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

washingtonpost.com

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

#301

Post by eppsilon »

jcranmer wrote: post #220
koolba wrote: post #158

Earlier quoted context omitted.

> But I already feel that when I look at my paystub, or pay property taxes. Unless you’re cutting a check in person you’re arguably not feeling it as much as you should. It’s like how replacing cash toll booths with electronic debit hides the true price you’re paying on the highway.

I doubt very many people know how much taxes they actually paid in 2022, even after the pain of filling out taxes. Instead, the number they know and remember is the size of the refund check (or the tax check they have to send out) in April. And the size of that check has relatively little to do with your actual tax rate, instead being driven by the withholding tables instead.

It might be nice if the IRS provided a summary of what you paid + your effective tax rate in a prominent place on the first page of your tax return. Maybe they could include last year's info for comparison.

If we ever reach a point where the IRS just tells you what they think you owe, they could include the same summary to placate the Norquist types (who undoubtedly will then start complaining about something else).

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

#302

Post by lozenge »

shadowgovt wrote: post #227
bityard wrote: post #193

Earlier quoted context omitted.

I'm not saying it's a GOOD reason, but the main reason the government doesn't just send you a tax bill and say, "here, now pay up" is because there are lots of things which are taxed but the government doesn't "see" because they are not (or cannot reliably be) reported. This goes for certain credits and deductions as well. So the only real leverage they have is to tell everyone to get it right or face the possibility…

Other countries just calculate up an estimated bill and it seems to work for them. Is there something about US taxes that makes that solution intractable?

They weren't designed for it.

I'm in the UK and there's reporting systems for- employers, pension schemes, savings accounts, charities and student loans- all to avoid most people having to fill in a tax return. Something like deducting sales tax would never be passed as a law because it wouldn't be accessible to most people.

As an analogy, we can say that laundry will never be automated because the washing machine can't separate whites from colours, doesn't apply stain remover, doesn't remove the delicates when it transfers to the dryer, etc. All technically correct, but people stopped caring. People have a financial and emotional attachment to their tax loopholes though.

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

#304

Post by wefarrell »

andrewla wrote: post #237

The steelman case for opposing "auto-filing" or having the IRS provide tax preparation is that the intention of requiring everyone to file is that all citizens should be directly aware of the amount of taxes being assessed and the complexity of the tax code itself, with the objective of making people oppose legislative increases in the complexity of the tax code, and to make tax increases more intrusive so that legis…

Opponents of progressive taxes lobby hard against auto-filing. They want the Americans to conflate the complexities of the US tax code with the complexities of filing and so they fight to keep the filing process complex and they tell us it's the tax code that's the problem.

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

#305

Post by JohnFen »

bluGill wrote: post #131
whimsicalism wrote: post #103

Earlier quoted context omitted.

My partner and I are both W2 earners and filing our taxes takes like under half an hour. Are we doing something wrong? It seriously does not seem hard to file taxes.

The tax industry goes out of their way to make it seem harder than it is to justify their existence. You can do the forms by hand (not even a calculator) faster than most tax software - most of that time is added delays to make it seem like the computer has to work hard to do something hard. Unfortunately if you do things by hand you will eventually make a trivial mistake and the IRS will get mad about that.

> the IRS will get mad about that.

In my experience, the IRS won't get mad about that. They'll ask you to correct it, of course. What makes the IRS mad is if it looks like you're actively trying to illegally avoid taxes.

Also, in my experience, the IRS are generally decent to work with. My state revenue department, however, is the opposite of the IRS in every way. They're just mean and vindictive.

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

#306

Post by dheera »

throw9away6 wrote: post #22
dheera wrote: post #17

Earlier quoted context omitted.

Pro tip: If you have a tax bill over a few thousand dollars, sign up for some credit cards with big fat bonuses just to pay the taxes, and you can easily make up the $100. When the system of {government, financial institutions, credit cards, etc.} sucks, shove it back to the system. Obviously, calculate whether it really works out in your favor with the credit card payment fees, but in many cases it will.

If you pay taxes with a card the processor charges a fee. You won’t come out ahead

Nope, not so fast. Do your research before making claims, please.

For example, if you have to pay $15K in taxes, you can sign up for a Chase Ink Business Preferred card, pay the $15K+1.85% = $15277, get the 100K bonus + 1X points on the $15277, which puts you at 115277 points, which is worth 1.25x in travel, which puts you at $1440 worth of air tickets or $1152 worth of cashback.

Subtract the $277 extra you paid, subtract the $95 annual fee for one year (before which you'll cancel the card of course), and that leaves you with a net return of $1068 in air tickets or $780 in cash.

There are quite a few other cards that you can come out ahead in as well, depending on how much tax you owe.

And yes, I did this.

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

#307

Post by rodgerd »

rapht wrote: post #224
lr1970 wrote: post #210

Earlier quoted context omitted.

> Yeah the American system absurd. “We have all the data but you still need to figure it out yourself and if you get it wrong you’ll get in trouble”. IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated and what IRS really knows is a guessing game. IRS is posturing and bluffing that they know everything an…

> IRS knows all the income data only in simple cases like salaried employees with W-2 forms. If you are business owner or contractor the things can be more complicated If you already can avoid the trouble for 50% (?) of the people who are in the standard case, it's already a massive win.

This is how it works in New Zealand; you get a tax statement. You can file if you think that IRD got it wrong, and you have to file if you have income from (for example) dividends, overseas incomes, or similar sources.

But for the great majority of people whose income comes from working for a living, you don't need to do anything to be 100% legally compliant.

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

#308

Post by dheera »

aynyc wrote: post #120
dheera wrote: post #17

Earlier quoted context omitted.

Pro tip: If you have a tax bill over a few thousand dollars, sign up for some credit cards with big fat bonuses just to pay the taxes, and you can easily make up the $100. When the system of {government, financial institutions, credit cards, etc.} sucks, shove it back to the system. Obviously, calculate whether it really works out in your favor with the credit card payment fees, but in many cases it will.

This is what we called premature optimization. If you owe big money on taxes, spend your energy and effort to figure out how to reduce that, not on credit card points.

No. This is not premature optimization. I have all the money to pay the taxes, it's just that I can actually come out ahead by paying with a credit card, paying it off right away, and then taking the points and sign up bonuses on multiple credit cards.

If you owe $20K in taxes, you can totally sign up for 3 or 4 cards and reap all the bonuses in one fell swoop. 2 payments per processor, PayUsaTax is 1.85%, Pay1040 is 1.87%, as long as your sign-up bonuses can beat those numbers (they easily do on many cards, see my other comment below), you can get 4 sign-up bonuses easily.

I already am doing everything I can possibly do within legal bounds to reduce my tax bill. 401K, IRA, credits, you name it, I have it. The credit card thing is just at least getting my cherry back after the government took my cake.

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

#309

Post by gigatexal »

ShadowBanThis01 wrote: post #5

It is WAY past time for this. It's absurd that we have to regurgitate tax information that has already been reported to the government. But it's even more absurd that the government gives us no way to do so electronically. And then there's the disgusting shell game that IS the entire U.S. tax system, which is the root of the whole problem. But... didn't Congress pass some corrupt legislation years ago that made it il…

Agreed. Intuit and it’s “competitors” need to stop fighting this and I’m glad to see this being a thing.

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

#310

Post by pb7 »

aynyc wrote: post #292
pb7 wrote: post #285

Earlier quoted context omitted.

>then you are intentionally under withholding What’s wrong with that? You can pay estimated quarterly taxes with a credit card too. Many churners do.

Nothing wrong with churning, but it's not within the context of this post. Your goal is to churn, tax happened to be one of the venues. But for most people, churning is the wrong approach because their taxes are the biggest issue.

If you have legal strategies for avoiding paying 6 figures in taxes ever year, I'm all ears.
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