don't know if this actually true though. I know almost all W-2 information is sent electronically. They know about most 1099 transactions too. But is all this information pre-compiled against someone's SSN, or do they only run that calculation as part of random audits?

Re: IRS tests free e-filing system that could compete with tax prep giants

#46

Post by dpb001 »

jandrese wrote: post #16

For what it is worth, even with my medium-complex tax return I have had great results with freetaxusa.com for the past few years. The first couple of times we used it we ran the taxes through TurboTax and FreeTax at the same time and due to better UI the FreeTax version was faster and less confusing. That said, at the end of the process after entering all of the same information in the same places the TurboTax one di…

Another vote for freetaxusa.com. The only complexity for my Federal returns is accounting for both refunds and taxes due to filing state returns in two states (as well as some 1099 income), but they handle those exceptions well.

For years I kept a Windows VM around just to run whatever the cheapest tax return software was for that particular year.

Re: IRS tests free e-filing system that could compete with tax prep giants

#47

Post by ww520 »

jandrese wrote: post #16

For what it is worth, even with my medium-complex tax return I have had great results with freetaxusa.com for the past few years. The first couple of times we used it we ran the taxes through TurboTax and FreeTax at the same time and due to better UI the FreeTax version was faster and less confusing. That said, at the end of the process after entering all of the same information in the same places the TurboTax one di…

This year TurboTax apparently made a mistake. The tax calculation showed I owed tax and I submitted payment for the reported amount. IRS sent me back a check later for overpayment based on the reported tax filling by TurboTax. They didn't explain where the error was; it's just that TurboTax made a bad calculation somewhere.

Re: IRS tests free e-filing system that could compete with tax prep giants

#48

Post by jandrese »

bubbleRefuge wrote: post #35
jandrese wrote: post #20

Earlier quoted context omitted.

Not only did they raise the standard deduction, but there's that $10k limit that you slam into when trying to itemize. My total tax burden went up about 2% after that change, but it does make filing theoretically easier, except that my wife is always holding out hope so we go through all the work to itemize only to discover yet again that we're over the cap and wouldn't benefit.

10K limit on mortgage interest from primary residence , right ?

It's a $10k limit on deductions so dependents, charitable contributions, mortgage interest, and probably some more stuff has to stay under that cap or it doesn't count. Since that change went in we've never been able to even match the standard deduction. It increased our tax bill by about 2% and my wife has still never forgiven Trump. I think we are directly in the middle of "squeeze the middle class" part of that tax change.

Re: IRS tests free e-filing system that could compete with tax prep giants

#49

Post by pwg »

brocklobsta wrote: post #15

What I don't understand about these programs is the added income clause. In California the state provides a free tool to file state income taxes (CalFile), but you can't use it if you make over $230,000 a year. Does it really make sense? It's similar with the federal free file program I believe. You would think they would want to encourage high income citizens to use their tool so they can control the deductions/cred…

> What I don't understand about these programs is the added income clause.

Lobbying by the "big tax preparers". Higher income individuals are more likely to have more complex returns and/or be more willing to part with $149.99 to TurboTax to do their taxes. TurboTax (and others like them) don't want to miss out on that gravy train by letting the IRS let those folks file for free.

Re: IRS tests free e-filing system that could compete with tax prep giants

#50

Post by jcfariadias »

RektBoy wrote: post #29

Wait what? Here in EU I've been filling out taxes for years electronically. Form and automatic guide is provided by our country. Btw should I mention this is mandatory only for self-employed. If you're an employee, it's required by law that your employer must provided you a free service of filling the taxes and everything for you.

In Portugal, every transaction should, by law, be sent to the tax authority. Every employer should also report what paid to their employees and also retain in source part of the income

Everything is then setup centraly by tax authority which enables the process of submiting tax reports being automatic for most or either, if you have a more complex tax situation, taking you a couple hours tops to self-fill and submit.

It's rather surprising how progressive USA can be in some fields but so far behind in others...

Post reply on HN